A price hike on popular drinks including wine, beer and spirits like gin and whisky is set to hit pub-goers and supermarket shoppers following today’s Budget announcements.
Chancellor Rachel Reeves announced in her Budget speech today that alcohol duty will rise in line with inflation in February.
Instead, it will be revised upwards with the Retail Price Index in February 2026, to maintain the same price in real terms.
Although businesses aren’t obligated to pass on the cost of the tax hike, they almost certainly will, especially as the pub industry continues to struggle.
The Chancellor’s decision to raise alcohol duty in line with inflation has been called a “sad day” for the nation’s distillers, pubs and wider hospitality sector.
Alcohol duty normally rises in line with the Retail Price Index from September – which was 4.5%.
Industry leaders had urged the Government to freeze duty in this year’s Budget, arguing members were still reeling from the tax hikes introduced in February, and the additional burden of the new glass tax.
As reported by The Spirits Business, the spirits industry had been calling on the government to freeze alcohol duty over the next few years, “however it appears these pleas have fallen on deaf ears,” it said.
Alcohol duty has been linked to the RPI since February 2025, a decision made by Reeves in her first budget last year and described as a “betrayal” for the Scotch industry.
Although today’s Budget speech did not mention alcohol duty, the Office for Budget Responsibility published a report, embarrassingly leaked ahead of the actual speech, calculating the impacts of Reeves’ new statement.
In it, it claims that alcohol duty receipts are expected to raise £12 billion in 2025-26, a 5.1% decrease compared with the year before.
It thinks tax receipts will increase by 3.4% each year thereafter, reaching £14bn by 2030-31. This will be due to increases in the duty rate, which “offset the impact of lower in-year and forecast consumption”.
It forecasts that the volume of alcohol sold will decline by 6.4% this year and remain broadly flat from 2027-28.
Industry sources said this would be the equivalent of about 15p on a bottle of red wine, 47p on a bottle of Scotch whisky and 7p on a four-pack of beer or lager. The cost of an average bottle of prosecco would increase by 13p.
Miles Beale, chief executive of the Wine and Spirit Trade Association (WSTA) said: “This Budget has been dubbed a death by a thousand cuts, and for wine and spirit businesses those cuts run deep.
“Our members are still reeling from the tax hikes introduced in February, and the additional burden of the costly new glass tax, known as EPR. Coupled with rises in National Insurance, increases to the minimum wage and business rates, it is no surprise that wine and spirit producers – along with our beleaguered hospitality sector – feel under sustained attack.
“The Government’s typically disappointing and shortsighted decision to raise alcohol duty yet again will only prolong the doom loop. Despite the OBR at last acknowledging higher prices lead to a decline in receipts, the Government fails to recognise that its own policy is driving up those prices.
“Amazingly, the Treasury continues to press ahead with its ill-founded plan to pile further duty increases on alcohol.
“Prices will rise once more for consumers, British businesses will suffer, and Treasury receipts will continue to fall – forecast to be £600 million lower than last year and £1 billion lower than was forecast in March.”
The Chancellor also announced an increase on taxes on remote gambling websites.
Ms Reeves will increase the levy on remote gaming from 21% to 40% next year, in a bid to deter people from a form of gambling, the Chancellor said, was associated with the “highest levels of harm”.
But a cut to fuel duty will be extended as a means of holding down the price of petrol at the pump.
The tax has been held at 57.95p since 2011, but the effective rate paid by drivers since 2022 has been 52.95p as a result of a “temporary” 5p cut.
