In the Spring budget, the UK government announced their plans to increase the duty rates on alcohol from August 2023 onwards. Overall, this is increasing by 10%, though a lower rate applies to drinks with low alcoholic content and sparkling wine.
What happened?
The Prime Minister, Rishi Sunak, and the Chancellor, Jeremy Hunt, decided to tax alcohol based on its strength in line with a 10.1% inflation rate. This affects businesses and consumers alike. Alcohol duties had previously been frozen since 2020, but now things are changing.
The one positive aspect of this — as far as anyone looking to purchase alcohol is concerned — is that prices for some of the low alcohol-content drinks will fall.
How does it work?
In simple terms, drinks with an Alcohol by Volume rate (ABV) of more than 8.5% will be taxed at higher rates. Meanwhile, drinks with an ABV of below 3.5% will be taxed at a lower rate.
What does this mean for businesses?
There are certain things affected businesses may need to reconsider due to the tax increases. They may find themselves needing to up the prices of drinks to compensate for the higher taxation.
Since the announcement, some companies soon started to decrease the alcohol percentage in their drinks so that they would not have to pay higher rates. This is a move that brands like Spitfire, Old Speckled Hen, Bishops Finger and Foster’s have allegedly made.
What does this mean for consumers?
For the average consumer in the supermarket, a bottle of wine with an ABV of between 11.5% and 14.5% could set them back an extra 44p.
Wines below 11.5% ABV and some sparkling wines are also likely to become cheaper. In the pub, a draught is likely to be up to 11p lower than what it would cost in the supermarket, a move by the government to support small businesses in the wake of Brexit.
Why is this happening?
There are a few reasons why the government has made this move.
• They state that this is a way to simplify and reform the previous system, which had more duty rates than the new system.
• It is also an incentive to reduce the number of weekly alcohol units consumed in the UK.
• They also hope that the draught relief that many pubs will now be entitled to on drinks with an ABV that is lower than 8.5% will benefit.
In a time when the economic situation is so volatile, it’s no surprise that changes are being made to the alcoholic beverages market too. The move has, of course been controversial with many businesses. What are your thoughts?