Chancellor Rachel Reeves has revealed the upcoming increase in alcohol prices for consumers at retail establishments, bars, pubs, and restaurants in the coming year during today’s Budget announcement. Alcohol tax in the UK, an excise duty paid by producers and importers, is determined based on the alcohol’s strength (ABV) and category.
In her Budget speech, Rachel Reeves stated that alcohol duty will rise in line with inflation, as it typically follows the Retail Price Index, which stood at 4.5% this year. The adjustment to alcohol duty will align with the RPI on February 1, 2026, to maintain its current real value.
Reeves emphasized that the decision to increase alcohol duty was made after considering various perspectives, including calls for a duty cut or freeze, aiming to strike a balance between the contributions of alcohol producers and the hospitality sector to the UK’s economy and cultural landscape.
Industry leaders had urged the Government to freeze duty in this year’s Budget, citing the financial strain caused by previous tax hikes and the introduction of the new glass tax. Official figures indicate that alcohol prices have already increased by 5.8% compared to last year.
Last year saw a 3.6% rise in alcohol duty, resulting in a 54p increase for a bottle of wine and a 32p rise for gin, while draught duty was reduced by 1.7%, equivalent to a penny off a pint, in the 2024 Budget. Miles Beale, CEO of the Wine and Spirit Trade Association (WSTA), expressed concerns about the cumulative impact of these duty increases on businesses in the industry.
The ongoing duty hikes on alcohol have faced criticism from various stakeholders, with expectations that the latest increase will negatively impact consumers, businesses, and government revenue. The UK Spirits Alliance spokesperson, Karl Mason, highlighted the challenges faced by distillers, pubs, and the wider hospitality sector due to the escalating duty rates.
On the other hand, the Alcohol Health Alliance (AHA) praised the Chancellor’s decision to align alcohol duty with inflation, emphasizing the importance of maintaining duty levels to address public health concerns. The UK’s Alcohol Duty plays a significant role in government revenue, contributing around £13 billion for the financial year 2025-26.
Comparisons with EU excise rates show that the UK ranks among the highest for beer, wine, and spirits duties. Despite periodic nominal increases in alcohol duty receipts, the share of total government revenue from alcohol duty has gradually declined over the years.
Duty rates in the UK are set per litre of pure alcohol, varying across different drink categories and alcohol strengths. The recent system introduced in August 2023 categorizes rates based on the type of drink, with varying levels of duty for different ABV ranges.
Overall, the adjustment of alcohol duty in line with inflation will result in higher prices for alcohol at retail outlets and pubs, impacting consumers.