Chancellor cuts alcohol taxes in major overhaul

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Budget 2021: The Chancellor of the Exchequer has announced sweeping changes to the UK alcohol tax which he says will create a simpler, fairer and healthier system.

Describing the existing system as “obsolete, complex and full of historical anomalies”, he announced five key points that would create a “simpler, fairer and healthier” system.

The number of duties has been reduced from 15 to 6, to reflect a “common sense principle” that the stronger the drink, the higher the rate.

This will result in a slight increase in duties on stronger red wines, strong ciders and fortified wines which he says have historically been “under-taxed”, but which many low-grade alcohols such as rosé wine, cups of fruit, liqueurs, beers and softer wines would pay less, having been overtaxed “for many decades.”

Sunak said this rational step was the “right thing to do” and would help “end the era of cheap high-strength drinks that can harm public health and allow problematic consumption.”

It also introduces a new lower rate for artisanal producers which extends the principle of the exemption of small brewers to cider houses and other producers of alcoholic beverages with an ABV of 8% or less; the reduction of the tax premium on sparkling wines, arguing that sparkling wine is no longer “just the prerogative of the rich”; the introduction of a new lower duty rate for draft drinks and the cancellation of the planned increase in duty on spirits. Finally, the tax on fruit-based drinks – including cider – will be reduced.

The Chancellor said modernizing the system would reflect the way people drink today, highlighting the rise of English prosecco and sparkling wine as well as fruit ciders and removing some of the “irrational” customs premiums.

“In the last decade, sparkling wines like prosecco have doubled, English sparkling wine has almost tenfold – it’s clear that they are no longer the privilege of the wealthy elites and they are no stronger than the still wines, ”he said.

Beer drinkers and pubs are also expected to benefit from the new pressure relief – a new lower duty rate on draft beer and cider served from containers with kegs larger than 40 liters.

“This will particularly benefit community pubs which do 75% of the commerce on drought,” he said, adding that it would reduce tariffs by 5%.

He said it was a long-term investment in UK pubs, which were struggling even before the pandemic, with the £ 150million a year boost helping to lower the cost of the pint of 3 pence.

However, before we all get too excited, with the exception of the freeze on the proposed increase on spirits, wine, beer and cider that was due to go into effect at midnight tonight, the proposed changes are only expected to come into effect. in force only in February. 2023 (although his decision to extend commercial tariff relief to smaller hospitality venues and abandon tariff rate increases, will take place now).

In addition, Sunak confirmed that the government will have to wait for a response to a consultation. Once organizations – including those such as the health lobby – submit their budget responses by January, the government will confirm its means to structurally and administratively improve the alcohol tax system and present its proposals. final plans.

Technical details will then follow over the summer.

Meanwhile, the Chancellor of the Exchequer unveiled further business rate relief of 50% for the retail and hospitality sector that will last for one year to help businesses hardest hit by the crisis. pandemic, and introduced changes to business rates, more frequent review cycles, and changes that allow business owners to make site improvements without incurring rate hikes.

However, an increase in the national minimum wage (NMW) of £ 9.18 for 21-22 year olds (up 10%), a 12% increase in learning rates and youth rates for 16-20 years increasing by 4.1% is expected to hit the hospitality sector.


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