The increase, an extra £225m in revenue, is thought to be fuelled by a 12% surge in gin sales.
According to the Wine and Spirit Trade Association (WSTA), gin now boasts the fastest growth rate of any drink and British exports of the spirit are set to hit £500m this summer.
In total, spirits duty raised £3.38bn in revenue for the Treasury last year, helped by a freeze in spirits duty that was announced in the 2016 spring Budget. Beer duty was also frozen in the same Budget, and raised £3.32bn.
Tax burden fears
However, there are fears the growth in sales of spirits could experience a slump after a 3.9% rise in alcohol duty was announced in the spring Budget, which added 30p to the price of a bottle.
The UK has the fourth highest rate of spirits duty rates in the EU, with a huge 77% of a bottle of spirits accounted for by tax.
WSTA chief executive Miles Beale said that the rise in duty “threatens the industry’s ability to invest, grow and export.”
Wine still on top
He said: “The WSTA dubbed 2016 the year of gin, and the gin boom has had a large part to play in the windfall now being enjoyed by the Treasury. The 7% increase on revenue takings came as a result of the Chancellor freezing spirit duty in 2016 and allowing the industry to grow and invest.
“It proves the point that cutting or freezing spirits duty brings rewards, which is why the inflation-busting rise in duty this year was such a disappointment and threatens the industry’s ability to invest, grow and export.”
Wine remains the highest revenue generator for the Treasury, bringing in more than £4bn this financial year.
The Scottish National Party has promised to conduct a review of alcohol taxation in its 2017 general election manifesto, which it is thought would shift the burden to lower strength drinks such as beer.