The headlines are starting to focus on this tax change, which was announced in the March Budget, but doesn't take effect until 1 August this year.
It's a complicated change, that is set to make a difference to the price of some of your favourite tipples. It's the biggest reform to alcohol duty in the UK in 140 years and when it was announced in the budget, it was used as a headline-grabber to suggest the price of a pint in a pub may come down. Sadly, with the continuing rise in other costs and pressures on breweries, the reality is this is highly unlikely and conversely, it will see price increases for other drinks. We have read many an article on this recently and thought we would share what we have learned, with the caveat that we are not the experts - just a couple of Publicans trying to make sense of it!
What is the change?
For the last 140 years, alcohol duty has been applied and set depending on the type of drink. This system had four separate categories - wine, beer, cider and spirits. How it ended up like this is a rabbit hole in itself. Suffice to say the new system intends to simplify things by taxing alcohol depending on the ABV (Average By Volume) of the alcohol content per litre of product. The ABV is clearly stated on all drinks in a percentage, e.g. a middle-of-the-road ale will usually have an ABV of 4%. It's the number you look for if you're thinking about pacing yourself in terms of the strength of your drinks and how much you can consume in one sitting!
The new duty rates will be as follows (remember this is per litre):
Less than 1.2% £0
1.2% to 3.5% £9.27
3.5% to 8.5%
£9.67 for still or sparkling cider under 5.5%
£21.01 for beer
£24.77 for spirits, wine and other fermented products, or sparkling cider higher than 5.5%
8.5% to 22% £28.50
Higher than 22% £31.64
A direct comparison to the rates in the old system is obviously not possible, but in general this means that the duty on your average bottle of wine will go up by 44p, over £1 for port and £1 for bottles of spirits.
There is good news though - there is a draught relief on qualifying beer and cider provided their ABV is below 8.5%, the product is in a container that's at least 20 litres (which most draught products are) and it is served on draught (which means anything from our pumps). The idea behind this is to bring the prices charged in supermarkets more in line with those served in pubs, bars and restaurants. The reality is that when you calculate this against the old duty system, the duty per pint doesn't change, so we hope breweries won't need to increase their prices. So your ales, ciders and lagers should stay the same.
The same can't be said for spirits - taking a bottle of standard vodka at 40% ABV, when you compare the duty from 1 August to now, it increases by 97p per bottle - an increase that will be passed on directly to the consumer.
Should we worry?
As said above, the full impact of these changes will come to light once they are fully embedded, as their impact is affected by other variables such as the cost of living in general. Producers who will have to increase their prices in line with the changes are concerned they may struggle, as they can't absorb the duty rise but are also worried about passing it onto their customers. It may also mean a shift in what people buy when they come out for an evening to a pub, bar or restaurant. There is no doubt the changes encourage lower ABV products, hence some producers are already changing their top selling lagers to sit in the lower 1.2 to 3.5% bracket.
We will keep you posted on what impact this will have going forwards - the reality is some of the price increases will be introduced gradually, as we have stock purchased at the old duty rates, so won't add any increases until we have to buy stock at the new duty rates.
In the meantime, perhaps enjoy a locally produced gin, rum or whisky to fully appreciate them and hopefully feel they are still worth every penny of the producer's hard work once the new rates have kicked in!