Chancellor Rachel Reeves has revealed the upcoming increase in alcohol prices for consumers at various retail outlets, including shops, bars, pubs, and restaurants, in the upcoming year. This announcement was made as part of today’s Budget. Alcohol tax in the UK is an excise duty paid by producers and importers, which is determined based on the alcohol’s strength (ABV) and category.
During her Budget speech, Rachel Reeves stated that alcohol duty would be raised in line with inflation. Typically, this increase aligns with the Retail Price Index from September, which stood at 4.5% this year. The adjustment in alcohol duty based on the RPI will take effect on February 1, 2026, to maintain its current value in real terms.
Reeves highlighted that the decision to increase alcohol duty was made after considering various perspectives, ranging from reducing or freezing the duty to implementing above-inflation hikes. She emphasized the balance between the significant contributions of alcohol producers and the hospitality sector to the UK’s culture and economy and the duty’s role in mitigating alcohol-related harm.
A call to freeze duty in this year’s Budget was made by industry leaders, citing the challenges faced by members following the tax increments introduced in February and the additional impact of the new glass tax. Official figures indicate that alcohol prices have already risen by 5.8% compared to the previous year.
In the previous year, a 3.6% increase in alcohol duty led to an additional cost of 54p for a bottle of wine and 32p for gin, while draught duty saw a reduction of 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 cumulative effects of these duty changes on businesses in the industry.
Furthermore, the UK Spirits Alliance spokesperson, Karl Mason, expressed disappointment over the impact of the duty increase on distillers, pubs, and the broader hospitality sector. The continuous rise in duty was criticized for hindering business growth, job creation, and investment opportunities.
However, the Alcohol Health Alliance (AHA) welcomed the Chancellor’s decision to adjust alcohol duty in line with inflation, emphasizing the importance of maintaining duty levels to address public health concerns. The AHA chairman, Professor Sir Ian Gilmore, emphasized the necessity of aligning alcohol duty increases with inflation to promote responsible drinking habits.
The forecasted revenue from Alcohol Duty for the financial year 2025-26 is estimated to be approximately £13 billion, contributing significantly to government receipts. The UK’s excise rates for alcohol compared to other EU countries indicate higher taxation levels, particularly on products like beer and wine.
In summary, the adjustment of alcohol duty rates to inflation will result in increased prices for alcohol at retail establishments, impacting consumers directly.