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3 Mar 2021

Budget 2021: alcohol duties frozen

Good news on 'sin taxes' for those who enjoy the odd tipple or sugary drink

All alcohol and sugary drink duties will be frozen in 2021, following the Budget announcement. Smokers are already paying extra for all tobacco products following rate increases in November 2020.

The freeze in alcohol duties - only the third time this has happened in two decades - was the main surprise from the so-called 'sin taxes'.

A sin tax is applied to goods deemed harmful to individuals, such as tobacco and alcohol, payable in addition to standard rate VAT at 20%.

Sin taxes are usually expected to rise in line with inflation, unless the Chancellor Rishi Sunak decides to freeze or cut them.

There were no changes to tobacco duties or the so-called 'sugar tax' - the Soft Drinks Industry Levy - which hasn't changed since April 2018.

Here, Which? explains what this year's Budget means for the cost of your drinks, cigarettes and soft drinks - and how you can save money.

  • Join the conversation on today's Budget by tweeting us @WhichMoney

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Alcohol duty is included in the price you pay for beer, cider or perry, wine or 'made-wine' (any alcoholic drink made by fermentation that's not cider, eg mead is a made-wine), and spirits.

The amount you pay depends on the type and strength of the drink or 'alcohol by volume' (ABV), with different rates for still and sparkling in the cases of wine and cider.

The rates in the chart below are charged per litre for every 1% of alcohol, eg you will continue to pay 54p in tax for a pint of 5% strength lager (19.08p x 5 = 95.40p per litre, equivalent to 54p a pint/0.568 litres).

You also pay tax on spirits, frozen at a rate of £28.74 per litre of pure alcohol, equivalent to £11.50 on a 1-litre bottle of 40% ABV vodka.

Cost per litre per 1% of alcohol, by drink type

Tobacco duties - no change to November 2020 increase

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

As the government has already increased the excise duty rate on all tobacco product - which took effect on 16 November 2020 - there were no further changes announced today.

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

Sugar tax to remain unchanged

The sugar tax or Soft Drinks Industry Levy aims to encourage manufacturers to reduce the sugar content of drinks to bring their sugar content below the taxable thresholds.

The tax rates will remain the same for the 2021-2022 tax year:

  • 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.

Listen:our experts discuss the Budget on the Which? Money Podcast.

How can you save money on alcohol, cigarettes and soft drinks?

The ultimate way to pay less in sin taxes is to give up or cut back, which could also improve your health.

But if that's not appealing, than consider how you could cut the cost of your weekly shop.

Each month, Which? tracks the cost of a basket of goods at the major supermarkets, including Aldi and Lidl. Find our latest cheapest supermarkets report here.

We've also revealed how much extra you'll pay by shopping at Sainsbury's Local and Tesco Express rather than their full-sized equivalents.

This story has been edited as the original government document contained an error on sugar taxes.