Chancellor Rachel Reeves has revealed the upcoming increase in alcohol prices across various settings like shops, bars, pubs, and restaurants in the coming year. This announcement was made as part of today’s Budget. In the UK, alcohol tax, an excise duty paid by producers and importers, is determined by the alcohol’s strength (ABV) and category.
During her Budget speech, Rachel Reeves declared that alcohol duty would see a rise in alignment with inflation. Traditionally, the duty increases in line with the Retail Price Index, which stood at 4.5% this year. The adjustment will take effect on February 1, 2026, to uphold its current real value.
Reeves highlighted, “The decision to adjust alcohol duty was made after considering input from various stakeholders, suggesting options from a duty cut or freeze to above-inflation increments. This choice strikes a balance between recognizing the significant role of alcohol producers and the hospitality sector in the UK’s culture and economy while acknowledging the duty’s role in curbing alcohol-related harm.”
Industry leaders had urged the Government to freeze the duty in this year’s Budget as they were still grappling with the tax hikes from February and the added burden of the new glass tax. Official figures indicate that alcohol prices have already risen by 5.8% compared to last year.
Last year, drinkers faced a 3.6% increase in alcohol duty, leading to a 54p rise in wine prices and a 32p increase in gin prices. Conversely, draught duty saw a 1.7% reduction, equivalent to a penny off a pint, in the 2024 Budget. The Wine and Spirit Trade Association’s chief executive, Miles Beale, expressed concerns, stating, “This Budget is perceived as a series of damaging blows, particularly for wine and spirit businesses.”
The UK Spirits Alliance spokesperson, Karl Mason, emphasized the detrimental impact of the duty increase on distillers, pubs, and the wider hospitality sector. He warned that businesses, already on the brink due to rising costs, could be pushed over the edge by this Budget. Mason added that the continuous duty hikes could impede businesses’ ability to invest, expand, and create jobs.
However, the Alcohol Health Alliance (AHA) welcomed the Chancellor’s decision to adjust alcohol duty in line with inflation. AHA chairman Professor Sir Ian Gilmore lauded this move as a step towards a more responsible alcohol taxation approach, emphasizing the importance of aligning duty with inflation to mitigate harm and protect public health.
Alcohol duty plays a significant role in the UK economy, forecasted to generate around £13 billion for the financial year 2025-26. This amount represents 1.1% of all government receipts, roughly £450 per household, and about 0.4% of national income. Compared to other EU countries, the UK ranks among the top for excise rates on beer, wine, and spirits.
In conclusion, the excise duty levied on alcohol varies based on the beverage’s alcohol by volume (ABV) and is set to increase in line with inflation, impacting prices in pubs and stores.