Chancellor Rachel Reeves has revealed the upcoming increase in alcohol prices at retail outlets, bars, pubs, and restaurants for the upcoming year as part of today’s Budget announcement. In the UK, alcohol tax is a duty paid by producers and importers, calculated based on the alcohol’s strength (ABV) and category.
During her Budget speech, Rachel Reeves stated that alcohol duty would be raised in alignment with inflation. Typically, the duty increases in line with the Retail Price Index from September, which stood at 4.5% this year. The alcohol duty will be adjusted with the RPI on February 1, 2026, to maintain its current real value.
Rachel Reeves emphasized that the government considered various viewpoints, ranging from reducing or freezing the duty to implementing above-inflation hikes. This decision aims to strike a balance between the vital roles played by alcohol producers and the hospitality sector in the UK’s cultural and economic landscape, while also addressing the duty’s role in mitigating alcohol-related harm.
Industry leaders had advocated for the duty to be frozen in this year’s Budget, citing the ongoing impact of previous tax increases and the additional burden of the new glass tax. Official figures indicate that alcohol prices have already risen by 5.8% compared to the previous year.
In the past year, consumers faced a 3.6% increase in alcohol duty, leading to a 54p rise in wine prices and a 32p increase in gin prices, while draught duty saw a 1.7% reduction – equivalent to a penny off a pint – in the 2024 Budget. Miles Beale, the chief executive of the Wine and Spirit Trade Association (WSTA), expressed concerns over the cumulative effect of these changes on businesses in the industry.
The decision to raise alcohol duty once more drew criticism from various sectors, with concerns raised about the potential negative impact on businesses, consumers, and government revenue. On the other hand, the Alcohol Health Alliance (AHA) supported the Chancellor’s move, emphasizing the importance of maintaining alcohol duty in line with inflation for public health benefits.
The UK’s Alcohol Duty plays a significant role in the economy, forecasted to generate around £13 billion for the financial year 2025-26. Comparisons with EU excise rates show that the UK ranks among the top in terms of taxation on beer, wine, and spirits. Despite periodic nominal increases in receipts, the share of alcohol duty in total government revenue has gradually declined over the years.
Duty rates in the UK are set per litre of pure alcohol and vary based on the type of drink, with different rates for beer, cider, spirits, wine, and other beverages. The duty is set to increase in line with inflation, impacting the prices of alcohol in retail and hospitality establishments.