Chancellor Rachel Reeves has revealed the upcoming increase in alcohol prices for consumers in various establishments such as shops, bars, pubs, and restaurants in the upcoming year, as a part of the latest Budget announcement. Alcohol tax in the UK is a duty paid by producers and importers, determined by the alcohol’s strength (ABV) and category.
During her Budget speech, Rachel Reeves disclosed that alcohol duty would be adjusted to match inflation rates. Normally, the adjustment is aligned with the Retail Price Index from September – which stood at 4.5% this year. The alcohol duty will be revised with the RPI on February 1, 2026, to retain its current real value.
In addressing stakeholders’ feedback, Rachel Reeves mentioned, “The government considered input ranging from calls for a duty reduction or freeze to above-inflation increments. This decision seeks to strike a balance between acknowledging the significant contribution of alcohol producers and the hospitality sector to the UK’s culture and economy, while recognizing the duty’s role in curbing alcohol-related harm.”
Industry leaders had advocated for a freeze on duty in this year’s Budget, citing the challenges faced due to previous tax hikes and the additional burden of the new glass tax. Official figures indicate that alcohol prices have already risen by 5.8% compared to last year.
Last year saw a 3.6% increase in alcohol duty, translating to a 54p addition to a bottle of wine and 32p to gin, while draught duty witnessed 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, stating, “This Budget has been labeled a death by a thousand cuts, and the impact on wine and spirit businesses is substantial.”
Despite opposition from industry representatives, the Chancellor’s decision to raise alcohol duty met with approval from the Alcohol Health Alliance (AHA). Chairman Professor Sir Ian Gilmore commended the move, highlighting the importance of maintaining alcohol duty in real terms to promote responsible alcohol consumption.
The UK’s Alcohol Duty plays a significant role in the economy, expected to generate approximately £13 billion for the financial year 2025-26. Comparing excise rates across the EU and UK, the UK ranks as the third highest, trailing behind high-duty countries like Finland and Ireland.
In conclusion, the adjustment in alcohol duty to align with inflation rates will result in higher prices for consumers at pubs and shops.