Reforms to the Alcohol Duty system come into place on 1 August 2023, marking the largest changes for almost half a century - and will be of interest to any retailers or businesses including pubs, restaurants and wine merchants (and, of course, those that purchase from those businesses).

The current system is related to four separate taxes: beer, cider, spirits, wine and “made-wine”. 

As per the Alcoholic Liquor Duties Act 1979, ‘wine’ is defined as “any liquor which is of a strength exceeding 1.2% and which is obtained from the alcoholic fermentation of fresh grapes or of the must of fresh grapes, whether or not the liquor is fortified with spirits or flavoured with aromatic extracts”.

‘Made-wine’ means “liquor which is of a strength exceeding 1.2% and which is obtained from the alcoholic fermentation of any substance or by mixing a liquor so obtained or derived from a liquor so obtained with any other liquor or substance but does not include wine, beer, black beer, spirits or cider”.

From 1 August 2023, six standardised alcohol duty bands will come into force, extending across all types of alcoholic products related to ABV, rather than type of drink. For drinks with an alcoholic strength of less than 8.5% ABV (and packaged in containers of at least 20 litres and which incorporate or are designed to connect to a qualifying dispense system) Draught Relief will be available, with relief also available for drinks with an alcoholic strength of less than 3.5% ABV. 

Drinks with an alcoholic strength of at least 3.5% but less than 8.5% will be taxed according to their category, with still / sparkling cider under 5.5% treated differently to beer of any strength, or wine/spirits.

These apply to all individuals and businesses involved in the manufacture, distribution, holding and sale of alcoholic products across the UK, although a temporary arrangement as a transitional phase will be in place from 1 August 2023 until 1 February 2025. Therefore, wine between 11.5% and 14.5% ABV will be treated as if it is 12.5% ABV for the purposes of calculating the charge to alcohol duty.

The current Small Brewers Relief has been extended and will now become the Small Producers Relief, applying if a single or groups combined annual alcohol production is 4,500 hectolitres or less.

The government also says that “Changes to the approval as an alcohol producer and new arrangements for duty returns and payments are scheduled to take effect from late 2024. Further detail on the timing of these changes will be announced at a later date. HMRC intends to provide at least 12 months’ notice so that businesses have time to prepare.”