Autumn Budget 2021

Duty increase for alcohol scrapped, new scheme to lower rate further

By Gary Lloyd contact

- Last updated on GMT

Toast the news: planned duty increases have been scrapped and a new scheme will see further reductions (credit: Getty/Matt Porteous)
Toast the news: planned duty increases have been scrapped and a new scheme will see further reductions (credit: Getty/Matt Porteous)

Related tags: Budget, Beer, Wine, Spirits, Cask ale, Lager, Craft beer, Cider, Rtds, Cocktails

Chancellor Rishi Sunak announced planned duty increases for alcoholic drinks at pubs would be cancelled from midnight on Thursday (28 October) and a new Draught Relief scheme would see duty cuts of 5% introduced in 2023.

Speaking during his Autumn Budget statement, Sunak said the planned increases on spirits, wine, beer and cider will be cancelled – a move that results in a tax cut worth £3bn.

Further, he announced the introduction of Draught Relief, which will apply a new lower rate of duty on draught beer and cider, and apply to drinks served in containers over 40 litres.

The move will cut duty by 5%, claimed Sunak, adding it would be “the biggest cut to cider duty since 1923, the biggest cut to fruit cider in a generation and the biggest cut to beer duty for 50 years”. He said this represented a permanent cut in the cost of a pint of 3p. 

In an overhaul of the duty system, Sunak vowed to slash the number of different types of duty systems from 16 to five.

Small increase for stronger products

One change will see beverages with a higher alcohol content – such as “stronger red wines, fortified wines or high strength white ciders” – face a “small increase” in duty costs while lower alcohol drinks, including rosé, lower strength beer and wine, that are currently “overtaxed and have been for many decades” will pay less.

Meanwhile, small craft producers will be granted a Small Producers' Relief akin to the Small Brewers' Relief to benefit smaller businesses making drinks, such as cider, making drinks of less than 8% ABV.

Sparkling wine makers will also see the end of the 28% duty rate they currently pay and this will be reduced to be in line with still wine producers of the same alcoholic percentage.

While, fruit cider producers that have currently been paying two or three times as much duty as those who make ciders with apples and pears will pay the same.

Summing up, Sunak said: “Our reforms make the alcohol duty system simpler, fairer and healthier. They help with the cost of living while tackling problem drinking. They support innovative entrepreneurs and craft producers and they back pubs and public health and they are only possible because we've left the European Union.”

Huge relief

Reacting to the Budget announcement, Miles Beale, chief executive of the Wine & Spirit Trade Association (WSTA), said: “The decision to freeze wine and spirit duty comes as a huge relief to British businesses, the hospitality sector – including its supply chain – and consumers, giving everyone a much-needed break to help them recover from the pandemic.

“Chancellor Rishi Sunak should be commended for listening to our calls for support and understanding that punishing tax hikes are not the best way to reinvigorate the sector. 

“By offering continued respite to the UK wine and spirit sector his actions will help save jobs and - in time – replenish revenues to the Treasury through growth in our potential-filled sector.

“We welcome the reduction of the sparkling wine super tax, which is long overdue. We look forward to seeing the detail of a new system which should remove the existing unfairness of how different products are treated.”

21st century success story

Andrew Carter of wine producer Chapel Down added: ​“English wine is a 21st-century success story, and demand for Chapel Down’s award-winning sparkling wines has never been higher. It’s very encouraging to see the support and recognition of the industry’s success at a governmental level, which is the best endorsement we could hope for. The English wine industry is one of the UK drinks industry’s fastest-growing categories, and consumers are discovering the quality on their doorstep.

“The duty saved will enable the industry to create jobs, support families, and bring even more young talent into this exciting, developing sector as it recovers from the pandemic. The English wine industry – comprising of 3,800 acres under vine, 800 vineyards, 178 wineries – is expanding rapidly and governmental support provides the opportunity to build English wine on a global level.

“The Chancellor’s patronage will make us more competitive against our worldwide competitors and this change will enable us to reinvest in our business and to continue growing at pace. Chapel Down, along with the wider English wine industry, will be raising a toast to the Chancellor for his support this week.”

Meanwhile UKHospitality said: “The Chancellor’s announcements simplifying – and in many cases reducing – alcohol duties, are great news for pubs, bars and restaurants, and will benefit all. The Chancellor has shown real innovation and creativity in reforming an archaic system of duty, which we applaud.”

Night time economy adviser for Greater Manchester Sacha Lord added: “Finally, the Chancellor has recognised the strength and importance of the hospitality sector. I am pleased to see the much-needed business rate discount and the introduction of tax reforms on alcohol, both of which will go far in helping hospitality operators, especially wet-led pubs, maintain a steadier footing while they recover.”

A game-changer

The Campaign for Real Ale (CAMRA) was delighted with the announcements by Sunak. On the subject of the Draught Relief, CAMRA chair Nik Antona said: “The introduction of a draught duty rate is a game-changer for cask beer drinkers, cider and perry drinkers and the great British local. 

“This is something CAMRA has campaigned on for many years and we are delighted the Government has listened, supported our locals and introduced the important principle that beer, cider and perry served in a pub or social club should be taxed at a different rate to alcohol bought at places like supermarkets. 

“CAMRA has previously commissioned research that showed that a draught beer duty rate could pull consumption into pubs and social clubs from the off trade, providing a boost to pubs and local economies. We hope pubs and producers will make sure drinkers see the impact of this revolutionary policy on the price of their pints, to encourage them to return to their locals.  

“We look forward to campaigning for future reductions in draught duty, to make sure that consumers, brewers and publicans can enjoy the maximum benefits of this ground-breaking new policy.” 

Crucial role of pubs recognised

British Beer & Pub Association chief executive Emma McClarkin welcomed the Budget announcement but warned the duty rate in the UK remains among the highest in Europe. She said: “Pubs, brewers and beer drinkers will be toasting the Chancellor today for a range of business-boosting measures. 

“The Chancellor’s decision to freeze beer duty instead of the RPI-linked increase he had planned is to be warmly welcomed. It will save £177m and secure 9,000 vital jobs across the country. Clearly, the Chancellor listened to the 134,000 people who signed the Long Live The Local​ petition calling on him to support pubs and brewers in the Budget.

“Pubgoers will also be toasting the Chancellor today for announcing a 5% lower duty rate on draught beer worth £62m. This is great news for our local pubs and recognises the crucial role they play in our economy and society. However, the overall beer duty rate in the UK remains among the highest in Europe. It is vital for Britain’s brewers, a world class homegrown manufacturing success story, that the overall beer duty burden is reduced – not just duty on draught beer in pubs. 

“Beer is a low-strength product and breweries have invested heavily in developing a range of innovative, exciting and great tasting low and no alcohol beers. We, therefore, welcome proposals to reduce duty on lower-strength products as part of the proposed modernisation of the alcohol duty regime to better incentivise the consumption of lower-strength drinks.   

“Overall, this has been a good Budget for pubs as they recover from the pandemic. The measures announced today will help pubs and breweries play a leading role in levelling up the economy and building stronger, more vibrant communities throughout the country.” 

Related topics: Legislation

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