Chancellor Rachel Reeves has unveiled the upcoming increase in alcohol prices across various retail and hospitality establishments as part of the Budget announcement. Alcohol tax in the UK, an excise duty paid by producers and importers, is determined by alcohol strength (ABV) and category.
During her Budget speech, Rachel Reeves confirmed that alcohol duty would climb in line with inflation, matching the 4.5% Retail Price Index from September. This adjustment is scheduled for February 1, 2026, to retain the duty’s current real value.
Reeves emphasized the government’s consideration of stakeholder feedback, which ranged from advocating for a duty cut or freeze to proposing above-inflation hikes. The decision aimed to strike a balance between acknowledging the contributions of alcohol producers and the hospitality sector to the UK’s economy and culture while addressing the duty’s role in curbing alcohol-related harm.
Industry leaders had urged the government to maintain duty levels in the current Budget due to the strain caused by previous tax increases and the introduction of the glass tax. Official data indicates a 5.8% increase in alcohol prices compared to the previous year.
In the previous year, alcohol duty saw a 3.6% rise, resulting in a 54p increase for a bottle of wine and a 32p rise for gin, while draught duty experienced a 1.7% reduction, equivalent to a penny off a pint. Miles Beale, CEO of the Wine and Spirit Trade Association (WSTA), expressed concerns over the cumulative impact of these duty adjustments on businesses in the industry.
The UK Spirits Alliance spokesperson, Karl Mason, lamented the detrimental effects of the duty increase on distillers, pubs, and the broader hospitality sector, emphasizing the potential financial strain on businesses already struggling to cope with existing pressures.
Despite opposition from industry representatives, the Alcohol Health Alliance (AHA) supported the Chancellor’s decision, viewing it as a step towards a more responsible approach to alcohol taxation. AHA chairman Professor Sir Ian Gilmore highlighted the importance of maintaining alcohol duty in line with inflation to mitigate harm and protect public health.
Alcohol duty plays a significant role in the UK economy, forecasted to generate approximately £13 billion in the 2025-26 financial year, representing 1.1% of government receipts and £450 per household. Comparatively, the UK’s excise rates on alcohol rank among the highest in the EU, with notable variations in duty rates across different beverage categories.
In summary, the inflation-linked increase in alcohol duty will result in higher prices for alcohol in retail and hospitality outlets, impacting consumers and businesses alike.