Policy paper

Alcohol duty: rate changes

Published 8 March 2017

Who is likely to be affected

Businesses and individuals responsible for accounting for excise duty prior to consumption - for example manufacturers, importers and warehouse keepers - as well as retailers and consumers of alcohol.

General description of the measure

This measure increases the duty rates on alcohol manufactured in, or imported into, the UK by reference to the retail prices index (RPI).

Policy objective

The public finances assume that all alcohol duty rates rise by RPI each year. This measure aims to support the public finances by implementing the expected indexation of alcohol duty rates for the fiscal year 2017 to 2018.

Background to the measure

At Spring Budget 2017, the Chancellor of the Exchequer announced that all alcohol duty rates will rise in line with RPI inflation from 13 March 2017.

Detailed proposal

Operative date

The new alcohol duty rates will have effect from 13 March 2017.

Current law

Alcohol duty rates are set out in the Alcohol Liquor Duties Act 1979. The duty rate(s) for:

• spirits is set out in section 5
• beer are set out in section 36(1AA) and 37(4)
• cider are set out in section 62(1A)
• wine and made-wine are set out in Schedule 1

Proposed revisions

Legislation will be introduced in Finance Bill 2017 to revise the alcohol duty rates. Sections 5, 36(1AA), 37(4), 62(1A) and Schedule 1 of the Alcohol Liquor Duties Act 1979 will be amended to provide for the relevant alcohol duty rates. The revised rates are:

• duty on beer exceeding 1.2% but not exceeding 2.8% abv: £8.42 per hectolitre for each per cent of alcohol
• general beer duty on beer exceeding 2.8% abv and not produced by small breweries: £19.08 per hectolitre for each per cent of alcohol
• duty on beer exceeding 7.5% abv (and in addition to general beer duty): £5.69 per hectolitre for each per cent of alcohol
• duty on still cider and perry exceeding 1.2% but not exceeding 7.5% abv: £40.38 per hectolitre of product
• duty on still cider and perry exceeding 7.5% but less than 8.5% abv: £61.04 per hectolitre of product
• duty on sparkling cider and perry exceeding 1.2% but not exceeding 5.5% abv: £40.38 per hectolitre of product
• duty on sparkling cider and perry exceeding 5.5% but less than 8.5% abv: £279.46 per hectolitre of product
• duty on wine and made-wine exceeding 1.2% but not exceeding 4% abv: £88.93 per hectolitre of product
• duty on wine and made-wine exceeding 4% but not exceeding 5.5% abv: £122.30 per hectolitre of product
• duty on still wine and made-wine exceeding 5.5% but not exceeding 15% abv: £288.65 per hectolitre of product
• duty on sparkling wine and made-wine exceeding 5.5% but less than 8.5% abv: £279.46 per hectolitre of product
• duty on sparkling wine and made-wine of at least 8.5% but not exceeding 15% abv: £369.72 per hectolitre of product
• duty on wine and made-wine exceeding 15% but not exceeding 22% abv: £384.82 per hectolitre of product
• duty on spirits, spirits-based ready-to-drinks and all other drinks exceeding 22% abv: £28.74 per litre of pure alcohol

Summary of impacts

Exchequer impact (£m)

2017 to 2018	2018 to 2019	2019 to 2020	2020 to 2021	2021 to 2022
nil	nil	nil	nil	nil

This measure is not expected to have an Exchequer impact.

Economic impact

This measure is not expected to have any significant economic impacts.

Impact on individuals, households and families

At the current VAT rate, and assuming 100% pass through wherever alcohol is purchased, from 13 March 2017 the tax on a typical:

• pint of beer will be 2 pence higher but 11 pence lower than it otherwise would have been since ending the beer duty escalator in 2013
• pint of cider will be 1 penny higher but 3 pence lower than it otherwise would have been since ending the cider duty escalator in 2014
• bottle of Scotch whisky will be 36 pence higher but 90 pence lower than it otherwise would have been since ending the spirits duty escalator in 2014
• bottle of wine will be 10 pence higher but 8 pence lower than it otherwise would have been since ending the wine duty escalator in 2014

The measure is not expected to impact on family formation, stability or breakdown.

Equalities impacts

Due to differences in alcohol consumption, any changes to alcohol duties will have an equalities impact that reflects consumption trends across the adult population.

Impact on business including civil society organisations

The changes in alcohol duty rates will impact on alcohol manufacturers, importers and retailers. This measure is expected to have a negligible administrative impact on businesses. Those businesses affected by the duty rate change will incur a negligible one-off cost to update their systems. There are not expected to be any additional on-going costs. This measure is not expected to have any impact on civil society organisations.

Small and micro business assessment: This measure will impact on some small and micro businesses. Small brewers - those producing less than 60,000 hectolitres - pay reduced rates of general beer duty. Small cider makers - those producing less than 70 hectolitres - do not pay any cider duty.

Operational impact (£m) (HM Revenue and Customs (HMRC) or other)

HMRC will incur a negligible one-off cost for changing alcohol duties.

Other impacts

Health impact assessment: increasing all alcohol duty rates by RPI inflation is likely to lead to a minor decrease in overall alcohol consumption in the UK.

Other impacts have been considered and none have been identified.

Monitoring and evaluation

The measure will be monitored through information collected from tax receipts.

Further advice

If you have any questions about this change, please contact the Excise and Customs Helpline on Telephone: 03000 200 3700.