UK

British PM insists alcohol duty changes will benefit businesses despite tax hikes

The alcohol duty freeze will come to an end (PA)
The alcohol duty freeze will come to an end (PA) The alcohol duty freeze will come to an end (PA)

The British Prime Minister has insisted businesses and consumers will benefit from alcohol duty changes on Tuesday, despite tax increases affecting some types of drink.

First set out by then-chancellor Rishi Sunak in 2021, the new system aims to encourage drinkers to cut back by taxing all alcohol based on its strength, rather than the previous categories of wine, beer, spirits, and ciders.

Mr Sunak described the overhaul as “the most radical simplification of alcohol duties for over 140 years”, enabled by Britain’s exit from the EU.

In March’s Budget, Chancellor Jeremy Hunt also announced that the freeze to alcohol duty would end on August 1 and increase by inflation, at 10.1%.

The increase will see duty rise by 44p on a bottle of wine, which when combined with VAT will mean consumers will pay an extra 53p, according to the Wine and Spirit Trade Association (WSTA).

Alcohol Drinking – Stock
Alcohol Drinking – Stock

Patrons with their drinks in Irish pub O’Neill’s in Carnaby Street, central London (Yui Mok/PA)

Duty on 18% cream sherry will go up from £2.98 to £3.85, with VAT adding up to an increase of more than £1 a bottle, while a bottle of port will go up by more than £1.50.

The total tax on a bottle of gin or vodka will go up by around 90p.

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The Chancellor is cutting the duty charged on draught pints across the UK by 11p in August in a major boost for pubs and draught beer drinkers, which Mr Sunak hailed as beneficial to “thousands of businesses across the country”.

The Prime Minister said: “I want to support the drinks and hospitality industries that are helping to grow the economy, and the consumers who enjoy the end result.

“Not only will today’s changes mean that that the price of your pint in the pub is protected, but it will also benefit thousands of businesses across the country.

“We have taken advantage of Brexit to simplify the duty system, to reduce the price of a pint, and to back British pubs.”

However, the British Beer and Pub Association (BBPA) said brewers will pay 10.1% more tax on bottles and cans of beer from Tuesday, meaning tax will make up around 30% of the cost of a 500ml bottle.

Despite the draught freeze, the BBPA said the tax increase on packaged beer will add an extra £225 million of costs per year across the industry.

Scotch Whisky Association director of strategy Graeme Littlejohn said: “The 10.1% duty increase is a hammer blow for distillers and consumers.

“At a time when inflation has only just started to creep downwards, this tax increase will continue to fuel inflation and make it more difficult for the Scotch Whisky industry to invest in growth and job creation in Scotland and across the UK supply chain.

“Rather than choosing to back an industry which the UK Government promised to support through the tax system, the Government has chosen to impose the largest duty increase in almost half a century, increasing the cost of every bottle of Scotch Whisky sold in the UK by almost a pound and taking the tax burden on the average priced bottle to 75%.

“In a further blow, distillers will now face a further competitive disadvantage in pubs, restaurants and bars by being unfairly excluded from tax breaks available to beer and cider.

“Pubs and other on-trade businesses are about far more than beer and cider.”

The Chancellor said the Government was doing “all we can” to help Britain’s pubs as they face rising costs and said the change taking effect on Tuesday “catapults us into the 21st century”.

The Treasury has said that more than 38,000 UK pubs will benefit from tax relief that effectively freezes or cuts the alcohol duty on beer poured from tap from Tuesday.

Mr Hunt said: “British pubs are the beating heart of our communities and as they face rising costs, we’re doing all we can to help them out. Through our Brexit Pubs Guarantee, we’re protecting the price of a pint.

“The changes we’re making to the way we tax alcohol catapults us into the 21st century, reflecting the popularity of low alcohol drinks and boosting growth in the sector by supporting small producers financially.”