Get ready for the new alcohol duty rates and reliefs introduction on 1 August 2023

Guest article from HMRC

This year will see the biggest reform of alcohol duties for more than 140 years. The government will introduce a new, simplified alcohol duty system based on the principle of taxing alcoholic drinks by their alcohol content (ABV). 

This will modernise the existing alcohol duty system, reduce administrative burdens on businesses, and support public health. HM Revenue & Customs (HMRC) is reminding the alcohol industry to prepare for the changes in good time ahead of the new duty rates and reliefs introduction on 1 August 2023. 

These reforms are the result of the Alcohol Duty Review, which follows a commitment by the Chancellor in the 2021 Autumn Budget to simplify the alcohol duty system.  The new legislation will create standardised alcohol duty bands across all types of alcoholic products, with all tax rates calculated based on the litres of pure alcohol in the product. The new alcohol duty system will reduce the number of tax bands from 15 to 6, and more information on them can be found on GOV.UK.

All alcohol products across all categories will pay the same rate of duty. There will no longer be premium rates for sparkling wine, as duty will be charged at the same rate as for still wines. However, recognising the impact that these changes will have on the alcohol industry, there will be transitional arrangements for certain wine products. These will also take effect from 1 August 2023 and run for 18 months, until 31 January 2025.

To support innovation and responsible drinking, low strength drinks below 3.5% ABV will be charged at a new lower rate of duty. In making these changes, the government aims to support public health, encourage product innovation, and ensure the alcohol duty system reflects modern drinking practices.

In addition, the government is introducing new reliefs to support businesses. These will include a Draught Relief, which is a lower rate of duty. It will apply to alcoholic products under 8.5% ABV, which are in containers of 20 litres or more and designed to be sold on draught.  At Spring Budget 2023 the Chancellor announced an even more generous Draught Relief rate, to specifically support businesses in the hospitality industry. By widening the gap between the Draught Relief rate and the standard alcohol duty rate from 5% to 9.2%, the government has ensured that the duty on a pint in a pub will not increase on 1 August 2023. 

The government will also introduce a more generous Small Producer Relief, which will extend the benefits of the current Small Brewer Relief to alcohol producers in other product categories, for alcoholic products under 8.5% ABV. Together, these changes will help bring relief to small producers, in turn supporting the hospitality sector. The Windsor Framework will enable the government to apply the alcohol duty reforms in Northern Ireland. The government is currently working through the details of implementing the Windsor Framework and will set out more detail in the coming weeks.

These reforms will impact individuals and businesses involved in the manufacture, distribution, holding, sale and consumption of alcoholic products across the UK. By early 2025, HMRC will also move to a fully digital alcohol duty system, where businesses will be able to submit their alcohol approvals, returns and payments online.

For more information on the Alcohol Duty Review reform please read more on GOV.UK.

The above article has been published by SIBA on behalf of HMRC, to assist members in preparing for the 1st August alcohol duty changes.

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