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 2022-23 we estimate that alcohol duties will raise £12.7 billion. This represents 1.3 per cent of all receipts and is equivalent to around £450 per household and 0.6 per cent of national income.
There are different rates for each type of product:
- The rate on beer (with a strength of between 2.8 and 7.5 per cent) is 19.08 pence per litre for each percentage point of alcohol. For example, the rate on a 5 per cent strength beer is 95.40 pence per litre – around 54 pence per pint. Beers with a strength below 2.8 per cent are taxed at a lower rate and beers with a strength above 7.5 per cent are taxed at a higher rate.
- The rate on wine depends on its strength and whether it is still or sparkling. Stronger wines and sparkling wines are taxed at a higher rate. For a still wine (with a strength of between 5.5 and 15 per cent) the rate is 297.57 pence per litre.
- The rate on spirits is £28.74 per litre of pure alcohol. For a litre bottle of spirits (with a strength of 40 per cent) the rate is therefore £11.50.
- The rate on cider depends on its strength and whether it is still or sparkling. For a sparkling cider (with a strength of between 1.2 and 5.5 per cent) the rate is 40.38 pence per litre – around 23 pence per pint.
From February 2023, the taxation of alcohol will shift 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.
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 £11.50 of duty plus 20 per cent VAT on both the pre-tax price and the duty.