Policy paper

Alcohol Duty: rate changes

Updated 7 July 2023

Changes to Alcohol Duty from 1 August 2023

The way you calculate Alcohol Duty will change on 1 August 2023.

Also, 2 new reliefs will be introduced for:

• small producers
• products sold on draught

Find out about the new rates and reliefs for Alcohol Duty.

Who is likely to be affected

Individuals and businesses involved in the manufacture, distribution, holding, sale and consumption of alcoholic products.

General description of the measure

As announced at Spring Budget 2023, the government will increase the duty rates under the revised duty structure for alcohol products being introduced from 1 August 2023 in line with the Retail Price Index (RPI). This includes all alcoholic products produced in, or imported into, the UK.

The government will also increase the value of Draught Relief from 5% to 9.2% for qualifying beer and cider products and from 20% to 23% for qualifying wine, other fermented products (previously made-wine) and spirits.

All changes will take effect from 1 August 2023.

Policy objective

The public finances assume that all Alcohol Duty rates increase by RPI year-on-year from 1 February. This measure increases duty rates by RPI equally across all categories in line with the government’s commitment to manage the UK’s finances responsibly.

To support the hospitality industry and recognising the vital role pubs play in our communities as well as in acknowledgement that pubs are supervised settings less associated with alcohol harm, the government has announced increasing the Draught Relief duty differential from 5% to 9.2% for qualifying beer and cider and from 20% to 23% for qualifying wine, other fermented products (previously made wine) and spirits.

Background to the measure

Alcohol Duty rates have remained frozen since Autumn Budget 2020. On 19 December 2022, the government extended the current Alcohol Duty freeze by 6 months from 1 February to 1 August 2023 provide certainty to businesses.

Although the public finances assume a RPI increase each February, in practice the government has enacted numerous cuts or freezes to alcohol duties over the past decade.

Detailed proposal

Operative date

The new Alcohol Duty rates and increasing the Draught Relief duty differential will take effect from 1 August 2023.

Current law

The main provisions relating to the production of alcoholic products and the charging, calculation, and remission of Excise Duty (including any reliefs) are set out within the Alcoholic Liquor Duties Act (ALDA) 1979. The duty rates for:

• spirits are set out in section 5
• beer are set out in section 36(1AA) and section 37(4)
• cider are set out in section 62(1A)
• wine and made-wine are set out in schedule 1

Proposed revisions

Linked to the Alcohol Duty Reforms measure, legislation introduced in Spring Finance Bill 2023 will replace provisions in ALDA for charging and calculating Excise Duty on alcoholic products.

The new legislation sets out the rates of duty for all categories of alcoholic products in schedule 6. The revised rates are:

• duty on all alcoholic products less than 3.5% alcohol by volume (ABV): £9.27 per litre of alcohol in the product
• duty on still cider at least 3.5% but less than 8.5% ABV: £9.67 per litre of alcohol in the product
• duty on sparkling cider at least 3.5% but not exceeding 5.5% ABV: £9.67 per litre of alcohol in the product
• duty on beer at least 3.5% but less than 8.5% ABV: £21.01 per litre of alcohol in the product
• duty on spirits, wine and other fermented products at least 3.5% but less than 8.5% ABV: £24.77 per litre of alcohol in the product
• duty on sparkling cider exceeding 5.5% ABV but less than 8.5% ABV: £24.77 per litre of alcohol in the product
• duty on all alcoholic products at least 8.5% but not exceeding 22% ABV: £28.50 per litre of alcohol in the product
• duty on all alcoholic products exceeding 22% ABV: £31.64 per litre of alcohol in the product

Wine between 11.5% and 14.5% ABV will be treated as if it is 12.5% ABV for the purposes of calculating the charge to Alcohol Duty from 1 August 2023 until 1 February 2025.

The legislation, as part of the Alcohol Duty Reform will also introduce a new Draught Relief, which will reduce the duty on ‘qualifying draught products’.

The new legislation sets out the Draught Relief rates in schedule 7. The rates including the increased draught relief differential are:

• the reduced rate of duty on all draught alcoholic products less than 3.5% ABV: £8.42 per litre of alcohol in the product
• the reduced rate of duty on draught still cider at least 3.5% but less than 8.5% ABV: £8.78 per litre of alcohol in the product
• the reduced rate of duty on draught sparkling cider at least 3.5% but not exceeding 5.5% ABV: £8.78 per litre of alcohol on product
• the reduced rate of duty on draught beer, spirits, wine and other fermented products at least 3.5% (but less than 8.5%): £19.08 per litre of alcohol in the product
• the reduced rate of duty on sparkling cider and perry exceeding 5.5% but less than 8.5% ABV: £19.08 per litre of alcohol in the product

Summary of impacts

Exchequer impact (£m)

The table below outlines the exchequer impact of the extension of the freeze to current duty rates from 1 February 2023 to 1 August 2023; increase in non-draught alcohol duties uprated by RPI on 1 August 2023; and the value of Draught Relief from 5% to 9.2% on qualifying beer and cider; and 20% to 23% on qualifying wine, spirits and other fermented products.

2022 to 2023	2023 to 2024	2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028
-155	-405	-75	-80	-80	-85

These figures are set out in Table 4.1 of Spring Budget 2023 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Spring Budget 2023.

Economic impact

The measure will have a direct effect on the consumer price index (CPI). In their March 2023 Economic and Fiscal Outlook (EFO), the Office for Budget Responsibility (OBR) have estimated a marginal reduction in the CPI inflation rate in 2023 to 2024 which will partially unwind in 2024 and 2025.

Impact on individuals, households and families

These measures may have an indirect impact on individuals who consume alcoholic products, if the changes on duty rates are passed onto individuals through higher or lower prices for these products. There could also be a difference in impact on individuals who consume draught alcohol in pubs and hospitality venues.

At the current VAT rate, and assuming 100% pass through wherever alcohol is purchased, from 1 August 2023 the tax on a typical:

• 4% ABV pint of draught beer will be 0 pence higher
• 4% ABV 500ml bottle of non-draught beer will be 5 pence higher
• 5% ABV pint of draught cider will be 2 pence higher
• 5% ABV 500ml bottle of non-draught cider will be 5 pence higher
• 40% ABV 25ml serving of whisky will be 3 pence higher
• 5.4% ABV 250ml can of spirits-based RTD will be 6 pence lower
• 11% ABV 250ml glass of still wine will be 5 pence higher

Individuals who drink stronger alcoholic products may pay more through the revised duty structure.

Individuals who drink draught products in on-trade venues (like pubs) will pay less tax than on the equivalent non-draught product in off-trade venues (like supermarkets).

These measures are not expected to impact on family formation, stability or breakdown.

Equalities impacts

Those who drink alcohol are represented in each of the groups sharing protected characteristics. This measure is therefore expected to have both a positive and negative impact for those in all groups depending on underlying patterns of alcohol consumption.

It is not expected that there will be adverse effects on any group sharing protected characteristics.

Impact on business including civil society organisations

The changes in Alcohol Duty rates will impact on alcohol manufacturers, importers and retailers. The measure is expected to have a negligible impact on up to 10,000 businesses that produce alcohol in the UK, import alcohol into the UK, or are involved in warehousing alcohol in duty suspense. Those businesses affected by the duty rate change will incur a negligible one-off cost.

One-off costs for businesses could include:

• familiarisation with the new process of calculating duty on their alcohol products and updating their processes
• updating the software used to calculate and track their alcohol duty obligations
• training and upskilling staff who are responsible for managing their alcohol duty

There are not expected to be any additional on-going costs. This measure is not expected to have any impact on civil society organisations.

Small and micro business assessment: This measure will impact on some small and micro businesses affected by the alcohol duty uprating.

Operational impact (£m) (HMRC or other)

HMRC will incur a negligible one-off cost for changing alcohol duties.

Other impacts

Increasing all Alcohol Duty rates by RPI in line with inflation may lead to a minor decrease in overall alcohol consumption in the UK. However, increasing the Draught Relief differential may increase supervised drinking in licenced premises, continuing the government’s commitment to support the hospitality sector.

Monitoring and evaluation

This measure will be monitored through information collected from tax receipts.

Further advice

If you have any questions about this change, contact the Excise and Customs Helpline.