Policy paper

Alcohol Duty uprating

Published 30 October 2024

Who is likely to be affected

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

General description of the measure

As announced at Autumn Budget 2024, the government will reduce all Alcohol Duty rates for draught products by 1.7% in cash terms (or 5.1% if compared to the baseline expectation that rates would be increased with the Retail Price Index). This will increase the value of Draught Relief from 9.2% to 13.9% for qualifying beer and cider products and from 23% to 26.9% for qualifying wine, other fermented products and spirits. Draught Relief provides a reduced rate of duty on draught alcoholic products below 8.5% alcohol by volume, where these are packaged in containers of at least 20 litres designed to connect to a pressurised gas delivery system or a pump delivery system for dispensing drinks. The reduction to duty rates on draught products will result in the average alcoholic strength pint (4.58% alcohol by volume) paying 1 pence less in duty.

The government will increase the Alcohol Duty rates that apply to all non-draught products in line with Retail Price Index inflation. Alongside this, the government will also increase the simplified duty rates used for calculating excise duty on alcoholic products brought into Great Britain (England, Scotland and Wales) for personal use.

The government will also increase the cash discount provided to small producers for non-draught products, and maintain the current cash discount provided to small producers for draught products. This increases the relative value of Small Producer Relief for both draught and non-draught products. Small Producer Relief provides lower Alcohol Duty rates for small producers — provided those products are below 8.5% alcohol by volume, not produced under licence, and are made on small producer premises producing below 4,500 hectolitres of pure alcohol per year.

All changes will take effect on 1 February 2025.

Policy objective

The Office of Budget Responsibility’s forecasts assumes that all Alcohol Duty rates will increase by Retail Price Index each year on 1 February. This measure increases Alcohol Duty rates on non-draught alcoholic products.

To support the hospitality industry, particularly recognising the role that pubs play in communities and as supervised settings less associated with alcohol harm, the government has announced a reduction to Alcohol Duty rates on draught products.

To support eligible small producers of alcoholic products, the government will also increase the cash discount provided to small producers for non-draught products, increasing the relative value of Small Producer Relief compared to the main duty rates. The relative Small Producer Relief value will also be increased for draught products, as a result of the current cash discount being maintained alongside the reduction to the duty rates for draught products.

Background to the measure

A progressive, strength-based duty system was introduced on 1 August 2023 following the Alcohol Duty Review. The reforms introduced two new reliefs:

• a draught relief to reduce the duty burden on draught products sold at on-trade venues
• Small Producer Relief that replaced the previous Small Brewers Relief

Also, a temporary wine easement was introduced on 1 August 2023 as a transitional arrangement to the new duty structure for certain wine products. Autumn Budget 2024 confirmed that the temporary wine easement will end on 1 February 2025, as originally planned.

Alcohol Duty rates last increased, in line with Retail Price Index, on 1 August 2023 following an announcement at Spring Budget 2023. At Autumn Statement 2023, Alcohol Duty rates were frozen until 1 August 2024. This freeze was extended until 1 February 2025 at Spring Budget 2024.

At Autumn Budget 2024, the Chancellor of the Exchequer announced that Alcohol Duty rates on non-draught products will rise in line with Retail Price Index from 1 February 2025. Although the Office of Budget Responsibility assumes a Retail Price Index increase each February, in practice alcohol duties have been cut or frozen on several occasions over the past decade.

Detailed proposal

Operative date

The new Alcohol Duty rates, draught rates and Small Producer Relief discounts will take effect on 1 February 2025.

Current law

The main provisions relating to the production of alcoholic products and the charging, calculation and remission of Alcohol Duty (including any reliefs) are set out in Part 2 of the Finance (No.2) Act 2023. The Alcohol Duty rates are contained in Schedule 7 (rates of Alcohol Duty), reduced rates for Draught Relief are contained in Schedule 8 (qualifying draught products: reduced rates) and tables used to calculate Small Producer Relief discounts are in Schedule 9 (small producer alcoholic products: duty discount).

Proposed revisions

Schedule 7 is amended so that the revised rates are:

• £9.61 per litre of alcohol in the product for duty on all alcoholic products less than 3.5% alcohol by volume
• £10.02 per litre of alcohol in the product for duty on still cider at least 3.5% but less than 8.5% alcohol by volume
• £10.02 per litre of alcohol in the product for duty on sparkling cider at least 3.5% but not exceeding 5.5% alcohol by volume
• £21.78 per litre of alcohol in the product for duty on beer at least 3.5% but less than 8.5% alcohol by volume
• £25.67 per litre of alcohol in the product for duty on spirits, wine and other fermented products at least 3.5% but less than 8.5% alcohol by volume
• £25.67 per litre of alcohol in the product for duty on sparkling cider exceeding 5.5% alcohol by volume but less than 8.5% alcohol by volume
• £29.54 per litre of alcohol in the product for duty on all alcoholic products at least 8.5% but not exceeding 22% alcohol by volume
• £32.79 per litre of alcohol in the product for duty on all alcoholic products exceeding 22% alcohol by volume

Schedule 8 is amended so that the revised rates for products qualifying for Draught Relief are:

• £8.28 per litre of alcohol in the product for the reduced rate of duty on all draught alcoholic products less than 3.5% alcohol by volume
• £8.63 per litre of alcohol in the product for the reduced rate of duty on draught still cider at least 3.5% but less than 8.5% alcohol by volume
• £8.63 per litre of alcohol on product for the reduced rate of duty on draught sparkling cider at least 3.5% but not exceeding 5.5% alcohol by volume
• £18.76 per litre of alcohol in the product for the reduced rate of duty on draught beer, spirits, wine and other fermented products at least 3.5% (but less than 8.5%)
• £18.76 per litre of alcohol in the product for the reduced rate of duty on sparkling cider exceeding 5.5% but less than 8.5% alcohol by volume

The marginal discount and cumulative discount figures in the tables at Schedule 9 are amended for non-draught products and maintained for draught products, to increase the Small Producer Relief percentage discounts. This will include for both non-draught and draught products, for each litre of pure alcohol:

First five hectolitres

All products between 1.2% to 3.4% alcohol by volume (except spirits), 3.5% to 8.4% alcohol by volume cider, sparkling cider, wine and other fermented products — 100% discount.

Spirits between 1.2% to 3.4% alcohol by volume — 66.1% discount

Beer between 3.5% to 8.4% alcohol by volume — 91.5% discount

Spirits between 3.5% to 8.4% alcohol by volume — 81.4% discount

Above first five hectolitres

All products 1.2% to 3.4% alcohol by volume (including spirits) — starts at a discount of 25.4%

Beer between 3.5% to 8.4% alcohol by volume — starts at a discount of 50.9%

Sparkling cider between 3.5% to 5.5% alcohol by volume and Cider between 3.5% to 8.4% alcohol by volume — starts at a discount of 25.4%

Sparkling cider between 5.5% to 8.4% alcohol by volume, wine and other fermented products between 3.5% to 8.4% alcohol by volume — starts at a discount of 10.2%

Spirits between 3.5% to 8.4% alcohol by volume — starts at a discount of 10.2%

Summary of impacts

Exchequer impact (£ million)

2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030
-10	-85	-85	-90	-95	-100

These figures are set out in Table 5.1 of Autumn Budget 2024 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Autumn Budget 2024.

Economic impact

This measure is not expected to have any significant macroeconomic impacts. The costing accounts for behavioural responses whereby the demand for alcoholic products is adjusted in response to the duty rate change. The costing is also adjusted to account for reverse forestalling of draught products.

Impact on individuals, households and families

This measure will have an indirect impact on individuals who consume alcoholic products if the changes on duty rates are passed on to individuals through higher or lower prices for these products.

Assuming 100% pass through to prices wherever alcohol is purchased, from 1 February 2025 the tax on a typical: 

• 4% alcohol by volume pint of draught beer will be 1 pence lower
• 4.58% alcohol by volume pint of draught beer (average strength) will be 1 pence lower
• 4% alcohol by volume 500ml bottle of non-draught beer will be 2 pence higher
• 5% alcohol by volume pint of draught cider will be 1 pence lower
• 5% alcohol by volume 500ml bottle of non-draught cider will be 1 pence higher
• 40% alcohol by volume 25ml serving of whisky will be 1 pence higher
• 5.4% alcohol by volume 250ml can of spirits-based ready to drink will be 1 pence higher
• 11% alcohol by volume 250ml glass of still wine will be 3 pence higher
• 11.5% alcohol by volume 250ml glass of still wine will be 5 pence lower
• 13% alcohol by volume 250ml glass of still wine will be 8 pence higher

The end of the wine easement will cause an additional duty increase for wines 12.5% to 14.5% alcohol by volume and a decrease for wines 11.5% to 12.4% alcohol by volume. With the example of the 8 pence increase for a 13% alcohol by volume 250ml glass of still wine — 4 pence of the increase is due to the end of the wine easement, 4 pence is due to the Retail Price Index uprating.

Individuals who consume stronger alcoholic products may pay more through the revised Alcohol Duty rates.

Individuals who consume draught alcoholic products at on-trade venues (such as pubs) may pay less due to the draught rates being lower than the non-draught Alcohol Duty rates.

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

Customer experience of engaging and interacting with HMRC is expected to remain the same, as there will be no changes in the way duty is collected.

Equalities impacts

Those who drink alcohol are represented in each of the groups sharing protected characteristics. This measure is expected to have both positive and negative impacts on protected groups where alcohol consumption is higher. People will experience a negative impact as a result of this measure as the cost of non-draught alcoholic products will increase, however cost increases can disincentivise alcohol consumption resulting in a beneficial impact to health. Also, people will experience a positive impact from the cost of draught alcoholic products being reduced as a result from this measure. This might result in negative health impacts if people consume more alcohol because of the cost decrease.

Men (61.9%) are more likely to drink alcohol than women (52.4%) and are also more likely to exceed recommended consumption limits. The frequency of alcohol consumption tends to increase with age, with people aged 16 to 24 drinking alcohol less frequently in a given week (47.9%) than people aged 45 to 64 (64.6%). However, young adults are more likely to exceed recommended consumption limits making the difference in total consumption between age groups less pronounced. 

Alcohol consumption also varies across ethnic groups, with people from white British (22.6%) and other white ethnic groups (14.8%) being more likely to consume alcohol compared to Asian or Asian British (3.7%), black or black British (7.1%), and mixed, multiple or other ethnic groups (9.9%). People who identified with no religious group are more likely to consume alcohol than Christians, Muslims, Hindus, and Buddhists.

Alcohol consumption has been linked to mental ill-health with alcohol misuse more prevalent in those with mental health conditions. Finally, the LGBT+ population (32%) are more likely to drink to excess compared to the general population (24%).

Impact on business including civil society organisations

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

There are not expected to be any continuing costs. This measure is not expected to have any impact on civil society organisations. Customer experience is expected to remain broadly the same as this measure does not alter how businesses interact with HMRC.

This measure will have some impact on the hospitality industry affected by the Alcohol Duty uprating. However, the impact will be reduced as Draught Relief means that eligible draught products are subject to lower Alcohol Duty rates.

This measure will impact on some small and micro businesses affected by the Alcohol Duty uprating. However, the impact will be reduced for producers eligible for Small Producer Relief.

Operational impact (£ million) (HMRC or other)

HMRC will need to make changes to IT systems to implement the measure. A review of the changes and respective costs are ongoing.

Other impacts

Increasing Alcohol Duty rates on non-draught alcoholic products by Retail Price Index may lead to a minor decrease in overall alcohol consumption in the UK. Any reduction in alcohol consumption from this measure may also be associated to reductions in alcohol-related economic inactivity.

Other impacts have been considered and none have been identified. 

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 alcohol policy at mailbox.alcoholpolicy@hmrc.gov.uk.