Chancellor Rachel Reeves has disclosed the upcoming increase in alcohol prices for consumers at various establishments like shops, bars, pubs, and restaurants in the upcoming year through a statement made during today’s Budget announcement. The alcohol tax in the UK, an excise duty paid by producers and importers, is determined based on the alcohol’s strength (ABV) and category.
During her Budget speech, Rachel Reeves revealed that alcohol duty will rise in accordance with inflation, aligning with the Retail Price Index increase of 4.5% from September this year. The adjustment will take effect on February 1, 2026, to ensure the duty maintains its current real value.
Reeves mentioned that the decision to raise alcohol duty was made after considering inputs from stakeholders advocating for a duty reduction or freeze, balancing the contributions of alcohol producers and the hospitality sector to the UK’s culture and economy with the duty’s role in mitigating alcohol-related harm.
Industry leaders had lobbied for duty freeze in this year’s Budget, citing the impact of previous tax hikes and the additional burden of the new glass tax. Official figures indicate that alcohol prices have already increased by 5.8% compared to last year.
In the previous year, drinkers faced a 3.6% rise in alcohol duty, resulting in a 54p increase for a bottle of wine and a 32p increase for gin. However, draught duty was reduced by 1.7%, equivalent to a penny off a pint, in the 2024 Budget. Miles Beale, the chief executive of the Wine and Spirit Trade Association (WSTA), expressed concerns over the challenges faced by wine and spirit businesses due to the successive duty increases.
The UK Spirits Alliance spokesperson Karl Mason lamented the impact of the duty increase on distillers, pubs, and the broader hospitality sector, highlighting the financial strain on businesses and potential job losses. The decision was criticized for its adverse effects on businesses and working individuals, with calls for the government to reconsider the excise duty review next year.
In contrast, the Alcohol Health Alliance (AHA) welcomed the Chancellor’s decision to adjust alcohol duty in line with inflation, emphasizing the importance of maintaining a responsible approach to alcohol taxation for public health benefits and harm reduction.
Alcohol duty plays a significant role in the UK economy, with a forecasted revenue of approximately £13 billion for the financial year 2025-26. The duty accounts for 1.1% of government receipts, roughly £450 per household, and around 0.4% of national income.
Comparing EU and UK excise rates for beer, wine, and spirits, the UK ranks as the third-highest overall, trailing high-duty countries like Finland and Ireland. Notably, the UK applies substantial duty on wine compared to other European wine-producing nations, with an average excise duty of around £2.35 per bottle of wine.
Despite occasional nominal receipt increases, the share of alcohol duty in total government revenue has gradually declined over the years. The rates are set per liter of pure alcohol and vary across different types of drinks, with different duty levels based on alcohol by volume (ABV).
In conclusion, the adjustment of alcohol duty in line with inflation will lead to higher prices for consumers in pubs and shops.