Alcohol duty: Current policy and developments

What is alcohol duty, and what does the new system look like?

Alcohol duty is a tax charged at the point of production or importation of drinks of alcoholic strength exceeding 1.2% alcohol by volume (abv - the percentage of pure alcohol per litre of product). Duty rates differ for beers, ciders and perries, wines, spirits, and other fermented products. Value Added Tax (VAT) is also charged on the duty-inclusive price.

Generally, drinks are taxed more the stronger they get. However, there are some exceptions. For example, beers and ciders at certain strengths are taxed at a lower rate than other products.

How much does alcohol duty raise?

The Office for Budget Responsibility (OBR) estimates that alcohol duty revenue was £12.5 billion in 2024/25 (PDF), and that it will rise to £14.1 billion in 2030/31.

What alcohol duty reliefs are available? Small producer relief

Small producers of alcoholic products below 8.5% abv may be entitled to a lower rate of duty. To be eligible, the total product made in the previous production year has to contain less than 450,000 litres of pure alcohol. Producers also have to reasonably expect that the production in the current production year will not exceed the 450,000-litre limit.

Some small producers may also be entitled to a 100% duty exemption for the first 500 litres of pure alcohol produced (on 10 February 2025, we updated this briefing to correct ‘5,000 litres’ to ‘500 litres’).

Draught relief

Alcoholic products below 8.5% abv sold in venues such as pubs may be entitled to a lower rate of duty. To qualify, products must also be able to be connected to a pump system or a drinks tap and be contained in a container of capacity of 20 litres or higher.

Alcohol duty and Northern Ireland

The new alcohol duty system applies in Northern Ireland as well. Originally, some changes to the alcohol duty system would only have applied in Great Britain, due to the terms of the Northern Ireland Protocol.

However, the agreement between the UK and the EU on changes to the Protocol (the ‘Windsor Framework’) agreed in February 2023 meant that the changes to the alcohol duty system would apply to Northern Ireland too. Some EU legislation also still applies in Northern Ireland.

The 2023 reforms to alcohol duty

The alcohol duty system was significantly reformed in 2023 to simplify its structure and administration, and to align it more closely with public health goals.

The previous system had more duty rates than the current one. The structure of duties for different drinks varied across, and often within, categories. This often resulted in different products at the same alcoholic strength being taxed at significantly different rates. The previous system was described by commentators, such as the Institute for Fiscal Studies, as “a mess”. The Conservative government consulted on reforming the duty system between 2020 and 2023. There was broad consensus among respondents that the system needed to be reformed and simplified.

Public health campaigners (such as the Alcohol Health Alliance) had also argued that the availability of cheap, high-strength drinks was contributing to alcohol misuse, with negative outcomes for wider society and public services. Alcohol misuse can cause long-term consequences, such as higher risk of brain damage, liver disease, dementia, and a number of cancers. This has a particular effect for health services. In 2022/23, there were over 320,000 alcohol-specific hospital admissions. NHS England estimate that up to 15% of A&E attendances are alcohol related. Alcohol-specific deaths in the UK were over 10,000 in 2022, a 70% increase from 2002.

What has been said about the new system?

The change in the structure of the new duty system was broadly welcomed across the political spectrum and by expert commentators. Campaigners who argued the previous system was enabling alcohol misuse, such as the Alcohol Health Alliance, said the new system was a welcome first step.

Organisations representing the beer industry, such as the Society of Independent Brewers and Associates (SIBA) and the British Beer and Pub Association (BBPA), have particularly welcomed the small producer relief and the introduction of lower rates on draught products.

There was a negative response, however, from the wine and spirits industry, whose products were going to be largely excluded from the new reliefs and would be taxed more on average (as wine and spirits tend to be stronger than beers or ciders).

The wine industry also expressed concern at the ending of the temporary easement, arguing that the new system would be expensive and administratively burdensome for producers.

There was also a negative reaction to the decision to increase the rates alcohol duty alongside the introduction of the new system. MPs expressed this during the debate on the Finance (No. 2) Bill 2022-23, which made provision for the new alcohol duty system. Industry representatives (such as the Wine and Spirit Trade Association and the Society of Independent Brewers) commented that raising alcohol duty during a difficult time for drinks producers and hospitality outlets would cause negative consequences for them and for consumers alike.

How are alcohol duty rates increased?

In absence of specific policy initiatives, public finance forecasting assumes that alcohol duty will be increased year-on-year. This typically happens on 1 February, based on the rate of Retail Price Index (RPI) measure of inflation. This process is known as ‘uprating’. However, many policy decisions on alcohol duty since 2010 have differed from this uprating assumption. At several fiscal events, consecutive chancellors had either not increased or reduced the rate of duty on most products.

As outlined above, the Conservative government uprated alcohol duty rates on 1 August 2023, when the new system took effect. Following, duty rates have been frozen by the Conservative government at Autumn Statement 2023 and Spring Budget 2024.

The Labour government increased the main rates of alcohol duty, and decreased the draught duty rates, effective 1 February 2025. At the Budget in November 2025 the government announced all duty rates would increase in line with RPI inflation from 1 February 2026.