Consumers are set to face a “double whammy tax grab” on alcohol prices from next month as the Government implements two major tax changes.
From February 1, alcohol duties will rise by 3.6 per cent in line with RPI inflation, whilst simultaneously introducing a new system that will tax wine based on its strength.
The Wine and Spirit Trade Association (WSTA) estimates that a bottle of wine at 14.5 per cent ABV will see a 54p increase in duty from February. For gin drinkers, the tax will rise by 32p per bottle.
Taking into account the duty increases from August 2023, the tax on a 14.5 per cent red wine will have risen by 98p in just 18 months.
These increases are forcing businesses to pass costs onto consumers, as they struggle to absorb another round of tax rises.
But the February duty rise is just the first hit for consumers, with a second wave of increases due in April through new waste packaging recycling fees.
These increases are forcing businesses to pass costs onto consumers
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These additional charges will add approximately 18p to a bottle of spirits and 12p to a bottle of wine.
When combined with the February increases and accounting for VAT, consumers face total price hikes of at least 60p on a bottle of gin.
A bottle of 14.5 per cent ABV red wine will cost around 80p more once both tax changes take effect.
Miles Beale, Chief Executive of the Wine and Spirit Trade Association, criticised the Government’s approach to addressing public finances.
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He said: “The Government continues to claim that the tax hikes are part of their big plan to plug the black hole in the public finances, but a series of record-breaking tax levies are doing the exact opposite.
“There are no winners under the UK’s punishing alcohol tax regime – higher duty rates mean people buy less which results in reduced income to the Exchequer, businesses are being squeezed and consumers have to pay more.”
The latest figures from HMRC reveal alcohol tax receipts have fallen by £209million in the financial year (April to December 2024) compared to the previous year.
The new wine taxation system will bring significant administrative challenges for businesses from February 1.
The Government is ending an “easement” mechanism that previously allowed 85 per cent of wines to carry the same amount of excise duty.
Instead, wine will now be taxed based on its precise labelled alcohol content, with different rates for each 0.1 per cent ABV variation.
Hal Wilson, Co-founder of Cambridge Wine Merchants, explained: “In my business, this feels like death by a thousand cuts, or even two thousand cuts.
“We sell over 2,000 different wines each year and from February will need to know the precise ABV of each and every one before being able to calculate their full cost.
Wine will now be taxed based on its precise labelled alcohol content
PA
For each 0.1 per cent ABV difference, there is a different amount of tax to be paid. Our range of wines has 48 different ABVs between 8.5 per cent and 22 per cent. This herculean bureaucratic exercise would not be necessary to carry out if the rates of tax weren’t so eye-wateringly high.”
The combined impact of these tax changes threatens to reshape the UK’s drinks market significantly. Industry experts warn that some favourite drinks could disappear entirely from shop shelves as businesses struggle with the new tax burden.
The financial impact will vary between businesses, but major retailers could face millions in losses, according to the WSTA
