Chancellor Rachel Reeves has revealed the upcoming increase in alcohol prices across shops, bars, pubs, and restaurants for the upcoming year as part of the latest Budget announcement. In the UK, alcohol tax is an excise duty paid by producers and importers, 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, following the usual adjustment based on the Retail Price Index, which stood at 4.5% this year. The increase in alcohol duty will be implemented on February 1, 2026, to maintain its current real-value status.
Reeves emphasized that the decision to raise alcohol duty was made after considering various viewpoints, including proposals for a duty reduction, freeze, or above-inflation hikes. The aim was to strike a balance between the contributions of alcohol producers and the hospitality sector to the UK’s economy and culture, while also acknowledging the duty’s role in mitigating alcohol-related harm.
Industry leaders had advocated for a freeze on duty in the recent Budget, citing the challenges faced by members following the tax hikes earlier in the year and the introduction of the new glass tax. Official figures indicate that alcohol prices have already increased by 5.8% compared to the previous year.
Last year, drinkers experienced a 3.6% rise in alcohol duty, leading to a 54p increase in a bottle of wine and a 32p rise in gin prices, while draught duty saw a 1.7% reduction – equivalent to a penny off a pint – in the 2024 Budget. Miles Beale, the CEO of the Wine and Spirit Trade Association (WSTA), expressed concerns, labeling the Budget as a series of detrimental measures for wine and spirit businesses.
The UK Spirits Alliance spokesperson, Karl Mason, lamented the impact of the duty increase on distillers, pubs, and the wider hospitality industry, highlighting the potential risks of businesses facing financial distress. The continuous duty hikes were criticized for hindering investment opportunities, growth, and job creation.
Conversely, the Alcohol Health Alliance (AHA) welcomed the Chancellor’s decision to align alcohol duty with inflation, signaling a move towards a more responsible approach to alcohol taxation. AHA Chairman, Professor Sir Ian Gilmore, emphasized the importance of maintaining alcohol duty in real terms to address public health concerns and the necessity of aligning duty increases with inflation.
Alcohol duty plays a significant role in the UK economy, projected to generate approximately £13 billion for the financial year 2025-26. Comparisons with EU excise rates highlight the UK as the third-highest overall, particularly for beer and wine, with notable variations in duty rates across different types of drinks.
The adjustment in alcohol duty rates reflects the ongoing effort to align prices with inflation, ultimately leading to higher costs for consumers in pubs and shops.