Duty discount for lower-strength alcohol products extended in budget

The government is to extend duty relief offered on products lower than 3.5% abv for small producers as part of its autumn budget. 

The move, which comes three years after the discount was introduced in 2023 under then-Chancellor Rishi Sunak, would strengthen “incentives to produce lower-strength products”, it said. 

Currently, alcoholic drinks of less than 3.5% abv face duty of £9.96 per litre of pure alcohol, compared with £26.61 per litre of pure alcohol for products between 3.5% and 8.4% abv.

Since the discount was introduced in 2023, a swathe of suppliers both large and small have moved to take advantage by launching new lower-strength products, as well as reformulating core lines to fit into the duty bracket. Carling, Foster’s and Carlsberg are just some of the beers to have been watered down to 3.4% abv in recent years – proof of what the Treasury described as “particularly evident” reformulation in beer around the 3.4% ABV threshold.

However, the new, additional relief will only apply to smaller producers that qualify for Small Producer Relief, The Grocer understands. These suppliers will also receive a more generous duty discount for products between 3.5%-8.4% abv from next February. 

The move will cost the government £10m per year, and reflected the “important contribution” made by small alcohol producers “to the economy and local communities”, budget documents said.

The Society of Independent Brewers and Associates (SIBA) welcomed the support for its members. “Fans of indie beer will be toasting the Chancellor’s big pledge for small breweries tonight,” CEO Andy Slee said, adding the changes would help smaller brewers “compete against the global brewers that dominate the sector”. 

Basic alcohol duty rates to rise

Meanwhile, the basic rates of alcohol duty are set to go up by 4.55% – in line with RPI inflation – from next year to maintain their real term value, the government has confirmed. 

It means larger producers, as well as those producing products above 8.4% abv, are facing a fourth increase in alcohol duty in less than four years. 

Wine and Spirits Trade Association CEO Miles Beale blasted the move, describing it as “piling on the pain for businesses and consumers”. 

“No one will be toasting yet another RPI increase on top of rising inflation,” said Beale. “Instead of providing breathing space in a cost of living crisis, the Chancellor’s alcohol tax hikes will further stifle British business and serve up nothing for consumers.

“The only way to give families and businesses a break from the suffocating economic crisis is to stop the hikes, look at the numbers and listen to those being impacted. The old tactics are not working for anyone. Increasing alcohol duty is not boosting Treasury funds, but it is closing down businesses and pricing consumers out of a bit of joy in their shopping basket.

“If government is serious about providing growth in every postcode it has stop piling on the pain for businesses and consumers across the country and show its support to the UK drinks sector.”