Chancellor Rachel Reeves has revealed the upcoming adjustments to alcohol pricing across retail outlets, bars, pubs, and restaurants for the following year during her Budget announcement. In the UK, alcohol tax is a duty paid by producers and importers, dependent on the alcohol’s strength (ABV) and category.
In her Budget speech, Rachel Reeves disclosed that alcohol duty would increase in line with inflation, aligning with the 4.5% Retail Price Index from September of this year. The alcohol duty will be updated with the RPI on February 1, 2026, to retain its current real value.
Reeves emphasized that the decision to raise alcohol duty considered various viewpoints, balancing the contributions of alcohol producers and the hospitality industry to the UK’s culture and economy with the duty’s role in mitigating alcohol-related harm.
Despite industry leaders urging the Government to freeze duty in this year’s Budget due to the recent tax hikes and the new glass tax, the Government proceeded with a rise, citing a 5.8% increase in alcohol prices compared to the previous year.
Notably, last year saw a 3.6% rise in alcohol duty, resulting in price increases for wine and gin. Miles Beale from the Wine and Spirit Trade Association expressed concerns over the continuous duty increases affecting businesses negatively.
The UK Spirits Alliance spokesperson, Karl Mason, lamented the impact of the duty increase on distillers, pubs, and the hospitality sector, warning of potential business closures and job losses. The Alcohol Health Alliance, however, welcomed the Chancellor’s decision to adjust alcohol duty in line with inflation, emphasizing the importance of maintaining duty to curb alcohol-related harms 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. The UK’s excise rates for alcohol compared to EU countries reveal higher taxation levels, particularly on beer and wine.
Despite periodic nominal receipt increases, alcohol duty’s share of total government revenue has gradually decreased over the years. Duty rates vary based on the type and strength of the drink, with different rates set for various categories of alcoholic beverages.
Overall, the adjustment to alcohol pricing to align with inflation will result in increased costs for consumers in pubs and retail establishments.