Chancellor Rachel Reeves has revealed the upcoming increase in alcohol prices across various establishments such as shops, bars, pubs, and restaurants for the upcoming year as part of today’s Budget announcement. In the UK, alcohol tax is an excise duty paid by producers and importers, determined by the alcohol’s strength (ABV) and category.
During her Budget speech, Rachel Reeves confirmed that alcohol duty will be raised in line with inflation, following the Retail Price Index increase of 4.5% this year. The adjustment in alcohol duty will align with the RPI on February 1, 2026, to maintain its current real value.
Explaining the decision, Rachel Reeves stated, “The government considered feedback from various stakeholders, proposing anything from a duty reduction or freeze to above-inflation hikes. This choice strikes a balance between acknowledging the significant contribution of alcohol producers and the hospitality sector to the UK’s economy and culture, while also recognizing the duty’s role in mitigating alcohol-related harm.”
Industry leaders had urged the Government to freeze duty in this year’s Budget, citing the challenges faced by members due to previous tax increases and the introduction of the new glass tax. Official figures indicate that alcohol prices have already risen by 5.8% compared to the previous year.
In the prior year, consumers experienced a 3.6% increase in alcohol duty, resulting in a 54p rise for a bottle of wine, a 32p increase for gin, while draught duty saw a 1.7% reduction, equivalent to a penny less per pint, in the 2024 Budget. Chief executive of the Wine and Spirit Trade Association (WSTA), Miles Beale, expressed concerns over the cumulative impact of these changes on businesses in the industry.
Despite opposition from various sectors, the Chancellor’s decision to raise alcohol duty was welcomed by the Alcohol Health Alliance (AHA). AHA chairman Professor Sir Ian Gilmore noted that maintaining alcohol duty in line with inflation signifies a step towards a more responsible approach to alcohol taxation, emphasizing the importance of this measure in promoting public health.
The revenue generated from alcohol duty plays a significant role in the UK economy, forecasted to reach around £13 billion for the financial year 2025-26. This amount represents approximately 1.1% of all government receipts, translating to about £450 per household and roughly 0.4% of national income.
Comparing EU and UK excise rates for beer, wine, and spirits, the UK ranks as the third highest overall, following high-duty countries like Finland and Ireland. Notably, the UK applies substantial duty on wine compared to several European wine-producing nations, with an average bottle incurring around £2.35 in excise duty.
Although nominal receipts from alcohol duty have periodically increased, its share of total government revenue has gradually declined over the years. Rates are set per litre of pure alcohol and vary based on the type of drink, with different rates for beer, cider, spirits, wine, and other fermented products. The levels of duty increase with the alcohol by volume (ABV) percentage, ranging from zero for low-ABV drinks up to £32.79 per litre for beverages stronger than 22% ABV.
With the adjustment in line with inflation, consumers can expect to pay more for alcohol in pubs and shops moving forward.