Chancellor Rachel Reeves has revealed the upcoming increase in alcohol prices across various establishments like shops, bars, pubs, and restaurants in the coming year as part of the latest Budget announcement. In the United Kingdom, 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 stated that alcohol duty would see a rise aligned with inflation. Typically, this increase follows the Retail Price Index from September, which stood at 4.5% this year. The adjustment to alcohol duty with the RPI is scheduled for February 1, 2026, to maintain its current real value.
Reeves emphasized that the decision to raise alcohol duty was made after considering input from various stakeholders, ranging from proposing a duty cut or freeze to suggesting above-inflation hikes. This decision sought to strike a balance between recognizing the significant contributions of alcohol producers and the hospitality sector to the UK’s culture and economy, while also acknowledging the duty’s role in mitigating alcohol-related harm.
Industry leaders had urged the government to freeze duty in the latest Budget, citing the challenges members faced due to previous tax hikes and the additional burden of the new glass tax. Official figures indicate that alcohol prices have already escalated by 5.8% compared to the previous year.
In the previous year, consumers experienced a 3.6% increase in alcohol duty, leading to a 54p rise in wine prices and a 32p increase in gin costs, while draught duty saw a 1.7% reduction, equivalent to a penny off a pint. Miles Beale, the chief executive of the Wine and Spirit Trade Association (WSTA), expressed concerns over the cumulative impact of these duty hikes on businesses in the industry.
Despite concerns raised by industry representatives, the government proceeded with raising alcohol duty once more, a move criticized for potentially harming businesses and impacting consumer costs. The UK Spirits Alliance spokesperson, Karl Mason, highlighted the detrimental effects this decision could have on distillers, pubs, and the broader hospitality sector.
On the contrary, the Alcohol Health Alliance (AHA) welcomed the Chancellor’s decision to maintain alcohol duty in line with inflation, signaling a more responsible approach to alcohol taxation. AHA Chairman Professor Sir Ian Gilmore emphasized the importance of aligning alcohol duty with inflation to address public health concerns and reduce harm associated with alcohol consumption.
Alcohol duty plays a significant role in the UK economy, projected to generate around £13 billion for the financial year 2025-26. Comparisons with EU excise rates reveal that the UK ranks among the highest in alcohol taxation, particularly for beer and wine. Despite periodic increases in nominal receipts, alcohol duty’s share of total government revenue has gradually declined over the years.
Different rates of excise duty are applied to various types of alcoholic drinks, with rates varying based on the alcohol by volume (ABV) content. These rates will now increase in line with inflation, impacting the prices consumers pay for alcohol in pubs and shops.