The UK’s wine and spirit sector breathes sigh of relief at a freeze to alcohol duty after disastrous tax hikes

Budget | 06 March, 2024

But for wine businesses the benefits of a freeze will be lost after the Exchequer Secretary confirms costly red tape changes to wine duty

The wine and spirit sector has breathed sigh of relief at the freeze to alcohol duty announced by the Chancellor, after record tax hikes, introduced last August, damaged sales and depleted Treasury coffers.

However, for wine businesses, the benefits will be short lived after the Exchequer Secretary, Gareth Davies MP, confirmed at a Westminster Hall debate (yesterday) that Government plans to go ahead with complex and costly changes to the way wine is taxed. All the benefits of a freeze will be lost for wine from 1st February next year.

Following the Government’s introduction of the largest alcohol tax rise for almost 50 years the Wine and Spirit Trade Association (WSTA) and its members were able to provide compelling evidence that a tax freeze or a cut would bolster British businesses and at the same time benefit Treasury coffers.

The Chancellor’s sensible decision to freeze excise duty comes at a time when alcohol inflation has risen to more than double the headline rate – while revenue from duty receipts has declined by almost £600 million since September.

Wine businesses were left fuming after common sense failed to prevail at a Westminster Hall debate on the wine easement hosted by Will Quince MP on Tuesday. In response to Quince and a number of other, supportive MPs* Davies ignored colleagues’ pleas and confirmed the Government it would use its Brexit freedoms to introduce of more red tape.

While the new system may appear simpler in a spreadsheet, in practice, for the wine sector, it is categorically the opposite. From February a single amount of duty paid on wines between 11.5 -14.5% abv – currently £2.67 – will be replaced buy up to 30 different payable amounts from £2.45 – £3.10 per bottle.

Miles Beale, Chief Executive of the Wine and Spirit Trade Association, said:  

“The wine and spirit sector will be relieved that the Chancellor has spared them a further duty hike. This will help to keep price rises down for consumers for a period. Six months ago, alcohol duty was subjected to the largest increase in almost 50 years. Those tax increases fuelled inflation and had a negative impact on sales, which in turn has seen Treasury lose around £600 million in alcohol revenue. We are pleased that Government has now recognised that duty hikes are bad for businesses, bad for consumers and bad for the Exchequer.

However, the benefits of a freeze will be short lived for wine businesses who are fuming after confirmation that costly and fiendishly complex new taxation rules will come into force from 1 February 2025. The changes to taxing wine have been described as “un-administrable” and “sheer lunacy” by our members. Scrapping the easement for wine duty will see price increases for 75% of red wines sold in UK. The Chancellor and his Treasury colleagues should have listened to businesses and kept in place the sensible, simplified procedure for taxing wine. It’s going to be a very costly mistake.

“The announcement that the freeze will last only until February is also a source of irritation for businesses. The recent pattern of raising alcohol duty at the Spring Budget and the Autumn statement is very unsettling for the industry. We need to go back to one announcement a year to give businesses certainty.”

Karl Mason, Founder of Masons of Yorkshire Gin, said:

“It’s a relief that the Government has chosen to freeze alcohol duties. Last August’s historic increases have been bad for the spirit sector, sales are down and since September the Treasury has taken nearly £600m less in alcohol duties compared to last year, of which spirits account for over £300m. Freezing, or even better cutting, alcohol duty supports British businesses like mine and boosts revenue. I’d encourage any Chancellor to go even further next time.”

Steve Finlan, CEO, of The Wine Society, said:

“We are extremely disappointed that, yet again, Government has failed to listen to business. Following the disastrous increase in wine duty last year, which has resulted in hundreds of millions of lost revenue to the Treasury and placed further strain on the wine trade; to double down with the intention of introducing a ludicrous and complex process for calculating duty rates shows just how tone deaf they have become.

It is hard to see how this new system could be made any more complicated. It is tough for a small company with a few hundred wines to sell. For The Wine Society with tens of thousands of wines stored in-bond, it is close to unworkable, yet another mountain of red tape and more costs for the consumer to bear.”

Since 2010 the Tories have put up fortified wine duty by 90%, still wine duty by 58%, spirits duty by 33% and beer duty by 21%, while over this period CPI is 47%.

According to ONS data for average prices on items in your shopping basket in January 2024: