UK: New Chancellor to scrap alcohol tax increase

The UK government has scrapped plans to increases the tax paid on beer, wine, spirits and cider. In a statement to parliament today, new Chancellor Kwasi Kwarteng said, the planned tax rises on beer, cider, wine, and spirits will all be cancelled. It was wrong to raise duty "at this difficult time," he said.

In February, former Chancellor Rishi Sunak introduced a new tax system with just six rates based on alcohol energy to replace the old, much more complex system of 15 different tax rates based on alcohol type, strength and production method. It was due to come into force a year later on 1 February 2023 and would have imposed an additional tax burden of GBP 600 million (USD 680m), thereof GBP 300 million (USD 340m) on wine drinkers alone.

With the now proposed tax cuts, the buyers will save GBP 0.07 (USD 0.08) on a pint of beer, GBP 0.04 (USD 0.05) on a pint of cider, GBP 0.38 (USD 0.43) on a bottle of wine and GBP 1.35 (USD 1.50) on a bottle of spirits according to estimates by HM Treasury.

Mr. Kwarteng, who took office just three weeks ago, also announced to freeze the tax on alcohol for the coming 18 months, while the government reforms the system.

In addition, cuts to duty on draught beer and cider by 5%, introduced to help pubs hit by pandemic closures, will be extended from February 2023 to cover kegs as small as 20 liters.

Kate Nicholls, CEO of UK Hospitality, called the freeze on alcohol duty “a very positive move for the breweries and drinks producers that supply the hospitality sector.”

Nevertheless, the Office for Budget Responsibility (OBR) forecasts alcohol taxes to bring in GBP 12.7 billion (USD 14.4bn) this year.

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