Chancellor Rachel Reeves has revealed the upcoming increase in alcohol prices across various settings such as shops, bars, pubs, and restaurants in the coming year, as part of the latest Budget announcement. In the UK, alcohol tax, an excise duty paid by producers and importers, is determined by factors like the alcohol’s strength (ABV) and category.
During her Budget speech, Rachel Reeves disclosed that alcohol duty would see a raise to match the inflation rate. Typically, this increase aligns with the Retail Price Index from September, which stood at 4.5% this year. The adjustment to alcohol duty will be made in accordance with the RPI on February 1, 2026, to sustain its current real value.
Stakeholders had differing views, ranging from advocating for a duty reduction or freeze to proposing above-inflation hikes. In her statement, Rachel Reeves explained that the decision struck a balance between acknowledging the significant contributions of alcohol producers and the hospitality sector to the UK’s culture and economy, while also recognizing the duty’s role in mitigating alcohol-related harms.
Industry leaders had urged for a freeze on duty in this year’s Budget, citing the ongoing impacts of previous tax increases and the additional burden of the new glass tax. Official data shows that alcohol prices have already surged by 5.8% compared to last year.
In the previous year, drinkers experienced a 3.6% rise in alcohol duty, resulting in a 54p increase for a bottle of wine and a 32p increase for gin. Conversely, draught duty saw a 1.7% reduction, equivalent to a penny off a pint, in the 2024 Budget. The Wine and Spirit Trade Association’s Chief Executive, Miles Beale, expressed concerns over the cumulative effects of these continuous duty increases on businesses in the sector.
The UK Spirits Alliance spokesperson, Karl Mason, lamented the implications of the latest duty increase on distillers, pubs, and the wider hospitality industry, highlighting the challenges faced by many businesses already on the brink of closure due to rising costs. The decision is anticipated to have negative repercussions on both businesses and consumers, limiting growth opportunities and job creation.
On the other hand, the Alcohol Health Alliance (AHA) praised the Chancellor’s move, emphasizing the importance of allowing alcohol duty to keep pace with inflation for a more responsible approach to alcohol taxation. The AHA chairman, Professor Sir Ian Gilmore, underlined the necessity of maintaining alcohol duty in real terms to address public health concerns and reduce harm effectively.
Alcohol duty plays a significant role in the UK economy, with projections indicating that it will generate around £13 billion in the 2025-26 financial year. This amount represents a notable portion of government receipts, equivalent to approximately £450 per household and about 0.4% of national income.
Comparatively, the UK ranks among the top three EU countries with the highest excise rates for beer, wine, and spirits. The duty rates vary based on the type of drink and alcohol content, with adjustments made in line with inflation. As a result, consumers can expect to pay more for alcohol in pubs and shops as a consequence of these revisions.