The UK government has announced changes to alcohol duty rates that will come into effect today, 1 August 2023, significantly impacting hospitality operators and consumers.
What are the changes to the Alcohol Duty?
Alcohol Duty is a tax included in the price consumers pay for alcohol.
From 1 August 2023, the Alcohol Duty system is being simplified, and all alcoholic drinks will now be taxed based on their alcohol by volume (ABV), by litre of alcohol. In simple terms, the higher the alcohol per volume (ABV), the higher the new duty rate will be.
Under the new system, there will be six standardised alcohol duty bands across all alcoholic products, leading to an increase in the price of stronger alcoholic drinks, such as spirits.
Draught Beer and Cider
The new alcohol duty system will have a different impact on draught beer and cider compared to packaged beer. Draught beer and cider products in 20-litre containers that are less than 8.5% ABV will be protected by a 9.2% discount. This means that the duty on these products will not change.
Impact on price: The standard rate of duty on packaged beer that is 3.5% ABV and above will rise by 10.1%. This will increase the price of a 24-pack of 330ml 4.5% lager by £0.69 per case.
In other words, the price of draught beer and cider will not change, while the price of packaged beer will increase. This is because draught beer and cider are typically sold in larger quantities and are subject to a lower duty rate. On the other hand, packaged beer is typically sold in smaller quantities and is, therefore, subject to a higher duty rate.
Reason: The draught relief is designed to support the hospitality industry and to encourage people to drink in pubs and restaurants.
Wines
The new alcohol duty system will have a different impact on wine depending on its alcohol by volume (ABV).
Impact on price: The price of most wine will increase, but the price of lower-alcohol wine will decrease, and the price of sparkling wine will decrease.
Reason: The new alcohol duty system is designed to encourage people to drink lower-alcohol wine and sparkling wine.
Spirits
The standard rate of duty for spirits over 22% ABV is increasing by 10.1%, which will put the price of a standard bottle of 40% ABV up by £0.81 per bottle. There are new bandings for products with less than 22% ABV and less than 3.5% which will reduce duty vs current rates.
Impact on price: The price of most spirits will increase, but the price of lower-alcohol spirits will decrease.
Reason: The new alcohol duty system is designed to encourage people to drink lower-alcohol spirits.
What will be the impact of the changes to the Alcohol Duty on hospitality operators?
Those changes are expected to have a mixed impact on hospitality operators – with some businesses benefiting from them and others facing increased competition.
The changes will reduce the amount of duty that operators pay on draught beer and cider by 9.2%, and by 23% on qualifying wine-based, spirits-based and other fermented products. The potential outcome of this measure could result in lower prices for drinks at pubs and restaurants, potentially leading to an increase in sales.
However, these changes may create a new duty differential between draught and non-draught products. Consequently, businesses selling non-draught products like bottled beer might face heightened competition from pubs and restaurants offering draught options.
Alcohol-duty changes are also expected to lead to changes in drinking habits, with people drinking less but spending more on premium drinks when they do go out. Venues can cater to these treat occasions by spotlighting their premium drinks offerings and giving customers a chance to explore flavours with creative cocktails.
We are here to help.
If you require any support with your beer, wine and spirits offering please get in touch today at hello@pelicanprocurement.co.uk
For more detailed information, head to the government website.
