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On 1 August 2023, the Alcohol Duty system will become much simpler, taxing all alcoholic drinks based on their alcohol by volume (ABV).
This replaces the current Alcohol Duty system, which consists of four separate taxes covering beer, cider, spirits, wine and made-wine.
It will make the system fairer and responsive to new products entering the market as consumer tastes evolve.
Small businesses as well as pubs and restaurants will benefit from reduced rates on qualifying products, such as draught beer and cider.
The new system reflects the government’s commitment to tax simplification, helping to foster the right conditions for businesses to prosper and the economy to grow – one of the Prime Minister’s five priorities.
Exchequer Secretary to the Treasury Gareth Davies said:
Because we left the EU we can make sure our alcohol duty system works for us. From next month the whole system will be simpler – the duty will reflect the strength of the drink.
We will also protect pubs and brewers with our Brexit Pubs Guarantee keeping Draught Duty down, and a new Small Producer Relief.
Jonathan Athow, Director General of Customer Strategy & Tax Design, HMRC, said:
After listening to feedback from industry, economists, public health groups and many business owners, the new Alcohol Duty system will be based on the founding principle of taxing alcoholic products by strength, ensuring consistency across the board for the first time.
The new system will support the government’s public health objectives and provide extra support to small producers, pubs and the hospitality sector.
The new system will create six standardised alcohol duty bands across all types of alcoholic products and apply to all individuals and businesses involved in the manufacture, distribution, holding and sale of alcoholic products across the UK.
These reforms will replace and extend the existing Small Brewers Relief with Small Producer Relief. This means that all small businesses that produce any alcoholic products with an ABV of less than 8.5% will be eligible for reduced rates on qualifying products, if they produce less than 4,500 hectolitres per year.
To support the hospitality industry, and recognising the vital role played by pubs in our communities, there will also be a reduced rate for draught products – known as Draught Relief. This will reduce Alcohol Duty on qualifying beer and cider by 9.2%, and by 23% on qualifying wine-based, spirits-based and other fermented products, sold in on-trade premises such as pubs and restaurants.
The reforms will mean that every pint in every pub across the UK will pay less duty than their supermarket equivalent, in line with the government’s Brexit Pubs Guarantee.
To support wine producers and importers in moving to the new method of calculating duty on their products, temporary arrangements will be in place for 18 months from 1 August 2023 until 1 February 2025.
To support innovation and responsible drinking, low strength drinks below 3.5% ABV will be charged at a new lower rate of duty. In making these changes, the government aims to encourage product innovation and ensure the Alcohol Duty system works for business and consumers.
More information on the new Alcohol Duty rates and reliefs can be found on GOV.UK.
Those involved in the production of smaller quantities of alcoholic products, can check the reduced rates of duty that apply to them by using the Small Producer Relief calculator. HMRC is also running a series of live webinars throughout July 2023 and in the months ahead to further support the alcohol industry through these changes.
Further information
More details on changes to Alcohol Duty can be found on GOV.UK.
The new Alcohol Duty system will tax products by Alcohol By Volume (ABV) per litre of alcohol. Stronger alcoholic products will attract higher duty rates than lower strength products. From 1 August 2023 the new rates are:
Table 1
| Alcoholic strength of alcoholic product | Rate of duty per litre of alcohol in the product |
|---|---|
| Less than 1.2% | Nil |
| At least 1.2% but less than 3.5% | £9.27 |
| At least 3.5% but less than 8.5% | See Table 2 |
| At least 8.5% but not exceeding 22% | £28.50 |
| Exceeding 22% | £31.64 |
Table 2
| Description of alcoholic product (of an alcoholic strength of at least 3.5% but less than 8.5%) | Rate of duty per litre of alcohol in the product |
|---|---|
| Still cider or Sparkling cider of an alcoholic strength not exceeding 5.5% | £9.67 |
| Beer | £21.01 |
| Spirits, wine, and other fermented products; or Sparkling cider of an alcoholic strength exceeding 5.5% | £24.77 |
Wine between 11.5% and 14.5% ABV will be treated as if it is 12.5% ABV for the purposes of calculating the charge to alcohol duty from 1 August 2023 until 1 February 2025.
Further details on the new rates can be found on GOV.UK.
The Small Producer Relief is available to those who produce less than 4,500 hectolitres (hL) of alcohol per year. More detail about this relief can be found on GOV.UK.
Reduced rates for draught products, also known as Draught Relief, will apply to products under 8.5% ABV, packaged in containers of at least 20 litres and which incorporate or are designed to connect to a qualifying dispense system. More detail can be found on GOV.UK.
A new penalty is being introduced to prohibit decanting alcoholic products subject to reduced rates for draught products – also known as Draught Relief. This aims to reduce misuse of the relief.
The temporary wine arrangements, in place for 18 months from 1 August 2023 to 1 February 2025, will treat all wine between 11.5% and 14.5% ABV as if it is 12.5% ABV for the purposes of calculating the alcohol duty. More information on this can be found on GOV.UK.
Changes to the approval as an alcohol producer and new arrangements for duty returns and payments are scheduled to take effect from late 2024. Further detail on the timing of these changes will be announced at a later date. HMRC intends to provide at least 12 months’ notice so that businesses have time to prepare.
The changes to the Alcohol Duty system follows a commitment made at Autumn Budget 2021.
Follow HMRC’s Press Office on Twitter @HMRCpressoffice.
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