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As of February 1, 2025, the United Kingdom has implemented changes to alcohol duty rates, resulting in increased prices for various alcoholic beverages. These adjustments are part of the government’s strategy to align alcohol duties with inflation and introduce a more nuanced taxation system based on alcohol content.

Inflation-Linked Duty Increase

The government has raised alcohol duty rates on non-draught products by 3.6%, corresponding with the Retail Price Index (RPI) inflation rate. This increase affects a wide range of alcoholic beverages, including spirits and wines. For instance, the duty on a standard bottle of gin has risen by approximately 32 pence.  

End of Wine Duty Easement

Additionally, a temporary easement that taxed wines with an Alcohol by Volume (ABV) between 11.5% and 14.5% at a flat rate has concluded. Now, wines are taxed based on their specific ABV, leading to higher duties on stronger wines. Consequently, a bottle of wine with a 14.5% ABV may see a duty increase of up to 54 pence.  

Impact on Consumers and the Industry

These duty changes are anticipated to result in higher retail prices for many alcoholic beverages, as manufacturers and retailers typically pass on the increased costs to consumers. The hospitality sector, particularly pubs and restaurants, may also experience financial strain due to these adjustments. While a 1.7% duty reduction has been applied to draught drinks under 8.5% ABV sold in licensed venues, industry leaders argue that this measure provides minimal relief. They express concerns that the overall duty increases could further burden an already struggling sector.  

Government’s Rationale

The government asserts that these changes aim to create a fairer taxation system by taxing alcoholic beverages in proportion to their strength. This approach is intended to encourage responsible drinking and generate additional revenue to address the societal costs associated with alcohol consumption.

As these duty changes take effect, consumers are advised to anticipate and budget for potential price increases on their preferred alcoholic beverages. Industry stakeholders will be closely monitoring the impact of these adjustments on sales and overall consumption patterns in the coming months.

Key Points on Alcohol Price Increases Due to Inflation

1. Inflation-Linked Duty Increase

• Alcohol duty rates on non-draught products have risen by 3.6%, in line with the Retail Price Index (RPI) inflation rate.

• Spirits and wines are most affected, with the duty on a standard bottle of gin increasing by around 32p.

2. End of Wine Duty Easement

• The temporary flat-rate tax on wines between 11.5% and 14.5% ABV has ended.

• Stronger wines (e.g., 14.5% ABV) may see duty increases of up to 54p per bottle.

3. Impact on Consumers and Businesses

• Consumers should expect higher retail prices on alcohol.

• The hospitality sector, particularly pubs and restaurants, may struggle with increased costs.

• Draught drinks under 8.5% ABV served in pubs get a 1.7% duty cut, but industry leaders say this offers minimal relief.

4. Government Justification

• The tax system is now based on alcohol strength, aiming to encourage responsible drinking.

• Additional revenue from duty increases is meant to address societal costs related to alcohol consumption.

5. Overall Impact

• Consumers should budget for price increases, particularly on spirits and higher-ABV wines.

• Industry stakeholders will monitor how the changes affect sales and drinking habits in the coming months.

Attached is a News article regarding the process of alcohol set to increase in line with inflation 

https://www.bbc.co.uk/news/articles/cg7zvrzm25lo.amp

Article written and configured by Christopher Stanley 

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