Budget 2021: Beer and prosecco duty cuts – new alcohol duty explained

Chancellor Rishi Sunak has announced a raft of changes to alcohol duties that he promised will bring the cost of a pint in the pub down by 3p “permanently”.

Alcohol will now be taxed on the basis of its strength rather than the current system, which has been in place for decades and which the Institute of Fiscal Studies called “a mess”.

Mr Sunak said the new steps for alcohol duty will make it “simpler, fairer and healthier”.

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The changes, which will take effect from 1 February 2023, are:

• The number of duty rates on alcoholic drinks will be cut from 15 to six – “the stronger the drink, the higher the rate”, Mr Sunak said

• All drinks above 8.5% ABV will pay the same rate of duty – so rose will come down by 23p per bottle while strong beer will be more expensive

• Fruit ciders and low alcohol spirit drinks, such as G&T in a can, below 3.5% ABV will have lower rates

• A new Small Producer Relief will give tax reliefs to small brewers and distillers of beer, cider (for the first time) and other alcoholic drinks less than 8.5% ABV

• Sparkling wine’s 28% premium duty will be cut so it is the same as still wine of equivalent strength

• Draught relief – a lower rate of duty on draught beer and cider from containers over 40 litres, with a cut of 5%

• An alcohol duty rate rise will be cancelled

The changes in alcohol duties have also been accompanied by business rate cuts and freezes for hospitality, including a 50% business rates discount up to a maximum of £110,000.

The alcohol duty changes have been largely welcomed by the drinks industry and investors, with Wetherspoons shares rising by 5% on the announcement, Young and Co’s up by 2% and Marstons, the largest independent brewer, up by 5%.

Emma Mcclarkin, chief executive of the British Beer and Pub Association, said pubs, brewers and beer drinkers “will be toasting the chancellor today”.