Alcohol duty freeze extended for six months
Pubs, brewers and distillers were handed a Christmas bonus today after the UK government announced a six-months extension to the freeze on alcohol duty rates.
Treasury Secretary James Cartlidge told MPs that the freeze will provide certainty to the hospitality trade.
While new duty rates usually come in on the 1 February each year, Mr Cartlidge set out that this year the duty rates decision will be held until the Chancellor Jeremy Hunt delivers his Spring Budget on 15 March.
If he announces any changes to duty they will not take effect until 1 August. This is to align with the date historic reforms for the alcohol duty system come in, and amounts to an effective six month extension to the current duty freeze.
Mr Cartlidge said: “The alcohol sector is vital to our country’s social fabric and supports thousands of jobs – we have listened to pubs, breweries and industry reps concerned about their future as they get ready for the new, simpler, alcohol tax system taking effect from August.
“That’s why we have acted now to give maximum certainty to industry and confirmed there will be just one set of industry-wide changes next summer.”
Miles Beale, chief executive of the Wine and Spirit Trade Association, said: “Delaying any increase until 1 August means businesses will not have to manage two duty rises in the space of 6 months.
“We hope that any duty increases applied in August take into account the damage suffered by wine and spirit businesses and the hospitality sector during the pandemic as businesses continue to fightback.
“We are calling on Jeremy Hunt to cancel double digit tax rises to help cash-strapped consumers and to support the UK’s world-class drinks industry.”
The current alcohol duty freeze was announced in the 2021 Autumn Budget, saving consumers over £3 billion over five years. It was expected to come to an end on 1 February, following the Chancellor’s reversal of most of September’s Growth Plan to restore trust in the economy and strengthen public finances.
In last year’s Budget the government announced the biggest reforms to alcohol duty in 140 years. The changes will radically simplify the entire system and slash red tape.
The new alcohol tax system will mean the higher a drink’s strength the higher the duty, whilst new reliefs will be made available to help pubs and small producers thrive.
New Draught Relief will be worth £100 million a year and will ensure smaller craft producers can benefit, the threshold for qualifying containers will be 20 litres.
Small Brewers Relief will be renamed Small Producer Relief, reformed and expanded. Until the revamp, a cliff-edge existed when relief is withdrawn for brewers who make more than 5,000 hectolitres a year.
This will be addressed, there will instead be a gradual taper to the removal of relief, which will empower small breweries to grow, after they had made clear through consultation that the current design was acting as a barrier. Further, the expansion of the relief means that all producers that make drinks below 8.5% – mostly craft brewers and cider makers – will be able to get relief on their products.
The government says the duty reforms will help create a simpler, fairer and healthier duty system. Higher rate for sparkling wines will come to an end, meaning they will pay the same rate as still wine. Liqueurs will be put on the same footing as fortified wine, meaning a sherry and Irish Cream will now pay the same duty, and super-strength ‘white cider’ will rise to address public health concerns.
The wine industry will also be supported as it adapts to the new system. All wine between 11.5-14.5% alcohol by volume (ABV) to calculate duty as if it were 12.5% ABV for 18 months from the implementation of the new system.