by The price of a bottle of wine is expected to rise by around 45p thanks to a crackdown on alcohol taxes announced in Wednesday’s budget.
Jeremy Hunt, the Chancellor, will confirm alcohol taxes will rise with inflation from August 1 despite pressure on the cost of living, The Telegraph understands.
At the same time, a new system for taxing alcohol comes into effect – stronger drinks are taxed more heavily.
According to industry estimates, as a result of the measures, around 90 percent of all still wines will be affected by a tax increase this summer, which will probably be passed on to consumers in higher prices.
It will be the biggest tariff hike on wine in more than 50 years, according to the Wine and Spirit Trade Association.
Finance ministers are likely to argue that the industry has received major government support over the past three years since the Covid-19 pandemic.
But industry insiders are expected to oppose the surge, arguing that many alcoholic beverages are heavily taxed and drinkers are already facing a bottleneck.
The tax hike on all alcoholic beverages is expected to be at least 10 percent and could be higher as the Treasury Department uses a recent figure from the Retail Price Index (RPI) for inflation.
At the same time, however, a second change comes into effect, as the government’s long-awaited alcohol tax restructuring also comes into effect this August.
The new system is based on alcohol content, with stronger drinks taxed more and weaker drinks taxed less.
Some drinks – like wine – will take a double hit, being taxed higher first because of the tax hike and then because of the impact of the new system.
A bottle of still wine will be taxed about 44p more from August, according to analysis by the Wine and Spirit Trade Association.
Analysts at the trade association believe this is the largest increase in wine tax since tax rates were unified in 1971. It would be double the last biggest increase of 22p per bottle in 1975.
A bottle of port will be taxed at £1.29 more and a bottle of sherry at 97p more, according to the analysis, which is based on a 10 per cent inflation rate from the Treasury.
However, the tax on some alcoholic beverages will fall under the new system, even if levies rise with inflation.
Cans of gin and tonic will fall 5p, according to industry analysis. The tax owed on sparkling wines will also decrease thanks to previously announced support from the Treasury.
“Crippling Blow”
Miles Beale, chief executive of the Wine and Spirit Trade Association, issued a last-minute plea, saying: “We are calling on the Chancellor to extend the alcohol tax freeze to lower prices for consumers who are facing the worst costs not escalate living crisis for decades.
“History has shown that freezing the tax on alcohol brings more revenue to the treasury. If duty rates had risen by RPI it would have been a major blow to the UK alcohol industry and consumers who have had to pay the price for tax increases.”
‘Investment Zones’
In a separate budget announcement, Mr Hunt will reveal that the idea of ”investment zones” floated during Liz Truss’ brief tenure will be bought back under Rishi Sunak.
Twelve investment zones will be created, each receiving £80m worth of tax incentives to encourage companies to build and develop within them.
Eight will be in England, specifically in the East Midlands, Greater Manchester, Liverpool, North East, South Yorkshire, Tees Valley, West Midlands and West Yorkshire.
The exact locations are to be determined. The other four are in Scotland, Wales and Northern Ireland, with the devolved administrations determining which locations prevail.
Tax incentives for the territories could include a 100 percent reduction in stamp duty, a 100 percent reduction in corporate tax rates, or a reduction in employer social security contributions. The peculiarities are to be determined.
Mr Hunt said: “True leveling has to be about local wealth creation and local decision-making to remove obstacles to regeneration.
“From unlocking opportunities through new investment zones to a new approach to accelerating research and development [research and development] In the city regions, we are delivering on our top priority of boosting growth across the country.”
