Chancellor Rachel Reeves has disclosed the forthcoming increases in alcohol prices for consumers in various settings like shops, bars, pubs, and restaurants in the upcoming year, as part of today’s Budget announcement. In the UK, alcohol tax, an excise duty paid by producers and importers, is determined based on the alcohol’s strength (ABV) and category.
During her Budget speech, Rachel Reeves confirmed that alcohol duty would see a rise in accordance with inflation. Typically, the duty increases in alignment with the Retail Price Index from September, which stood at 4.5% this year. The adjustment to alcohol duty will be based on the RPI starting on February 1, 2026, to retain its current real value.
Reeves stated, “The government considered various perspectives from stakeholders, including suggestions for a duty reduction or freeze versus higher-than-inflation hikes. This decision aims to strike a balance between the significant contributions of alcohol producers and the hospitality sector to the UK’s culture and economy, while also addressing the duty’s role in mitigating alcohol-related harm.”
Industry leaders had urged the government to maintain duty at current levels in this year’s Budget, citing ongoing challenges from previous tax increases and the added burden of a new glass tax. Official figures show that alcohol prices have already increased by 5.8% compared to the previous year.
In the previous year, consumers faced a 3.6% rise in alcohol duty, resulting in a 54p increase for a bottle of wine and a 32p increase for gin, while draught duty saw a 1.7% reduction, equivalent to a penny off a pint, in the 2024 Budget. Miles Beale, the chief executive of the Wine and Spirit Trade Association (WSTA), expressed concerns, labeling this Budget as a series of detrimental measures affecting wine and spirit businesses deeply.
Beale remarked, “Our members are still grappling with the repercussions of the tax hikes introduced earlier this year, compounded by the costly new glass tax, also known as EPR. Alongside increases in National Insurance, minimum wage, and business rates, wine and spirit producers, along with the struggling hospitality sector, are facing sustained challenges.”
He continued, “The government’s decision to once again raise alcohol duty, despite acknowledging that higher prices reduce receipts, perpetuates a cycle of adversity. By not recognizing that its policies are driving up prices, the government is causing further financial strain on consumers, British businesses, and the Treasury.”
UK Spirits Alliance spokesperson Karl Mason lamented the impact of the decision on distillers, pubs, and the broader hospitality sector, emphasizing the potential dire consequences for businesses on the brink.
Mason highlighted, “Innovative distillers are disappearing, and many landlords fear financial collapse due to rising costs. This Budget will push already struggling businesses over the edge, limiting their capacity to invest, grow, and create jobs.”
The Alcohol Health Alliance (AHA) commended the Chancellor’s move to adjust alcohol duty in line with inflation. AHA Chairman Professor Sir Ian Gilmore lauded the decision, emphasizing the importance of maintaining alcohol duty in real terms to promote public health and address alcohol-related harms.
The duty on alcohol plays a significant role in the UK economy, with projections indicating that for the financial year 2025-26, alcohol duty collections are expected to reach approximately £13 billion. This amount represents 1.1% of all government receipts, translating to about £450 per household and roughly 0.4% of national income.
Comparing excise rates across the EU and the UK in 2025 reveals that the UK ranks as the third highest, trailing behind countries like Finland and Ireland. The UK imposes substantial duties on beer and wine, with varying rates based on the type of drink and alcohol content.
In conclusion, the adjustments to alcohol duty will be made in line with inflation, leading to increased prices for consumers in pubs and shops.