UK Alcohol Prices Set to Rise Following Chancellor’s Budget Announcement

Chancellor Rachel Reeves has revealed that alcohol prices in the United Kingdom will increase following her recent Budget announcement. The rise in alcohol duty, which affects prices in shops, bars, pubs, and restaurants, aligns with inflationary trends and the Retail Price Index (RPI), which recorded an increase of 4.5% in September.

The excise duty on alcohol is a significant source of revenue for the UK government. For the financial year 2025-26, the UK’s alcohol duty is expected to generate approximately £13 billion, accounting for about 1.1% of total government receipts. This translates to around £450 per household and constitutes roughly 0.4% of the national income.

Impact of Duty Rates on Alcohol Prices

The UK ranks among the highest in the European Union for alcohol duty rates, sitting third overall behind countries like Finland and Ireland. For instance, the tax on a 330 ml bottle of beer with an alcohol by volume (ABV) of 5% is approximately €0.4187, making it the second-highest rate in the EU/UK category for that product.

In contrast, many European wine-producing nations impose little to no duty on wine. As of 2024, 15 EU member states do not levy any excise duty on wine, while the UK imposes a significant charge. The average bottle of wine in the UK carries an excise duty of around £2.35. Despite these nominal increases in duty receipts, the proportion of alcohol duty in total government revenue has declined from 1.8% in the fiscal year 1999-2000 to 1.5% in 2018-19.

Rates for alcohol duty are determined per litre of pure alcohol and vary significantly among different categories of beverages. New rates were introduced in August 2023, with specific duties established for beer, cider, sparkling cider, spirits, and other fermented products, including a distinct duty for draught products.

The excise duty applied ranges from zero for beverages with an ABV below 1.2% to as much as £32.79 per litre for drinks exceeding 22% ABV. As such, consumers should prepare for higher costs for their favourite alcoholic beverages as these figures adjust in line with inflation.

Broader Economic Context

The increase in alcohol duties is part of a broader approach by the UK government to manage economic challenges. The Chancellor’s announcement reflects ongoing efforts to balance public finances while addressing inflationary pressures faced by consumers. With the anticipated rise in alcohol prices, households may see a noticeable impact on their budgets when purchasing alcoholic drinks.

In summary, the changes in alcohol duty as outlined by Rachel Reeves will lead to increased prices for consumers in the coming year. As the UK government relies on alcohol duties for a substantial portion of its revenue, these adjustments will be felt across the economy, reinforcing the significant role that alcohol taxation plays in the nation’s financial landscape.