Less Taxes on Draught Beer and Cider as Duty Overhaul Takes Effect

But trade association warns reform discriminates against wine and spirits

Prime Minister Rishi Sunak during a visit to the Great British Beer Festival at Olympia, in London on Aug. 1, 2023. (Daniel Leal/PA)

Pubs will pay less taxes on draught beer and cider as the government’s alcohol duty overhaul took effect on Tuesday.

But the landmark tax shake-up, which favours drinks with lower alcohol content, will impose more duty on wine and spirits.

The tax reform also came with the end to a three-year inflation freeze, meaning alcohol duty have jumped up by 10.1 percent overall.

Promoting the new tax regime on X, previously known as Twitter, Prime Minister Rishi Sunak summarised it as “Use our Brexit freedoms. Protect the price of your pint. Back British businesses.”

A trade association said the policy is discriminatory against wine and spirits, which alcohol content can’t be easily reduced.

Biggest Shake-up In 140 Years

Under the alcohol tax reform, which the government said is “the biggest in 140 years,” alcohol will be taxed according to their alcohol by volume (ABV) strength instead of their type and the number of tax bands is reduced from 15 to six.

Beers below 3.5 percent ABV, still cider below 8.5 percent ABV, and sparkling cider below 5.5 percent ABV will be taxed at around £9.5 per litre of alcohol in the product.

The Treasury said this will bring down the taxes on products such as bottles of pale ale, pre-mixed gin and tonic, and prosecco.

Taxes on stronger alcohol range between £21.01 to £31.64 per litre of alcohol in the product.

Separately, draught beer and cider enjoy a tax cut of 9.2 percent while wine, spirits, and other fermented products sold on draught can get a tax relief of between 20 to 23 percent as long as their ABV strengths are below 8.5 percent.

The government said this means the duty paid on drinks on tap in pubs will be up to 11 percent lower than at the supermarket. It also said the Brexit Pubs Guarantee, first announced by Chancellor Jeremy Hunt in his spring budget, means pubs will always pay less taxes than supermarkets.

Another duty relief for smaller producers is designed to encourage them create new drinks with below 8.5 percent ABV.

Barry Watts, head of policy and public affairs at the Society of Independent Brewers, said the reform is “the culmination of five years of consultation on the future of Small Breweries’ Relief—a scheme that has made the huge growth of craft breweries possible over the past twenty years.

“These changes will finally address the ‘cliff edge’ which was a barrier to small breweries growing and build on the scheme’s success by applying it to other alcoholic products below 8.5 [percent],” he said.

He also said the draught duty relief is “a gamechanger for the sector.”

Biggest Tax Rise in 50 Years

However, the changes came together with a tax hike.

Alcohol duty hasn’t changed since February 2019 because Mr. Sunak froze the tax rate during the COVID-19 pandemic when he was chancellor.

The freeze was extended for a number of years, but Mr. Hunt said in March that the rate would rise with RPI inflation from August 1.

The Treasury said it means a 10.1 percent increase from Tuesday.

Despite the draught freeze, the British Beer and Pub Association the tax increase on packaged beer will add an extra £225 million of costs per year across the industry.

Miles Beale, chief executive of the The Wine and Spirit Trade Association (WSTA), an organisation that has called on the government to scrap the alcohol tax reform, said the added “inflationary misery” brought about the “biggest single alcohol duty increase in almost 50 years.”

According to WSTA, the tax increase will see duty rise by 44 pence on a bottle of wine, which when combined with VAT will mean consumers will pay an extra 53 pence.

Duty on 18 percent cream sherry will go up from £2.98 to £3.85, with VAT adding up to an increase of more than £1 a bottle, while a bottle of port will go up by more than £1.50.

The total tax on a bottle of gin or vodka will go up by around 90 pence.

Mr. Beale also said the new duty regime ultimately “discriminates against premium spirits and wine more than other products.”

“Wine from hotter countries, like new trade deal partner Australia, will be penalised most of all, because the grapes grown in hotter climates naturally produce higher alcohol wines," Mr. Beale said.

He also said that the nature of wine-making means the alcohol content in wine can’t be easily reduce to fit the government’s mandated level.

“Nor can the alcohol in full strength spirits be reduced for products such as gin, vodka and whisky where a minimum strength prescribed by law,” he said, adding that the changes would “reduce consumer choice and push up prices.”

Prime Minister Heckled

Mr. Sunak was heckled on Tuesday as he pulled a pint to promote the new tax regime.

The prime minister was visiting the Great British Beer Festival in London when he was heckled by Rudi Keyser, a 46-year-old who runs a chain pub in London’s Wimbledon.

“Prime minister, oh the irony that you’re raising alcohol duty on the day that you’re pulling a pint,” the former brewer yelled as Mr. Sunak poured a pint of Black Dub stout at the stall of the Wensleydale brewery from his constituency.

Mr. Keyster said Mr. Sunak’s claim that drinkers and businesses will benefit is just “smoke and mirrors.”

“It’s robbing Peter to pay Paul,” he said, insisting the consumers will see an increase in prices as a result of the changes.

Another man shouted at the teetotal premier, who is famously a fan of Coke: “Prime minister, it’s not Coca Cola.”

PA Media contributed to this report.