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'.
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.”