ALCOHOL DUTY SHAKE-UP: DRAUGHT DISCOUNTS, NON-DRAUGHT PRICE HIKES

In her 2024 Autumn Budget announcement, Chancellor Rachel Reeves laid out a series of alcohol and soft drink tax changes that aim to support pubs and small brewers while raising taxes on other alcoholic products like spirits and wine. These changes, effective in February 2025, are expected to increase consumer costs and place more strain on the hospitality industry. We have given an outline of the budget, and what it means for businesses and consumers.

Key Points:

– Draught Duty Cut: Alcohol duty on draught beers will drop by 1.7%, saving consumers about 1p per pint.
– Non-Draught Duty Hike: Duty on non-draught spirits and wines will rise with inflation (2.7%), driving up consumer costs.The government state this will for example (supposedly) add 1p or 2p more on a 25ml shot of 40% alcohol, assuming a 100% pass through on prices.
– Industry Revenue Concerns: Last year’s 10.1% duty hike led to hundreds of millions lost in spirits revenue rather than gained taxes due to the increase in prices; further increases are expected to depress sales and hurt hospitality businesses.
– Small Business Relief: Expanded tax relief for small brewers, but new, complex tax bands could strain smaller producers.
– Hospitality Impact: Business rates reduced for pubs, but National Insurance increases add costs to employers.

Budget Breakdown: Industry Reactions and Expected Impacts

The Wine and Spirits Trade Association (WSTA) and the Scotch Whisky Association (SWA) have voiced concerns over the hike, arguing that a similar increase last year led to a drop in sales, costing the Treasury hundreds of millions in lost revenue. They warn that further tax hikes will drive down demand rather than increase government revenue and will hurt an industry already facing high costs.

Industry leaders, particularly within Scotch whisky, have criticised Prime Minister Sir Keir Starmer for appearing to backtrack on his pledge to “support Scotch producers to the hilt.” The SWA has pointed out that the duty increase is at odds with this commitment, likely to harm Scottish whisky producers and make Scotch whisky even less accessible.

While the expanded Small Producer Relief offers some benefit to small brewers by reducing their duty, the introduction of 30 new tax bands based on alcohol by volume (ABV) will require small producers to adapt to complex changes, likely increasing their administrative costs.

Kate Nicholls of UKHospitality noted that while the draught duty cut and reduced business rates may help pubs, the rise in employer National Insurance contributions will add financial stress. As a result, higher costs are expected to be passed on to consumers, impacting already-tight household budgets and making the hospitality industry’s recovery more challenging.

What’s Next for Consumers and the Industry?

These budget changes are likely to drive up prices across all non-draught alcohol products in both retail and hospitality venues. For consumers, the cost of wine, whisky, and other spirits will increase noticeably. With ongoing inflationary pressures, industry leaders and hospitality sector advocates continue to urge the government to consider policies that better balance economic needs with consumer and industry demands.

What so you think of the budget? Will this change how you purchase and drink alcohol? We would love to hear your thoughts.