Chancellor Rachel Reeves has disclosed the forthcoming 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, an excise duty paid by producers and importers, is determined by the alcohol’s strength (ABV) and category.
During her Budget speech, Rachel Reeves revealed that alcohol duty would be adjusted in accordance with inflation. Typically linked to the Retail Price Index from September, which stood at 4.5% this year, alcohol duty will be aligned with the RPI on February 1, 2026, to sustain its current real value.
Reeves emphasized that the decision to raise alcohol duty considers input from stakeholders advocating for a duty reduction or freeze versus above-inflation hikes. The balance struck aims to recognize the significant role of alcohol producers and the hospitality sector in the UK’s cultural and economic landscape, while also acknowledging the duty’s role in curbing alcohol-related harm.
Industry leaders had urged the Government to maintain duty levels in this year’s Budget, citing the ongoing impact of previous tax increases and the additional burden of the new glass tax. Official figures show that alcohol prices have already risen by 5.8% compared to last year.
In the previous year, drinkers faced a 3.6% increase in alcohol duty, translating to a 54p rise for a bottle of wine and a 32p increase for gin, while draught duty saw a 1.7% reduction, equivalent to a penny off a pint, in the 2024 Budget. Miles Beale, chief executive of the Wine and Spirit Trade Association (WSTA), expressed concerns over the cumulative effects of these tax adjustments on businesses in the industry.
The Treasury’s decision to raise alcohol duty once more has sparked criticism from various sectors, with voices pointing out the potential negative implications on consumers, businesses, and government revenue. The UK Spirits Alliance and Alcohol Health Alliance have expressed differing views on the Chancellor’s decision, highlighting the ongoing debate over alcohol taxation and its impact on public health and the economy.
Alcohol duty plays a significant role in the UK economy, with forecasts indicating a revenue generation of approximately £13 billion for the financial year 2025-26. Despite periodic increases in receipts, the share of alcohol duty in total government revenue has gradually declined over the years.
The UK’s excise rates for beer, wine, and spirits rank among the highest in the EU and UK, reflecting the country’s taxation policies on alcohol products. The system of rates for different types of drinks varies based on their alcohol content, with adjustments made in line with inflation to reflect changes in pricing for consumers at pubs and stores.