Alcohol Tax Revenues Drop £285m Despite Duty Increases, HMRC Figures Show

Provisional government data has revealed a significant shortfall in alcohol duty receipts for the current financial year, raising fresh questions about the relationship between taxation levels and overall revenue generation across the UK’s drinks industry.

HM Revenue & Customs figures show that total Alcohol Duty receipts for the 2025-26 financial year to date stand at £7.01 billion — a fall of £285 million, or 4%, compared with the equivalent period in the previous year.

The decline is broad-based, cutting across the majority of major drink categories and coming despite successive duty upratings in recent years, a trend that will concern operators and producers across the licensed on trade.

Wine and other fermented products have returned £2.58 billion so far this financial year, representing a year-on-year reduction of £100 million, or 4%. Spirits receipts have fared worse, generating £2.15 billion — down £156 million, or 7%, making it the single largest cash decline of any category. Beer has contributed £2.09 billion, some £59 million or 3% below the comparable period last year.

The one outlier is cider, which has recorded receipts of £175 million — up £30 million, or 21% year on year. HMRC notes, however, that cider has historically accounted for approximately 2.5% of total annual Alcohol Duty revenue, limiting the wider impact of that growth on overall figures.

The steepest proportional and cash decline falls on spirits, where a 7% reduction in receipts follows a period of considerable structural change to the duty framework. The government’s overhaul of Alcohol Duty, which came into force on 1 August 2023, introduced a system under which duty is calculated per litre of pure alcohol. Spirits are liable for duty on products above 1.2% ABV, with the charge typically falling due when product leaves bonded warehouse.

Despite subsequent uprating’s to duty rates since that reform was implemented, revenue from spirits has nonetheless declined by £156 million in the current financial year to date — a result that is likely to intensify industry debate around the effectiveness of repeated duty increases as a revenue-raising mechanism.

Looking at the most recent three-month window, provisional receipts for August to October 2025 totalled £3.12 billion, marginally ahead of the same period last year by £17 million, or 1%.

Within that period, wine and other fermented products rose by £33 million, or approximately 3%, to reach £1.18 billion. Cider continued its upward trajectory, climbing £19 million or 33% to £75 million. Spirits, however, slipped £19 million or 2% to £995 million, while beer fell £15 million or 2% to £869 million.

Following chancellor Rachel Reeve’s November budget and tax hike Wine and Spirit Trade Association (WSTA) warned that the Government’s “typically disappointing and shortsighted decision” to increase alcohol duty by RPI will perpetuate the economy’s “doom loop”.

Miles Beale, Chief Executive of the Wine and Spirit Trade Association, said:
“This Budget has been dubbed a death by a thousand cuts, and for wine and spirit businesses those cuts run deep. Our members are still reeling from the tax hikes introduced in February, and the additional burden of the costly new glass tax, known as EPR. Coupled with rises in National Insurance, increases to the minimum wage and business rates, it is no surprise that wine and spirit producers – along with our beleaguered hospitality sector – feel under sustained attack.

“The Government’s typically disappointing and shortsighted decision to raise alcohol duty yet again will only prolong the doom loop. Despite the OBR at last acknowledging higher prices lead to a decline in receipts, the Government fails to recognise that its own policy is driving up those prices. Amazingly, the Treasury continues to press ahead with its ill-founded plan to pile further duty increases on alcohol.

“Prices will rise once more for consumers, British businesses will suffer, and Treasury receipts will continue to fall – forecast to be £700 million lower than last year and £1.1 billion lower than was forecast in March.”