Chancellor announces overhaul of alcohol tax system – what it means for the price of alcohol

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The Chancellor announced a major overhaul of the alcohol tax system, which will see the price of drinks such as prosecco and fruit cider drop, while others may become more expensive.

The changes will also see the price of a pint in the pub cut by 3 pence and a planned increase in duties on spirits such as Scotch whiskey, wine, cider and beer canceled.

Rishi Sunak explained that the way alcohol is taxed will be made fairer and simpler as he announced a series of changes in his fall budget this afternoon.

The teetotaler said the system, which dates back to 1643, was “outdated, complex, and full of historical anomalies.”

READ MORE: Seven key fall 2021 budget announcements and what it means for you

A new system, which will come into force in February 2023, will be based on the principle that drinks are taxed in proportion to their alcohol content, he said.

The number of main tariff rates will be reduced from 15 to six as part of the sweeping changes, which constitute the “most radical simplification of alcohol duties in more than 140 years”, according to the Chancellor.

The reforms will make Britain’s alcohol tax system “simpler, healthier and fairer,” Sunak said, adding that changes were only possible now that the country has left the European Union.

The changes follow warnings from the World Health Organization that countries abiding by EU rules do not operate tax systems that benefit from a public health perspective, Sunak said.

Here are the five alcohol tax changes announced by the Chancellor and how they affect the price of alcohol.

1. “The stronger the drink, the higher the rate”

The new alcohol tax system will impose a higher level of duty on the strongest drinks.

The “more rational” system could have an effect on the price of some alcoholic beverages, he said.

The Chancellor explained: “Our new system will be designed around a principle of common sense: the stronger the drink, the higher the rate.

“This means that some drinks – like stronger red wines, fortified wines or high-grade ‘white ciders’ – will see their prices increase slightly because they are currently under-taxed due to their strength.”

Port and Madeira will be particularly hard hit, with typical bottles of 20 percent port likely to see their tax increase by more than £ 1.



Will your favorites be affected?

Sherry could also get more expensive, with documents showing Sherry Croft would see a 51p tariff increase.

Scottish favorite Buckfast, who is around 8.5%, will face an 81 pence tax hike on an £ 8.50 bottle.

Mr Sunak said the move “will help end the era of cheap, high-potency drinks that can harm public health and lead to problems with alcohol consumption.”

Some drinks, however, will be made cheaper.

“Many low-alcohol drinks are currently overtaxed and have been for many decades,” Sunak said.

He said consumers can expect to pay less for rosé, fruit ciders, liqueurs, beers and softer wines under the new tax system.

Rosé wine drinkers would see a bottle of Echo Falls Zinfandel priced around 23 pence lower, while less potent spirits such as Baileys and Malibu would see a reduction of 41 pence and 50 pence per bottle respectively.

2. Relief for small artisanal cider producers

Mr. Sunak said that a “Small Producer Relief” would be introduced to support manufacturers of innovative craft drinks.

He said it is an extension of the Small Brewers Relief principle.

This will impact small cider houses and other producers making alcoholic beverages below 8.5%, he said.

3. Reductions in duties on prosecco and fruit cider

Popular drinks like prosecco and fruit cider will be made cheaper.

Mr. Sunak said the new system “would reflect the way people drink today”.

“In the last decade, the consumption of sparkling wines like prosecco has doubled,” he said, adding that sparkling wines were “no longer the preserve of the wealthy elites”.



Prosecco has become a popular drink in recent years

He said he would end the “irrational” 28% tariff premium, aligning it with still wines of the same strength.

He added that because growing conditions in the UK generally favor weaker wines, English and Welsh wines will pay less than stronger imported wines.

An 11 percent £ 8.50 bottle of Canti Prosecco would see its tax cut by 87 pence, while a 12 percent bottle of Chapel Down sparkling wine would see a 64 pence retail tax cut .

In addition to Prosecco, drinkers seem to enjoy more fruit cider, the Chancellor told MPs.

“Sales of fruit cider have gone from one in a thousand ciders sold in 2005 to one in four today,” he said.

“But they can pay two or three times as much duty as cider made with apples or pears, so I’m lowering the duty on them as well.”

4. Ad support with the new “Draft Relief”

Mr Sunak has announced a new relief plan – which will reduce the duty rate on draft beer and cider in pubs.

The new lower rate, which will be a five percent reduction, will reduce the price of a pint in a pub by 3 pence, he said.

He told MPs: “This will apply to beverages served in draft containers larger than 40 liters. This will particularly benefit community pubs which do 75% of their business on pressure. “



A pint of lager drawn in a bar
A pint of lager drawn in a bar

He said it was “the biggest cup of cider since 1923” and “the biggest cup of fruit ciders in a generation”.

He described the move as a “long-term investment in UK pubs of £ 100million a year”.

In his final alcohol tax announcement, the Chancellor said: “I can confirm that the planned increase in taxes on spirits such as Scotch Whiskey, wine, cider and beer, will all be, from midnight tonight, canceled. It’s a tax cut worth £ 3 billion.

5. Fee increase planned from tonight canceled

A planned increase in duties on certain beverages, which was due to arrive at midnight, has been removed.

Mr Sunak said the move was a tax cut worth £ 3 billion and would help the struggling hotel industry “right now”.

He told MPs: “I can confirm that the planned increase in duties on spirits such as Scotch Whiskey, wine, cider and beer, will be canceled as of midnight tonight. It’s a tax cut worth £ 3 billion.

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