ALCOHOL: Chancellor reserving decision on duty rates for Spring Budget 2023

By Bill Heaney

  • Alcohol duty freeze extended six months from 1 February to 1 August 2023
  • Part of government’s responsible management of UK economy, plan aims to reassure and provide certainty to pubs, breweries and distilleries facing tough challenges ahead
  • End date aligns with new simpler alcohol tax system taking effect, with Chancellor reserving decision on future duty rates for Spring Budget 2023

The freeze to UK alcohol duty rates has been extended six months to 1 August 2023, the government has announced, a measure that will be welcomed by West Dunbartonshire and Argyll and Bute-based distillers and brewers.

In a statement to the House of Commons, Exchequer Secretary to the Treasury James Cartlidge laid out a plan designed to provide certainty and reassure pubs, distilleries, and breweries as they face a challenging period ahead.

While new duty rates usually come in on the 1 February each year, Mr Cartlidge set out that this year the duty rates decision will be held until the Chancellor Jeremy Hunt, right,  delivers his Spring Budget on the 15 March 2023.

Further, the Minister made clear that if any changes to duty are announced then, they will not take effect until 1 August 2023. This is to align with the date historic reforms for the alcohol duty system come in, and amounts to an effective six month extension to the current duty freeze.

As part of the government’s commitment to responsible management of the UK economy, these changes will provide pubs, breweries, distilleries and other alcohol-related businesses with increased certainty to plan and make investment decisions more effectively.

Exchequer Secretary to the Treasury James Cartlidge said: “Today’s announcement reflects this government’s commitment to responsible management of the UK economy and supporting hospitality through a challenging winter.

“The alcohol sector is vital to our country’s social fabric and supports thousands of jobs – we have listened to pubs, breweries and industry reps concerned about their future as they get ready for the new, simpler, alcohol tax system taking effect from August.

“That’s why we have acted now to give maximum certainty to industry and confirmed there will be just one set of industry-wide changes next summer.”

The current alcohol duty freeze was announced at Autumn Budget 2021, saving consumers over £3 billion over five years. It was expected to come to an end on 1 February 2023, following the Chancellor’s reversal of most of September’s Growth Plan to restore trust in the economy and strengthen public finances.

At Autumn Budget 2021 the government announced the biggest reforms to alcohol duty in 140 years. The changes overhaul the UK’s out-dates rules following exiting the EU by radically simplifying the entire system and slashing red-tape. To give industry more time to prepare, September’s Growth Plan set out that the reforms would take effect from 1 August 2023.

The new alcohol tax system will adopt a common-sense approach, where the higher a drink’s strength the higher the duty, whilst new reliefs will be made available to help pubs and small producers thrive.

New Draught Relief will be worth £100 million a year and will ensure smaller craft producers can benefit, the threshold for qualifying containers will be 20 litres.

Small Brewers Relief will be renamed Small Producer Relief, reformed and expanded. Until the revamp, a cliff-edge existed when relief is withdrawn for brewers who make more than 5,000 hectolitres a year. This will be addressed, there will instead be a gradual taper to the removal of relief, which will empower small breweries to grow, after they had made clear through consultation that the current design was acting as a barrier.

Further, the expansion of the relief means that all producers that make drinks below 8.5% – mostly craft brewers and cidermakers – will be able to get relief on their products.

The alcohol duty reforms will help create a simpler, fairer and healthier duty system. Higher rate for sparkling wines will come to an end, meaning they will pay the same rate as still wine. Liqueurs will be put on the same footing as fortified wine, meaning a sherry and Irish Cream will now pay the same duty, and super-strength ‘white cider’ will rise to address public health concerns.

The wine industry will also be supported as they adapt to the new system. All wine between 11.5-14.5% alcohol by volume (ABV) to calculate duty as if it were 12.5% ABV for 18 months from the implementation of the new system.

One comment

  1. Interesting article.

    Setting tax levels is a complicated business since price sets demand. Some seventy years ago one Chancellor Sir Stafford Cripps decided to cut tax on beer to please the electorate. The result however was a huge increase in the overall tax take. Reduced tax but huge sales increase.

    Of course if the concern is keeping pubs in business one of the big concerns is how many people now buy their booze in the supermarket because it’s cheaper than going out. Increase off sale prices, reduce pub prices, and maybe we could have a vibrant eating and drinking out culture, rather than the stay at home bevy culture.

    But aside of keeping the pubs and restaurants alive, we also need to be mindful of our whisky export market which, in relation to malts to America was so recently badly hit by protective trade tariffs. In truth the punitive whisky tariffs appear to have had more to do about engineering trade disputes between Boeing and Airbus – but Scotland got caught in the crossfire, and of course now out of the EU cross border EU bottling, labelling of spirits, as was done with Swedish vodka at Kilmalid is now off the card.

    But back to pubs and restaurants these are so much better for our social interactions, economic activity than sitting at home.

    Pity Scotland doesn’t have any say over alcohol duty. Making decisions to suit ourselves as opposed to Westminster has a certain appeal to it.

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