Chancellor Rachel Reeves has revealed the upcoming increase in alcohol prices for consumers at retail locations like shops, bars, pubs, and restaurants in the coming year as part of the latest Budget announcement. In the UK, alcohol tax is a duty paid by producers and importers, determined by the alcohol’s strength (ABV) and category.
During her Budget speech, Rachel Reeves disclosed that alcohol duty would see a rise matching the inflation rate. Typically, the duty increase aligns with the Retail Price Index from September, which stood at 4.5% this year. The adjustment in alcohol duty will be implemented on February 1, 2026, to maintain its current real value.
Reeves emphasized that the decision to raise alcohol duty was made after considering various viewpoints, ranging from a duty reduction or freeze to above-inflation hikes. This choice aims to balance the significant contributions of alcohol producers and the hospitality sector to the UK’s economy and cultural landscape with the duty’s role in mitigating alcohol-related harm.
Industry leaders had urged the Government to freeze duty in this year’s Budget, citing the impact of previous tax increases and the additional burden of the new glass tax. Official data shows that alcohol prices have already increased by 5.8% compared to the previous year.
In the previous year, alcohol duty saw a 3.6% hike, resulting in a 54p increase for a bottle of wine and a 32p rise for gin, while draught duty was reduced by 1.7%, equivalent to a penny off a pint. Miles Beale, the chief executive of the Wine and Spirit Trade Association (WSTA), expressed concerns over the cumulative effect of tax hikes and additional costs on businesses in the sector.
The UK Spirits Alliance spokesperson, Karl Mason, lamented the impact of the duty increase on distillers, pubs, and the broader hospitality industry, highlighting the potential negative consequences on businesses and employment opportunities. Despite the discontent among industry stakeholders, the Alcohol Health Alliance (AHA) supported the Chancellor’s decision to align alcohol duty with inflation.
The significance of alcohol duty to the UK economy is noteworthy, with projections indicating a revenue generation of around £13 billion for the financial year 2025-26. Comparisons with EU countries reveal that the UK ranks among the top in terms of excise rates for beer, wine, and spirits. The duty rates vary based on the alcohol content and type of drink, with recent adjustments reflecting an alignment with inflation.
In conclusion, the adjustment in excise duty will lead to higher prices for alcohol in retail settings, impacting consumers and businesses in the sector.