Beer and wine prices set to drop in potential booze tax overhaul next week

The Chancellor Rishi Sunak could overhaul UK alcohol taxes in the Autumn Budget  ​(image: Shutterstock)
The Chancellor Rishi Sunak could overhaul UK alcohol taxes in the Autumn Budget ​(image: Shutterstock)

The Chancellor Rishi Sunak is reportedly planning to overhaul alcohol duty in next week’s Autumn Budget - a move which could slash the prices of products, such as beer and wine.

Mr Sunak, who is teetotal, is said to be committed to simplifying the alcohol tax system, according to the Sunday Times.

A review of the system was a commitment in the Conservative Party’s manifesto for the 2019 general election.

Under the current rules, there are 15 different bands of taxation across four product types: beer, cider, wine and spirits.

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    However, independent think tank the Institute for Fiscal Studies (IFS) has described this system as a “mess” as it taxes the same amount of alcohol at different rates depending on the beverage.

    It pointed to the example of the different duties for beer and cider.

    Beer carrying more than 7.5% alcohol by volume (ABV) is taxed at just under 25p per litre.

    However, non-fizzy cider that contains the exact same amount of alcohol is taxed at 61p, while sparkling cider has a levy of £2.88 if it contains more than 5.5% ABV but less than 8.5% ABV.

    Beer prices could also be cut by Rishi Sunak's mooted alcohol duty overhaul (image: Shutterstock)

    How could alcohol prices change?

    As first reported by The Sunday Times yesterday (17 October), treasury officials are believed to regard the existing tax system as outdated, complicated and full of anomalies.

    Premiums on sparkling wine, which are currently £2.88 per litre if under 8.5% ABV or £3.81 if the ABV sits between 8.5% and 15%, are understood to be in line to be scrapped.

    Under the Chancellor’s reported plans, the tax on bubbles could be brought in line with still wine.Should this happen, consumers could expect to save 83p per bottle of fizz as the tax would drop to just under £2.98 per litre.

    And English sparkling wine could be given a tax advantage over its more famous cousins Champagne and Prosecco.

    But while beer might also see its tax cut, the price of cheap cider could rise.

    Rishi Sunak will deliver the Autumn Budget next week (image: Getty Images)

    When is the Autumn Budget?

    The Autumn Budget is set to take place next Wednesday (27 October).

    It will form Chancellor Rishi Sunak’s first opportunity to set the economic agenda for the post-Covid-19 pandemic period.

    According to predictions by ‘big four’ accountancy firm Deloitte, Mr Sunak will outline his roadmap for rebuilding public finances.

    Its senior economist Debapratim De said he believed the Chancellor would not make “stinging spending cuts” in the short-term as estimates of the severity of the pandemic on the nation’s finances were likely to be scaled down.

    The biggest announcement that has already been made is the 1.25 percentage point increase to National Insurance from April 2022, which the government said would be used to raise funds for the NHS and social care.

    The government has also already said the state pension ‘triple lock’ will be suspended for a year.