Alcohol duties are levied on purchases of beer, cider or perry, wine or ‘made-wine’ and spirits. Made-wine is any alcoholic drink made by fermentation that is not beer, cider, perry, spirits or wine – mead, for example.
In 2024-25 we estimate that alcohol duties will raise to £12.7 billion. This represents 1.1 per cent of all receipts and is equivalent to around £437 per household and 0.5 per cent of national income.
From August 2023, the taxation of alcohol shifted to a system in which duty is paid by reference to the product’s final alcohol by volume (ABV), harmonizing the tax rates for different types of beverages and reducing the number of rates. The new system has also introduced a new draught relief which allows for a reduced duty rate for qualifying draught products. The new rates for each type of product are outlined below:
- The rate on all alcoholic products (products that are 1.2 per cent ABV or more) less than 3.5 per cent ABV is £9.27 per litre of alcohol in the product. The reduced rate is £8.42 per litre of alcohol in the product.
- The rate on beer (with a strength between 3.5 and 8.5 per cent ABV) is £21.01 per litre of alcohol in the product. The reduced rate is £19.08 per litre of alcohol in the product.
- The rate on still cider (with a strength between 3.5 and 8.5 per cent ABV) is £9.67 per litre of alcohol in the product. The reduced rate is £8.78 per litre of alcohol in the product.
- The rate on sparkling cider (with a strength between 3.5 and 5.5 per cent ABV) is £9.67 per litre of alcohol in the product. The reduced rate is £8.78 per litre of alcohol in the product.
- The rate on sparkling cider (with a strength between 5.5 and 8.5 per cent ABV) is £24.77 per litre of alcohol in the product. The reduced rate is £19.08 per litre of alcohol in the product.
- The rate on spirits, wines and other fermented products (with a strength between 3.5 and 8.5 per cent ABV) is £24.77 per litre of alcohol in the product. The reduced rate is £19.08 per litre of alcohol in the product.
- The rate on all alcoholic products (with a strength between 8.5 and 22 per cent ABV) is £28.50 per litre of alcohol in product.
- The rate on all alcoholic products (with a strength exceeding 22 per cent ABV) is £31.64 per litre of alcohol in the product.
- The rate on wine (with a strength between 11.5 and 14.5 per cent ABV) will be treated as if it is 12.5 per cent ABV for the purposes of calculating the charge to alcohol duty from 1 August 2023 until 1 February 2025.
VAT is applied after alcohol duty, so, for example, the price of a one litre bottle of spirits (with a strength of 40 per cent) currently reflects the pre-tax price plus £12.66 of duty plus 20 per cent VAT on both the pre-tax price and the duty.