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Landmark overhaul for alcohol duty is the biggest shakeup in 140 years

Published:  27 October, 2021

Chancellor Rishi Sunak has announced the most radical simplification of alcohol duties for over a century by slashing the number of main duty rates from 15 to six, while also cutting the premium on sparkling wine.

In today’s midday Autumn Budget address, Sunak officially announced the adoption of a new excise duty hierarchy which follows the principle of “the stronger the drink, the higher the rate”.

This will create a system that is “simpler, fairer and healthier”, he said, with stronger red wines, fortified wines and high strength white ciders likely to see a small increase in their rates, and a fall for rosé, fruit ciders and low abv beers and wines.

The premium on duty on English sparkling wine has also been eliminated. Sunak announced the end of the “irrational duty premium of 28%”, and will now see sparkling wine attract the same rates as still.

The announcements largely follow leaked documents prior to the budget announcement, which said that the review of alcohol duty will see higher strength drinks attract a small increase in their rates. This is the “right thing to do” Sunak said, given that they are currently undertaxed based on their strength.

This will also “help to end the era of cheap high strength drinks”.

Regarding sparkling wine, Sunak said he is “going to modernise the system to reflect the way that people drink today”. This including changing consumption patterns of wines like Prosecco, which has doubled over the past decade; and English sparkling wine, which has “increased tenfold”.

“It’s clear [sparkling wines] are no longer the preserve of wealthy elites and they are no stronger than still wines. So I’m going to end the irrational duty premium of 28% that they currently pay. Sparkling wines, wherever they are produced, will now pay the same duty as still wine of equivalent strength. And because growing conditions in the UK typically favour lower strength and sparkling wines, this means English and Welsh wines compared with stronger imported wines will now pay less.”

Miles Beale chief executive of the Wine & Spirit Trade Association, said: “The decision to freeze wine and spirit duty comes as a huge relief to British businesses, the hospitality sector – including its supply chain – and consumers, giving everyone a much-needed break to help them recover from the pandemic.

“Chancellor Rishi Sunak should be commended for listening to our calls for support and understanding that punishing tax hikes are not the best way to reinvigorate the sector.

“By offering continued respite to the UK wine and spirit sector his actions will help save jobs and – in time – replenish revenues to the Treasury through growth in our potential-filled sector.

“We welcome the reduction of the sparkling wine super tax, which is long overdue. We look forward to seeing the detail of a new system which should remove the existing unfairness of how different products are treated.”

The freeze on duty increases on categories such as Scotch, wine, cider and beer, are worth £3bn.

There is also a 5% cut in taxes on pints pulled in pubs.

Shares in UK pub chains have allegedly jumped after Sunak announced “draught relief” – a new, lower rate of duty on draught beer and cider.

This draught relief will apply a lower rate of duty on draught beer and cider, cutting the tax by 5% on drinks served from draught containers over 40 litres and bringing the price of a pint down by 3p.