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27 Oct 2021

Autumn Budget 2021: new alcohol duties will shave 3p off a draught pint... in 2023

Alcohol duties and the 'sugar tax' are frozen for now, but tobacco duties will rise
Autumn Budget 2021 sin taxes

The Chancellor, Rishi Sunak, has announced a radical overhaul of the way alcohol is taxed and the biggest cut to draught beer duty for 50 years.

While the changes won't kick in until February 2023, drinkers can raise a glass to duties being frozen for now.

Duty rates on all tobacco products will increase by Retail Price Index (RPI) inflation plus 2%, but there were no changes to the so-called 'sugar tax' - the Soft Drinks Industry Levy - which hasn't changed since April 2018.

These so-called 'sin taxes' are applied to products that are seen as harmful to consumers or costly to society, payable in addition to standard rate VAT at 20%.

Here, Which? explains what this year's Budget means for the cost of your drinks, cigarettes and soft drinks.

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Alcohol duties

In the Spring 2021 Budget, alcohol duties were frozen for only the second time in two decades.

They remain frozen, with the planned increase to duty on spirits cancelled, but a radical simplification of the current system is on the horizon.

From 1 February 2023 the number of different duty rates will be slashed from 15 to six.

Under the new system, stronger drinks will be more expensive (high-strength ciders, red wine and fortified wine) but some lower-alcohol drinks will be cheaper. Sparkling wine will no longer attract a higher rate than still wine of equivalent strength.

Other changes include a new small-producer relief for cidermakers and other producers of lower-alcohol drinks. Pubs will also benefit from a new lower rate of duty on draught beer and cider, taking 3p off a pint.

Duties until 1 Feb 2023Duties from 1 Feb 2023
Draught pint of beer 5% ABV£0.54£0.51
75cl bottle of wine 12%£2.23£2.33
75cl bottle of prosecco 8%£2.16£1.35
1l bottle of vodka 40%£11.50£11.50

As the charts below show, rates are charged per litre for every 1% of alcohol, eg 51p in tax for a pint of 5% strength draught lager (18.13p x 5 = 90.65p per litre, equivalent to 51p a pint/0.568 litres).

The Institute for Fiscal Studies (IFS) had previously called for the government to create a 'simpler system of alcohol taxes targeted at socially costly drinking'. It labelled the old system 'incoherent' because it created anomalies such as higher taxes depending on whether you drink still or sparkling wine.

Find out more:Autumn Budget 2021 key points

Tobacco duties

Duty rates on all tobacco products will increase by RPI + 2%.

Hand-rolling tobacco will increase by an additional 4% (to 6% above RPI) and the minimum excise tax will increase to RPI + 3% this year. These changes will take effect from 6pm today.

All tobacco products are liable for duties, although you pay different amounts depending on whether you're buying cigarettes, cigars, or other tobacco products.

The government increased the excise duty rate on all tobacco products on 16 November 2020, though there were no further changes announced in the Spring Budget. New rates, shown in the table below, will apply from today.

E-cigarettes don't contain tobacco and are therefore not liable for tobacco duty.

Old duty rateNew duty rate
Cigarettes16.5% of the retail price plus £244.78 per 1,000 cigarettes16.5% of the retail price plus £262.90 per 1,000 cigarettes
Cigars£305.32 per kilogram£327.92 per kilogram
Hand rolling tobacco£271.40 per kilogram£302.34 per kilogram
Other smoking tobacco and chewing tobacco£134.24 per kilogram£144.17 per kilogram
Tobacco for heating£251.60 per kilogram£270.22 per kilogram

New rates apply from 6pm 27 October 2021, old rates applied from 16 November 2020. Find out more on Gov.uk.

Sugar tax

The Soft Drinks Industry Levy - or 'sugar tax' - hasn't changed since April 2018, and no changes were announced today.

The tax rates are:

  • 24p per litre of drink if it contains eight or more grams of sugar per 100ml
  • 18p per litre if it contains more than five and less than eight grams of sugar per 100ml.

Manufacturers are encouraged to reduce the sugar content of their drinks to below the taxable thresholds.

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