The government has published 'Consultation: The new alcohol duty system' which outlines a new structure of alcohol duty, including new rates and reliefs, and it is seeking views on the proposals.
In formulating the new system, the government took account of earlier consultations and other factors.
- The fiscal impact of changes.
- The potential benefits to public health.
- The changing nature of the alcohol market.
- The economic impacts of changes to duties on producers and consumers.
Overall changes to duties
All products across all categories will be taxed in reference to the litres of pure alcohol they contain, as is currently the case for spirits. All categories will move to a standardised series of bands rates for products between:
- 1.2 - 3.4% ABV.
- 3.5 - 8.4% ABV.
- 8.5 - 22% ABV.
- Above 22% ABV.
- All products across all categories will pay the same rate of duty above 8.5% ABV.
New duty rates (per litre of pure alcohol) from 1 February 2023
| ABV | Beer | Cider | Wine, made-wine and spirits |
| 0 - 1.2% | Nil | Nil | Nil |
| 1.3 - 3.4% | £8.42 | £8.42 | £8.42 |
| 3.5 - 8.4% | £19.08 | £8.78 | £22.50 |
| 8.5 - 22% | £25.88 | £25.88 | £25.88 |
| over 22% | £28.74 | £28.74 | £28.74 |
Changes for beer duty
The minor changes to the structure of beer duty are in line with the overall changes above.
- The reduced rate for products below 2.8% ABV will be widened and extended to products below 3.5% ABV.
- The higher rate for beers above 7.5% ABV will be moved up to start at 8.5% ABV and aligned with the new rate for products above 8.5% ABV.
These changes mean that beers above 8.5% ABV will now pay the same rate of duty as wines and spirits.
Changes for wine and made-wine duties
The government's position is that wine and made-wine duties are currently poorly structured taxes, with significant anomalies and distortions. Currently, products below 8.5% ABV are only competitive when produced at 4% and 5.5% ABV, as these are the minimum rates of duty per unit available to manufacturers.
All wine and made-wine drinks will be taxed in reference to their ABV. The reform to this duty is as follows:
- The different rates for still and sparkling wines will be abolished and both products will be taxed at a single rate. For products below 8.5% ABV, this will be slightly below the level per unit currently applied to wine and made-wine drinks at 4% ABV.
- Products between 8.5% - 22% ABV will be taxed at a single flat rate per litre of pure alcohol. This will be between the existing still and sparkling rates and will be set at approximately the current rate per unit of an 11.5% ABV still wine.
- To support the development of lower strength products, a new reduced rate will be introduced for products below 3.5% ABV.
- The existing system of taxing wines above 22% ABV in line with spirits on the basis of their pure alcohol content will continue.
Changes for cider duty
All cider products will be taxed on the basis of their ABV i.e. their pure alcohol content. This will be set at approximately the rate currently charged to a 4.6% ABV cider.
There were some requests to revisit the definition of cider for duty purposes (e.g. to widen the list of permitted ingredients) but it was decided not to make changes as cider is an important and historic industry and the definition of cider should therefore remain tightly focussed to reflect this heritage.
Changes for spirits duty
Spirits with an ABV below 22% will get reduced rates to match that for wine and made-wine.
Draught products rates
The government has decided to distinguish the duty rates between the on-trade (pubs) and off-trade (shops). Draught products include beer, cider and made-wines such as fruit ciders or mead. To qualify for the reduced rates products must be:
- Below 8.5% ABV.
- In large containers of at least 40 litres.
- Sold so as to connect to a dispensing system.
For beer and cider, these rates are approximately 5% lower than the proposed rates in the main structure. For draught made-wines and wines, it is proposed these should align with the new rate for draught beer.
Small producers' relief
The new scheme builds upon the Small Brewers' Relief scheme. which will also be applicable to small producers of cider, wines/made-wines such as fruit ciders or fruit wines, and spirits-based products. Unlike the existing SBR scheme, the government intends that this will apply to lower strength beers as well.
- Qualifying businesses will be entitled to reduced rates on products below 8.5% ABV.
- Producers will need to produce less than a maximum threshold of pure alcohol in the previous calendar year to qualify.
- Businesses will be able to qualify for the reduced rates based on their production in the previous year.
- Products produced under licence will not qualify.
- The scheme will be open to imported products.
- The Government does not intend to extend this small producer relief to products at 8.5% ABV or above, which will exclude many (but not all) wines and spirit-based products.
The relief will be calculated in reference to the total hectolitres of pure alcohol (hLpa) made by the producer and a producer’s total production across all categories will count towards the Taper calculation. For example, if a business produced 2,000 hLpa from beer and 1,000 hLpa from cider, it would be assessed on the basis that it had produced 3,000 hLpa.
Products at or below 1.2% ABV would not count towards production, as they are not subject to duty.
The consultation is particularly interested to understand the views of stakeholders on the appropriate level of these thresholds. The maximum threshold for SBR is currently 60,000 hectolitres of finished product, which when converted to a pure alcohol basis using typical strengths for beers would be approximately 2,500 hectolitres of pure alcohol. 4.35
It was announced in July 2020 that it intended to reduce the taper for SBR to start at 2,100 hectolitres of finished product, which on the same calculation would be approximately 90 hectolitres of pure alcohol.
The existing exemption for small cidermakers, as the transition at 70hL has been identified as an impediment to growth and will continue to be exempt from the requirement to register and therefore pay no excise duty.
Regulation
Views are sought on potential reforms to the administrative elements of the alcohol duty regime including allowing alcohol production businesses to operate under one approval system.
Returns and payment
As with approvals, there are different rules for declarations and payments of duty across the production regimes. The call for evidence asked for views on a single policy and process for duty payment across all alcohol production regimes.
Digitisation
The consultation proposes to digitise the approvals and accounting systems to provide alcohol producers with the ability to submit information online.
This consultation will run for three months and will close on 30 January 2022. Responses should be submitted electronically to
Consultation questions
Overview of new rates structure
- What are your views on the proposed new structures of alcohol duty?
- Do you think the proposed duty rates are appropriate?
- Are there any other changes that you think should be included in the new structures?
Draught products rates
- Do you support the principle of the proposed rates for draught products?
- Do you consider that the proposed rates are appropriate?
- Do you agree with the qualifying criteria for the draught rates?
- Would any safeguards be needed to prevent fraud or diversion?
Small producer relief
- Do you support the principle of an expanded small producer relief?
- Do you agree that this should be based on total production, measured in hectolitres of pure alcohol?
- What would the appropriate start point be for a taper be in hectolitres of pure alcohol?
- What is the largest size a producer should be to qualify for the small producer relief, in hectolitres of pure alcohol?
- To inform this, do you have any information on the cost differences between large and small producers in the different categories?
- Would any safeguards be needed for any categories? For example, would businesses be required to grow themselves a minimum percentage of the input ingredients to qualify for these new reliefs?
- Are you content for the small producer relief to otherwise follow the design of the Small Brewers Relief (SBR) scheme, e.g. on technical details?
Approvals
- What are your views on the proposed administration system for alcohol approvals?
- Will the changes reduce the complexities in the current system and support your business’s ability to diversify, grow and adapt?
- Do you see any issues with the changes proposed and, if so, how could they be improved?
Returns and payment
- What are your views on the revised arrangements for declaration and payment of alcohol duty?
- Will the changes reduce administrative burdens?
- Do you see any issues with the changes proposed and, if so, how could these be improved?
Digitisation
- What are your views on the intention to digitise the approvals and accounting systems for alcohol producers?
- Do you have any suggestions on how further digitisation could support your business?
- Do you see any issues with the proposals and, if so, how these could be improved?
Useful guides on this topic
Small Brewer's Relief
Small Brewer’s Relief (SBR) allows reduced rates of duty, of no more than 50% below the standard rate for small producers that are registered.
External links
Consultation: The new alcohol duty system
If you like our content come and join us.
Thousands of accountants and advisers and their clients use www.rossmartin.co.uk as their primary TAX resource.
Register with us now to receive our receive our FREE SME Topical Tax Update & newletter
