Consumers are being warned to expect substantial price rises on their favourite alcoholic drinks as Government is set to make a double whammy tax grab.
Tomorrow, February 1st duty hikes imposed at the Autumn Budget come into effect businesses are keen for customers to understand why their favourite wine and spirit drinks are likely to jump up in price.
Alcohol taxes will be increased, following the Chancellor’s decision to increase duty by RPI at 3.6% and introduce taxing wine by strength. This will mean duty on a bottle of gin will increase by 32p, and for wine, at 14.5% abv, will increase by 54p.
Taking into account the duty hikes introduced on 1 August 2023, duty on a 14.5% red wine will have increased by 98p in just 18 months.
The added tax burden for British businesses doesn’t stop there and wine and spirit companies are set to face a second round of punishing tax increases when new waste packaging recycling fees, as part of Extended Producer Responsibility (EPR), come into effect in April, adding around 18p* to a bottle of spirits and 12p* to a bottle of wine.
UK businesses are warning customers that they cannot absorb another round of tax increases and so consumers should expect to pay a higher price for their favourite tipple. For example, as a result of the double tax slam coming down the line, and taking into account VAT, the price of a bottle of gin will go up by at least 60p a bottle and a bottle of 14.5% abv red wine, will increase by about 80p.
Alcohol sales in the UK have been in steady decline since 2023 following the largest alcohol tax hike for 50 years, which saw more than 10% duty increases for spirits and beer and at least a 20% increase in duty for most wine.
Latest figures from HMRC show that alcohol tax receipts have fallen by £209 million in the financial year (April to December 2024) compared to the previous financial year, showing that tax increases supress consumer demand and reduces Treasury coffers.
Miles Beale, Chief Executive of the Wine and Spirit Trade Association, said: “The Government continues to claim that the tax hikes are part of their big plan to plug the black hole in the public finances, but a series of record-breaking tax levies are doing the exact opposite. There are no winners under the UK’s punishing alcohol tax regime – higher duty rates mean people buy less which results in reduced income to the Exchequer, businesses are being squeezed and consumers have to pay more.”
“The financial impact will be different for every business, but it is estimated that some of the major retailers will be facing millions of pounds in losses. This will have a knock-on effect on producers and distributors who will also find their profits plundered. The result is a bitter blow for British businesses, large and small.”
“Unfortunately, the pain of price hikes for consumers won’t stop there as new taxes on waste packaging are coming round the corner. This seemingly never-ending assault on wines and spirit businesses mean consumers need to brace themselves to pay substantially more for their favourite products.”
Excise Duty on wine between 11.5% abv and 14.5% abv is currently calculated according to a temporary easement mechanism, introduced as part of the new duty system last year. However, from 1 February when the single amount of duty paid on wines between 11.5-14.5% abv – which encompasses 85% of all wine on the UK market – will be replaced with up to 30 different payable amounts.
The WSTA and its members have argued that avoiding imposing damaging and unnecessary additional costs and red tape by maintaining the wine easement, will benefit businesses and consumers by driving growth and keeping prices stable while optimising Government income.
Miles Beale added: “The wine and spirit industry is not against environmental taxes and businesses continue to work towards using less packaging and making products more recyclable, but the design and development of EPR has thus far been confusing, badly managed and remain incomplete.
Defra’s latest estimate for forecast EPR fees for glass of £240 per tonne has come as an unwelcome shock after earlier estimates were much lower, at around £110 to £215 a tonne.”
“These substantially higher estimates, which will fail to reassure WSTA members that the EPR scheme is in any way ready to be introduced in less than 3 months’ time. The fallout from another exorbitant tax hit will mean another price rise for consumers.”
The tax increases will not only impact prices but will also mean that consumers will start to see some of their favourite drinks could disappear from shelves. For smaller independent retailers the administrative burden of calculating the new duty system for wine will hit hard and consumer choice will be reduced.
Emma McClarkin, CEO of the BBPA, said: “British brewers and pubs pour billions into the economy, support more than a million jobs, and are at the heart of communities.”
“Whilst we welcome the Government’s acknowledgement of the sector and the cut to draught beer in the last Budget, we need to see further cuts in beer duty to get close to the European average. We pay far more than our European neighbours, with the UK paying 12 times more duty than Spain and Germany. Indeed, the increase in packaged beer is a step the other way and another burden our sector will have to shoulder.”
“Following the wider Budget announcements, pubs and brewers now face an April cliff edge, when a further £650m extra in costs will begin.”
“This includes the reduction of vital business rates relief, staggering new employer costs, and the beer bottle packaging tax, all which will stifle growth and investment.”
“We urge Government to work with us and quickly introduce meaningful business rates reform and phase in new costs so that pubs can thrive and our sector can help deliver their growth mission.”