Wine and spirits prices soar after introduction of a new UK tax

First introduced by then-Chancellor Rishi Sunak in 2021, the system aims to encourage consumers to limit their alcohol consumption by taxing all alcohol based on its alcohol content rather than the previous categories of wine, beer, spirits and cider becomes.

Mr Sunak described the overhaul as “the most radical simplification of alcohol taxes in over 140 years”, made possible by Britain’s exit from the EU.

In the March budget bill, Chancellor Jeremy Hunt also announced that the alcohol tax freeze would end on August 1, raising inflation to 10.1%.

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

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

WSTA chief executive Miles Beale said: “We are facing an extremely difficult time for wine and spirits companies with tax hikes and other costs, including an ongoing cost-of-living crisis for their consumers, persistently high inflation, particularly in food and beverages, and prices for Glass are rising and leaving many companies little scope to generate profits. Some will inevitably be unable to stay afloat, with SMEs being the most vulnerable.

“Despite all this pressure, the government decided to inflict even more inflationary misery on consumers on August 1, with the largest single increase in alcohol taxes in almost 50 years.”

“Ultimately, the government’s new tariff regime discriminates against premium spirits and wines more than other products.

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“Wine from hotter countries, like new trading partner Australia, is penalized the most because grapes grown in hotter climates inherently produce wines with higher alcohol levels.”

“At the same time, you can’t reduce the alcohol content in wine like you can with some other products.”

“The production of wine is not an industrial process; reducing the alcohol content of wine is limited, alters the product and is costly to implement. Also, the alcohol content in full strength spirits cannot be reduced in products such as gin, vodka and whiskey with a minimum content.” required by law.

“Ultimately, the Sunak Hunt wine tax changes will limit consumer choice and drive up prices.

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“For spirits you can expect a minimum increase of £1 on a bottle of gin or vodka and a jump of £1 per bottle of wine if the duty is increased by 20% (plus VAT).”

The Chancellor cut tariffs on pints on tap across the UK by 11p in August, marking a big boost for pubs and draft beer drinkers.

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 the tax will account for around 30% of the cost of a 500ml bottle.

Despite freezing the draft, the BBPA said the tax increase on packaged beer will cost an additional £225m a year across the industry.

Graeme Littlejohn, strategy director of the Scotch Whiskey Association, said the alcohol tax increase was the largest single increase in almost 50 years: “The 10.1% increase in the tax is a hammer blow for distillers and consumers.”

“At a time when inflation is just beginning to fall, this tax increase will further fuel inflation and make it more difficult for the Scotch whiskey industry to invest in growth and job creation in Scotland and across the UK supply chain.”

“HM Treasury had a decision to make. Rather than opting to support an industry the UK government has promised to support through the tax system, the government has opted to introduce the biggest tariff increase in almost half a century, raising the cost of every bottle of Scotch sold in the UK Whiskey increased by almost a pound and the tax burden on the average bottle price increased to 75%.

“Another blow is that distillers are now faced with another competitive disadvantage in pubs, restaurants and bars as they are unfairly excluded from the beer and cider tax breaks. Pubs and other catering establishments are about much more than just beer and cider.

“Today, consumers seek quality products at social gatherings, often choosing to pay for an expertly brewed beverage but less of it when they are socializing. Scotch whiskey and spirits are at the heart of this trend towards premiumisation, which supports our ambitions of “moderation while supporting public finances.”

“The industry has come to terms with the tax increase but is determined to continue the campaign for fairer treatment. We urge the Chancellor to ensure there are no further tax hikes on Scotch whiskey for the rest of this Parliament and to work with industry to repair some of the damage done to Scotland’s national drink.”

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