Chancellor Rachel Reeves has revealed the upcoming adjustments to alcohol prices in various establishments like shops, bars, pubs, and restaurants for the coming year as part of today’s Budget announcement. Alcohol tax in the UK is a duty paid by producers and importers, determined by the alcohol’s strength (ABV) and category.
During her Budget speech, Rachel Reeves declared that alcohol duty would increase in line with inflation, aligning with the 4.5% Retail Price Index from September. This adjustment will take effect on February 1, 2026, to maintain the current real value of alcohol duty.
Reeves stated that the decision to raise alcohol duty was reached after considering various viewpoints, including suggestions for a duty reduction or freeze, as well as above-inflation hikes. She emphasized the balance between the contributions of alcohol producers and the hospitality sector to the UK’s culture and economy, along with the duty’s role in mitigating alcohol-related harm.
Despite industry leaders urging the Government to freeze duty in the current Budget, citing the challenges posed by previous tax increases and the introduction of the glass tax, official figures already indicate a 5.8% increase in alcohol prices from the previous year.
Last year, drinkers faced a 3.6% rise in alcohol duty, leading to a 54p increase for a bottle of wine and a 32p rise for gin, while draught duty experienced a 1.7% reduction, equivalent to a penny off a pint, in the 2024 Budget. The Wine and Spirit Trade Association’s Chief Executive, Miles Beale, expressed concerns about the cumulative impact of these duty hikes on businesses in the industry.
The Treasury’s decision to once again raise alcohol duty was criticized by industry representatives, anticipating negative consequences on consumers, businesses, and government revenues. The UK Spirits Alliance spokesperson, Karl Mason, highlighted the detrimental effects on distillers, pubs, and the wider hospitality sector due to the continuous duty hikes.
Conversely, the Alcohol Health Alliance (AHA) viewed the Chancellor’s decision positively, considering it a move towards a more responsible approach to alcohol taxation. AHA Chairman Professor Sir Ian Gilmore emphasized the importance of maintaining alcohol duty in real terms to address public health concerns and promote responsible alcohol consumption.
Alcohol duty plays a significant role in the UK economy, projected to generate approximately £13 billion for the financial year 2025-26. Comparative analysis shows that the UK’s excise rates for beer, wine, and spirits rank among the highest in the EU, with specific examples highlighting the extent of duty on various alcohol products.
In conclusion, the adjustment of alcohol duty to track inflation will lead to increased prices for alcohol in pubs and shops, impacting consumers and businesses across the sector.