Chancellor Rachel Reeves has revealed the upcoming increase in alcohol prices across various establishments like shops, bars, pubs, and restaurants in the coming year. This announcement was made as part of today’s Budget release. Alcohol tax in the UK, an excise duty paid by producers and importers, is determined by the alcohol’s strength (ABV) and category.
During her Budget speech, Rachel Reeves confirmed that alcohol duty would climb in line with inflation, which was 4.5% according to the Retail Price Index from September. The alcohol duty will be adjusted with the RPI on February 1, 2026, to maintain its current real value.
Reeves stated, “After considering various viewpoints, including calls for a duty reduction or freeze as well as above-inflation increases, the decision was made to strike a balance between the significant role alcohol producers and the hospitality sector play in the UK’s culture and economy, while also addressing the duty’s role in curbing alcohol-related harm.”
Industry leaders had pushed for a duty freeze in this year’s Budget, highlighting the financial strain from previous tax hikes and the additional burden of the new glass tax. Official data shows that alcohol prices have already risen by 5.8% compared to last year.
Last year, alcohol duty saw a 3.6% increase, leading to a 54p rise in a bottle of wine and a 32p increase in gin prices. However, draught duty experienced a 1.7% reduction, equivalent to a penny less for a pint, in the 2024 Budget. Miles Beale, the chief executive of the Wine and Spirit Trade Association (WSTA), expressed concerns over the cumulative impact of such increases on businesses in the sector.
The decision to raise alcohol duty once more was met with criticism from industry representatives like Karl Mason of the UK Spirits Alliance, who emphasized the detrimental effects on distillers, pubs, and the wider hospitality industry. The continuous duty hikes were viewed as harmful to businesses’ ability to invest, grow, and create jobs.
On the other hand, the Alcohol Health Alliance (AHA) praised the Chancellor’s move to align alcohol duty with inflation, emphasizing the importance of maintaining duty in real terms to address public health concerns related to alcohol consumption.
Alcohol duty plays a significant role in the UK economy, with projections indicating a revenue of approximately £13 billion for the financial year 2025-26. Comparisons with EU excise rates reveal the UK’s position as the third highest in terms of duty rates for beer, wine, and spirits. Despite periodic nominal increases in receipts, alcohol duty’s share of total government revenue has gradually declined over the years.
Duty rates are based on the alcohol content per litre and vary across different types of drinks, with specific rates introduced in August 2023. The new rates will now be adjusted in line with inflation, impacting the prices consumers pay for alcohol at various outlets.