Understanding the Changes to Alcohol Duty: What You Need to Know
The UK government has announced significant updates to Alcohol Duty, which will take effect from 1 February 2025. These changes aim to support the hospitality industry, promote small producers, and adjust rates in line with the Retail Price Index (RPI). Below is an overview of how these updates might affect individuals, businesses, and the wider economy.
Who Will Be Affected?
The changes are set to impact:
Manufacturers: Those producing alcoholic beverages.
Distributors and retailers: Businesses involved in the supply chain.
Importers: Companies bringing alcoholic products into the UK.
Consumers: Individuals purchasing alcohol for personal use.
Key Changes to Alcohol Duty
Draught Products
Reduction in Duty: Alcohol Duty rates for draught products will decrease by 1.7% in cash terms (or 5.1% compared to the expected RPI increase).
Enhanced Draught Relief:
For qualifying beer and cider, relief increases from 9.2% to 13.9%.
For qualifying wine, spirits, and other fermented products, relief increases from 23% to 26.9%.
Eligibility for Draught Relief: Applies to draught alcoholic products under 8.5% alcohol by volume (ABV), packaged in containers of at least 20 litres, designed for dispensing via pressurised or pump delivery systems.
Non-Draught Products
Alcohol Duty rates for non-draught products will rise in line with RPI inflation.
Simplified duty rates for calculating excise duty on alcoholic products imported for personal use will also increase.
Support for Small Producers
Increased Cash Discounts: Small Producer Relief for non-draught products will increase, offering greater support to small producers.
Maintained Discounts for Draught Products: Existing cash discounts for draught products will remain.
Eligibility for Relief: Available for small producers creating beverages under 8.5% ABV, with total production under 4,500 hectolitres of pure alcohol annually.
Policy Objectives
The government’s primary goals are:
Supporting the Hospitality Industry: Recognising the importance of pubs and other on-trade venues in communities.
Encouraging Small Producers: Offering financial relief to boost competitiveness for small-scale producers.
Aligning with RPI: Ensuring Alcohol Duty rates are in step with inflation forecasts.
The Bigger Picture: Background to the Measure
Recent reforms have shifted towards a progressive, strength-based Alcohol Duty system:
Introduced on 1 August 2023 following the Alcohol Duty Review.
Included:
Draught Relief: Reduced duty for draught products sold in on-trade venues.
Small Producer Relief: Replaced the previous Small Brewers Relief.
Temporary Wine Easement: A transitional measure for certain wine products, set to end on 1 February 2025.
Historical Context:
Alcohol Duty rates were frozen at the Autumn Statement 2023, extended until 1 February 2025.
The recent announcement at Autumn Budget 2024 confirmed that non-draught Alcohol Duty rates would rise in line with RPI from February 2025.
Economic and Consumer Impacts
Economic Impacts
The measure is not expected to have significant macroeconomic effects.
Revenue implications (in £ millions):
| Year | Impact (£m) |
|---|---|
| 2024/25 | -10 |
| 2025/26 | -85 |
| 2026/27 | -85 |
| 2027/28 | -90 |
| 2028/29 | -95 |
| 2029/30 | -100 |
For Consumers
The impact on prices depends on how changes in duty rates are passed on by businesses. Assuming full pass-through, here’s what to expect:
Draught Products:
4% ABV pint of draught beer: 1p less in duty.
5% ABV pint of draught cider: 1p less in duty.
Non-Draught Products:
500ml bottle of 4% ABV beer: 2p more in duty.
250ml glass of 13% ABV wine: 8p more in duty (4p due to RPI uprating, 4p from the end of the wine easement).
Impacts on Businesses
Administrative Burden
Up to 10,000 businesses (including producers, importers, and warehouses) will need to familiarise themselves with the new rates. The one-off administrative cost is expected to be negligible.
Hospitality Industry
Lower draught Alcohol Duty rates will benefit pubs and other on-trade venues, partially offsetting the impact of the uprating.
Small and Micro Businesses
Small Producer Relief will reduce the financial impact of duty increases for eligible small-scale producers.
Conclusion
These updates to Alcohol Duty reflect a balanced approach to supporting the hospitality sector, encouraging small producers, and aligning duty rates with inflation. While the changes will result in slightly higher costs for non-draught products, they will provide relief for draught beverages served in pubs and similar venues — reinforcing the government’s commitment to promoting community-focused settings.
As the 1 February 2025 implementation date approaches, businesses and consumers alike should prepare for these changes to ensure a smooth transition to the updated Alcohol Duty framework.
