Budget 2021: Alcohol duty shake-up will see cheaper sparkling wine and draught beer, Rishi Sunak tells MPs

The Chancellor said he was 'radically' simplifying alcohol duty by introducing a system designed around the principle of 'the stronger the drink, the higher the rate'.

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Rishi Sunak said steps would be taken to deliver the “most radical simplification of alcohol duties for over 140 years”.

The Chancellor told MPs: “First, to radically simplify the system, we are slashing the number of main duty rates from 15 to just six.

“Our new system will be designed around a common-sense principle: the stronger the drink, the higher the rate. This means that some drinks, like stronger red wines, fortified wines, or high-strength ‘white ciders’ will see a small increase in their rates because they are currently undertaxed given their strength.”

Mr Sunak added many lower alcohol drinks are “currently overtaxed”, adding: “Rose, fruit ciders, liqueurs, lower strength beers and wines – today’s changes mean they will pay less.”

The Chancellor announced proposals for a new “small producer relief” to include small cidermakers and other producers making alcoholic drinks of less than 8.5% alcohol by volume (ABV).

In relation to sparkling wines, Mr Sunak said: “I’m going to end the irrational duty premium of 28% that they currently pay. Sparkling wines – wherever they are produced – will now pay the same duty as still wines of equivalent strength.”

Mr Sunak also announced “draught relief” – a new, lower rate of duty on draught beer and cider.

The Chancellor told MPs: “It will apply to drinks served from draught containers over 40 litres. It will particularly benefit community pubs who do 75% of their trade on draught. Let me tell the House the new rate: draught relief will cut duty by 5%.

“That’s the biggest cut to cider duty since 1923. The biggest cut to fruit ciders in a generation. The biggest cut to beer duty for 50 years. This is not temporary, it’s a long-term investment in British pubs of £100 million a year. And a permanent cut in the cost of a pint by 3p.”

Mr Sunak said the reforms will come into effect in February 2023.

On his final announcement on alcohol duty, the Chancellor said: “I can confirm that the planned increase in duty on spirits like Scotch Whisky, wine, cider and beer, will all, from midnight tonight, be cancelled. That’s a tax cut worth £3 billion.”