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September 23, 2022

UK “mini-budget” cancels proposed alcohol duty rate increases

Chancellor unveils raft of measures to help businesses but industry calls for further action.

By Conor Reynolds

The UK government is abolishing a proposed increase in duty rates for beer, cider, spirits and wine, a move widely welcomed by the industry.

The announcement was made today in a mini-budget delivered by UK Chancellor of the Exchequer Kwasi Kwarteng, during which the Government detailed its plans to cut taxes and provide relief to inflation hit business.

Addressing the House of Commons, Kwarteng said: “I have listened to industry concerns about the ongoing reforms. I will therefore introduce an 18-month transitional measure for wine duty. I will also extend draught relief to cover smaller kegs of 20 litres and above, to help smaller breweries.”

Under the new measures, all wine between 11.5% abv and 14.5% abv will be taxed at 12.5%. The “easement” will run for 18 months from 1 August 2023 to the 1 February 2025.

Drink industry associations across the UK are welcoming the duty cancellation and the additional aid aimed at pubs and smaller brewers. Emma McClarkin CEO of The British Beer & Pub Association tweeted: “We welcome the Beer Duty Freeze and recommitment to draught discount & extension to 20L kegs for small brewers.”

Under the proposed legislation a new draught relief will be introduced, which will reduce the duty on draught products under 8.5% abv.

The Scotch Whisky Association (SWA) CEO Mark Kent said: “Chancellor Kwasi Kwarteng has again frozen duty on Scotch Whisky and other spirits, meaning the planned double-digit inflationary increase will now not go ahead. This will save consumers GBP1.35 (US$1.49) on the average priced bottle of Scotch Whisky and help the industry as it deals with the dual challenge of rising energy costs and supply chain pressures. The duty freeze will not only support our sector but the hospitality industry and the wider economy.”

However, the SWA is calling for “further action” and is asking the government to reduce the 70% “tax burden” that is applied to Scotch whisky in the UK, which Kent claims is the “highest in the G7 and one of the highest in the world.”

Calls for further action extended more broadly, with the CEO of The British Institute of Innkeeping, Steve Alton, urging Kwarteng to look at areas including business rates. “Today’s announcement by the Chancellor does not address the vulnerability of our members’ pubs in every community. The energy price guarantee, whilst welcome, will see most pubs at least doubling their energy costs from last year in addition to the inflationary pressures on their costs of doing business,” Alton said. 

“His recognition of too many barriers to enterprise must now also translate into radically reduced regulation allowing our members to trade fully and freely alongside delivering a significant reduction in the ongoing disproportionately high business rates that our members pay.”

The UK mini-budget follows the implementation of an energy cap for businesses and consumers that was aimed at alleviating the sting of rising energy costs. That scheme, which sets an energy cap of GBP2,500, applies for the next six months, with a planned review in three months.

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