Chancellor Rachel Reeves has disclosed the upcoming increase in alcohol prices for consumers at retail outlets, bars, pubs, and restaurants in the coming year as part of today’s Budget announcement. In the UK, alcohol tax is an excise duty paid by producers and importers, determined by the alcohol’s strength (ABV) and category.
During her Budget speech, Rachel Reeves confirmed that alcohol duty would be adjusted in line with inflation. Typically, the adjustment aligns with the Retail Price Index from September, which stood at 4.5% this year. The alcohol duty will be uprated with the RPI on February 1, 2026, to maintain its current real value.
Reeves emphasized that the decision to increase alcohol duty was made after considering various viewpoints, including proposals for a duty reduction, freeze, or above-inflation hikes. The aim was to strike a balance between acknowledging the contributions of alcohol producers and the hospitality sector to the UK’s culture and economy, while also recognizing the duty’s role in mitigating alcohol-related harm.
Industry leaders had advocated for a freeze on duty in this year’s Budget, highlighting the challenges faced by members due to previous tax hikes and the introduction of the new glass tax. Official data shows that alcohol prices have already risen by 5.8% compared to last year.
Last year, alcohol duty saw a 3.6% increase, resulting in a 54p addition to a bottle of wine and a 32p increase for gin, while draught duty experienced a 1.7% cut, equivalent to a penny off a pint, in the 2024 Budget. The Wine and Spirit Trade Association (WSTA) CEO, Miles Beale, expressed concerns over the cumulative impact of these tax changes on businesses in the industry.
Despite opposition from some industry sectors, Chancellor Reeves’ decision to raise alcohol duty was welcomed by the Alcohol Health Alliance (AHA). AHA chairman Professor Sir Ian Gilmore viewed the move as a step towards a more responsible approach to alcohol taxation, emphasizing the importance of maintaining duty in line with inflation for public health benefits.
The UK’s Alcohol Duty plays a significant role in the economy, forecasted to generate approximately £13 billion for the financial year 2025-26. Comparisons with EU excise rates reveal that the UK ranks among the highest in duties for beer, wine, and spirits. Rates are set per litre of pure alcohol and vary based on the type of drink and its alcohol content.
In summary, the adjustment in excise duty to match inflation will result in higher alcohol prices for consumers in pubs and retail outlets.