Is the new drinks tax regime something to cheer?

As we raise our glasses to reduced alcohol duty, does this bring us a sparkling cheer or does it leave us flat?

The tee-total Chancellor spent a considerable amount of time in his Autumn 2021 Budget extolling the virtues of the Treasury’s post-Brexit freedom to reform alcohol duty to be based on the strength of a drink.

Subject to a consultation which ran until 30 January 2022, it is proposed that with effect from 1 February 2023 (yes, 2023!) duty on sparkling wine, draught beers and ciders be reduced, whilst duty on stronger drinks like some red wines be raised. 

This is part of a plan to simplify the current duty regime and streamline the number of rates from 15 to just 6.

As an aside to the announcement, Rishi Sunak confirmed that the planned Budget Day rise in duties was cancelled, so there was at least some immediate cheer.

But we will have to wait another 15 months to celebrate the proposed cuts in duty, the biggest of which will be reserved for sparkling wines. Rishi Sunak explained: "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 wines of equivalent strength."

So, English sparkling wine, champagne and prosecco drinkers may all have something to look forward to, although, sadly not for this Christmas or the next. They will have to wait until 2023 to pop a cork to the cuts.

Added the good news on sparkling wines is that drinks with a lower alcohol such as rose, fruit ciders, liqueurs, lower strength beers and wines will also be subject to less tax.

Subject to the outcome of this new consultation, the Government says it will include reforms to duty in the 2022/23 Finance Bill in time for their 2023 introduction.

Pubs will also benefit from a new lower rate of duty for draught drinks, which the Chancellor expects will lead to a cut in the cost of a pint by around 3 pence where drinks are served from draught containers of over 40 litres.

There will also be a new ‘small producer relief’ that will benefit small cidermakers and others who make alcoholic drinks of less than 8.5% alcohol by volume.

Whilst overall these reforms are welcome, it is disappointing that we will have to wait so long to celebrate their introduction.

If you would like to discuss the implications of the Budget and the proposed reforms on your business, please contact a member of our Food & Drink team.