Alcohol duty will rise by 3.66 per cent from Sunday, a move industry figures say will push up prices for consumers as producers pass on the additional costs.
Chancellor Rachel Reeves confirmed the increase in the November 1 autumn budget, linking the rise to Retail Prices Index inflation.
Although the tax is levied on producers rather than retailers, wine and spirits businesses warn they have no capacity to absorb further pressures and will be forced to raise prices.
The timing means drinkers marking the end of dry January are likely to face higher costs from February 1.
Official calculations show duty on a standard 37.5 per cent ABV bottle of gin will increase by 38p to £8.98 including VAT, while Scotch whisky at 40 per cent ABV will see a 39p rise, taking the duty per bottle to £9.51.
A 14.5 per cent bottle of red wine will face a further 14p increase.
Trade bodies say the cumulative effect of duty changes has become increasingly burdensome since the current system was introduced in August 2023.
According to the Wine and Spirit Trade Association, tax on a 14.5 per cent bottle of red wine has risen by £1.10 in that period.
The UK Spirits Alliance, representing hundreds of distillers, has written to the Chancellor calling for an end to what it describes as “spirits discrimination” and urging the Government to set out a long‑term strategic framework in the forthcoming duty review.
Miles Beale, chief executive of the Wine and Spirit Trade Association, criticised the Government’s approach, arguing that the Office for Budget Responsibility has already acknowledged that higher prices reduce tax receipts.
Industry leaders warn higher taxes will push up prices for drinkers
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He said the structure of the new system has added complexity for businesses, particularly for wine producers now taxed by strength, and warned that firms are being squeezed by rising national insurance contributions, business rates and waste packaging taxes.
With costs mounting on multiple fronts, he said companies have little choice but to pass increases on to customers.
Braden Saunders, spokesperson for the UK Spirits Alliance and co‑founder of Doghouse Distillery in Battersea, said the timing of the rise would be felt immediately.
“Just as dry January draws to a close and people contemplate their first hard‑earned drink, they’re met with higher prices at the bar,” he said, adding that successive governments have treated the sector as a “cash cow”.
Industry bosses and landlords have warned the Chancellor of the damage she’s doing to the sector despite the move to provide some business rate relief
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Hospitality leaders have echoed those concerns.
Allen Simpson, chief executive of UKHospitality, warned that pubs and bars are already under intense pressure from energy bills, staffing costs and food inflation.
He urged suppliers to show restraint when passing on duty increases, cautioning that further price rises could place an unsustainable burden on venues struggling to stay open.
Labour has confirmed a new support package of business rate relief for pubs, offering targeted help as the hospitality sector continues to battle rising operating costs and falling footfall.
Under the plans, every pub in England will receive a 15 per cent discount on its updated business rates bill from April, with bills then frozen for two years.
As the cost of living crisis persists, the escape of going to the pub is becoming harder to afford
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The Treasury says the measure will be worth around £1,650 to the average pub next year and will ensure that roughly three‑quarters of venues see their bills either fall or remain unchanged.
By 2028/29, business rates receipts from pubs are expected to be lower than they are this year.
Announcing the package, Exchequer Secretary Dan Tomlinson said pubs had been left without adequate support “for too long” under the previous government, describing them as essential to the “social and cultural life” of communities across the country.
Alongside the rate relief, ministers will also relax licensing rules for hospitality venues ahead of this year’s World Cup, offering additional flexibility during one of the industry’s busiest trading periods.
