UK’s Chancellor Rishi Sunak announced today sweeping changes to alcohol duty that reward lower-strength drinks like beer and especially non-alcoholic and low-alcohol (NoLo) drinks. The son of Punjabi Hindu parents who does not drink alcohol himself, referred to UK’s 380 year old system as “outdated, complex and full of historical anomalies” that urgently needed to be simplified.
Taking effect in 2023, the number of main duty rates will be cut from 15 to just six with the taxation increasing corresponding to the alcohol content to encourage healthier choices. As a consequence drinks with an alcohol content below 11% will be taxed less and other drinks with a higher alcohol content, especially high-strength wines and ciders will have to pay more.
As a short time effect, Sunak cancelled an increase in alcohol duty that was due to take effect from midnight on Wednesday at a cost of GBP 3 billion (USD 4.1bn).
In a separate measure the chancellor announced “draught relief”, cutting the tax on drinks served from pumps, such as beer and cider, by 5%. This move, which is planned to take effect after consultations in February 2023, is especially aimed to support pubs that are struggling with the negative effects of the COVID-19 pandemic. According to the plans this relief will only apply to 40 liter containers, below 8.5% ABV and sold as to connect to a dispense system.
James Calder, Chief Executive of the Society of Independent Brewers (SIBA), praised the announcement. “The lower rate of duty for beer sold in pubs is a huge win for the industry.”
“Furthermore the Freeze in Beer duty, taking effect from tonight, is very helpful at a time when brewers are seeing a myriad of other supply and running costs rising, and the Business Rates Relief for pubs will be welcomed by many in a struggling sector,” he added.
However, he criticized that the draught relief should also be applicable to containers of over 20L – to apply to pins and craft keg which are mainly used by the small and craft breweries.
Emma McClarkin, Chief Executive of the British Beer & Pub Association, also welcomed the announcement. “The Chancellor’s decision to freeze beer duty instead of the RPI linked increase he had planned is to be warmly welcomed. It will save GBP 177 million [USD 244] and secure 9,000 vital jobs across the country.
“Pub goers will also be toasting the Chancellor today for announcing a 5% lower duty rate on draught beer worth GBP 62 million [USD 85m]. This is great news for our local pubs and recognises the crucial role they play in our economy and society. However, the overall beer duty rate in the UK remains amongst the highest in Europe. It is vital for Britain’s brewers, a world class homegrown manufacturing success story, that the overall beer duty burden is reduced – not just duty on draught beer in pubs,” she added.