Beer and cider tax slashed as Sunak unveils measures to support British pubs

‘Simpler, fairer and healthier’ system of alcohol taxes aimed at encouraging more responsible drinking

Ben Chapman
Wednesday 27 October 2021 18:16
Budget 2021: One-year 50 per-cent cut in business rates, Sunak announces

Taxes on beer, cider and sparkling wine in pubs are to be slashed as part of a package of measures unveiled in the Budget to overhaul duty on alcoholic drinks and help struggling pubs through the continuing damage caused by the pandemic.

Drinkers will be charged higher rates for stronger drinks and lower rates for weaker ones - a system that Rishi Sunak said was “simpler, fairer and healthier” than the one it replaces.

Some higher strength drinks, such as some red wine and “white ciders” will attract more tax, while buyers of lower strength products, such as rose, fruit ciders, liqueurs, and lower strength beers and wines, will pay less.

Mr Sunak criticised the current system of alcohol taxes as outdated and too complicated. Fifteen different categories used for taxing alcohol will be replaced with six. The changes are set to be introduced in February 2023.

A planned increase in duty on spirits such as Scotch whisky, wine, cider and beer will be cancelled from midnight, saving drinkers £3bn overall and cutting the cost of a pint by 3p, according to the Treasury’s calculations.

To encourage drinking in pubs rather than in the home, Mr Sunak announced “draught relief” - a 5 per cent cut in the rate of duty on draught beer and cider served from containers over 40 litres.

“It will particularly benefit community pubs who do 75 per cent of their trade on draught,” Mr Sunak said.

“That’s the biggest cut to cider duty since 1923. The biggest cut to fruit ciders in a generation. The biggest cut to beer duty for 50 years. This is not temporary, it’s a long-term investment in British pubs of £100m a year.”

He also revealed that hospitality, retail and leisure firms will get a 50 per cent business rates discount for one year.

Any eligible businesses, including shops, pubs and leisure centres, will see the tax on their premises slashed for a year, up to a value of £110,000, the chancellor told MPs.

Mr Sunak also said he would make the system “fairer and timelier” revaluations with more frequent revaluations every six years, starting in 2023.

However, Rishi Sunak stopped short of granting business groups their wish of overhauling the widely disliked tax.

Industry leaders welcomed the changes but said more help was needed to support the sector.

Mike Kill, chief executive of the Night-time Industries Association said he was “disappointed” that the chancellor chose not to extend the lower 12.5 per cent rate of VAT on hospitality.

“This is a missed opportunity, and it will prevent those forecasts from improving further still,” he said.

Nik Antona, cheir of the Campaign for Real Ale (Camra) said: “The introduction of a Draught Duty Rate is a gamechanger for cask beer drinkers, cider and perry drinkers and the Great British local.

“This is something Camra has campaigned on for many years and we are delighted that the Government has listened, supported our locals and introduced the important principle that beer, cider and perry served in a pub or social club should be taxed at a different rate to alcohol bought at places like supermarkets.”

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