As announced at the Autumn budget last year, alcohol duty rates increased in line with inflation of 3.65% from 01 February. This is only the third time in a decade that most products’ duty rate has kept in line with inflation, as the Treasury and OBR assume will happen.
As explained in our budget analysis, alcohol duty will still be much lower than it was in 2012/13. In real terms:
- Draught cider duty will be 36%
- Beer duty will be 32% lower
- Draught beer duty will be 42% lower
- Cider and spirits duty will be 26% lower
Cumulatively, duty cuts will cost the Treasury over £28.6 billion from 2013- 2030, compared with if duty had been raised in line with inflation as was planned.
Also from 1 February a 1.7% reduction in the duty on draught drinks sold in licensed venues with an ABV below 8.5% came into force – equivalent to 1p less on a pint of an average strength beer.
Wine duty ‘easement’
The wine duty ‘easement’ also ended on Saturday, which means all wine products will be brought into line with other alcoholic drinks and taxed on the basis of strength by ABV. The easement meant wines with strength of 11.5-14.5% ABV were taxed as if they were 12.5% ABV.
Although the Wine & Spirit Trade Association (WSTA) was lobbying to make the easement permanent, as we explained in a blog, this would have been bad for public health.
During the easement there was a temporary distortion in how most wines were taxed, as this chart demonstrates:
From now on, the structure will be more sensibly like this (albeit with slightly higher rates):
In The Guardian, the WSTA said that prices on about 43% of wines will increase as a result of the easement period ending. However, as shown by the first chart above, wines between 11.5-12.5% will now be taxed less than they were during the easement.
Overall, this move to tax wine by strength should incentivise producers to develop less strong and harmful drinks.