Government freezes alcohol duty, sets out “transitional measure” for wine duty reform
The government has scrapped plans to increase the duties on beer, cider, wine and spirits. The move was announced today as part of chancellor Kwasi Kwarteng’s ‘mini-budget’.
“At this difficult time, we are not going to let alcohol duty rates rise in line with RPI,” he said. “So, I can announce that the planned increases in the duty rates for beer, for cider, for wine, and for spirits will all be cancelled.”
The move was welcomed by the Scotch Whisky Association. Chief executive Mark Kent said the measure means the planned double-digit inflationary increase will no longer go ahead.
“This will save consumers £1.35 on the average-priced bottle of Scotch whisky, and help the industry as it deals with the dual challenge of rising energy costs and supply chain pressures,” Kent said.
Kwarteng also said that he would introduce new measures for wine, in the context of alcohol duty reform.
“I have listened to industry concerns about the ongoing reforms,” he said. “I will therefore introduce an 18-month transitional measure for wine duty.”
Miles Beale, chief executive of the Wine and Spirit Trade Association (WSTA) welcomed the government’s decision to freeze duty. However, Beale said the response to the consultation on reviewing the way the UK taxes alcohol “is a product of the Sunak era and clashes strongly with chancellor Kwarteng’s desire to unleash the potential of the private sector and to simplify taxation”.
“The proposals mean wine between 11.5% and 14.5% [abv] will be taxed at the mid-point - but only for 18 months,” explained Beale. “After that the Treasury are set to tax wine by strength adding a costly administrative burden for UK wine businesses and consumers. Fortified wine will be offered no transition, meaning the outlook is even worse.”
Beale said the chancellor's response to the WSTA’s concerns over duty reform fails to avoid red tape or to understand the impact that taxing wine by strength will have on UK wine businesses and consumers.
“We need a permanent and simple way of taxing wine, the UK’s most popular alcoholic drink. An 18-month transitional period fails to do this, and it is not available to all wines.”
In beer, the chancellor said he plans to extend draught relief to cover smaller kegs of 20 litres and above “to help smaller breweries”.
Elsewhere, the Association of Convenience Stores (ACS) welcomed the chancellor’s measures to stimulate growth and cut taxes in the short term.
- Around 40 new 'Investment Zones', providing targeted tax reliefs for new businesses
- The April 2022 rise in both employee and employer National Insurance rates will be reversed
- Corporation tax rates will be frozen at 19%
- The Annual Investment Allowance will be permanently set at £1m from April 2023
- Reducing the basic rate of income tax to 19% from April 2023
ACS chief executive James Lowman said: “We welcome that the government’s plan aims to stimulate growth and incentivise investment by businesses. In the last 12 months local shops have invested £605 million in improving services, making their businesses more sustainable, and creating secure local jobs.”
However, Lowman warned that shops will need longer term support to tackle rising energy costs.