From 1 February 2025, new alcohol tax cuts have come into effect, marking the first alcohol duty reduction on draught beer in over a decade. The updated alcohol duty system is designed to support pubs, breweries, and small producers by applying tailored tax reliefs to draught products, while non-draught products have seen duty increases in line with Retail Price Index inflation.

A Closer Look at the New Alcohol Duty System

As announced in the Autumn Budget, the government has introduced a new draught relief and updated alcohol duty rates under a reformed tax system. The aim is to boost sector growth, encourage innovation, and support smaller brewers.

Under the new measures, draught relief means a 1.7% duty cut in cash terms (or 5.1% compared to the baseline expectation that rates would rise with inflation). This translates to a 1p duty cut per pint on a standard 4.58% ABV draught beer — the first such duty cut in 10 years.

The updated alcohol duty system is designed to reward qualifying draught products, helping pubs, small breweries, and craft brewers compete more effectively against off-trade venues selling non-draught products.

Support for Small Producers and Craft Brewers

In addition to draught relief, the government has increased small producer relief to help small breweries and craft brewers produce alcohol, expand capacity, and encourage innovation.

These tailored tax reliefs are worth around £85 million in total and are aimed at helping the alcohol sector grow sustainably, create local jobs, and maintain its role as an essential part of the UK’s brilliant high streets.

“Our pubs and brewers are an essential part of the fabric of the UK and our brilliant high streets,” said the Exchequer Secretary to the Treasury. “Through draught relief, small producer relief, and expanding market access for smaller brewers, we will boost sector growth and deliver our Plan for Change to put more money in working people’s pockets.”

Mandatory Duty Stamps to End

From 1 May 2025, mandatory duty stamps for spirits will be scrapped. This change is intended to streamline compliance and help Scotch whisky makers, distilleries, and producers of other alcoholic products reduce costs and improve market access.

By removing these administrative barriers, the new system aims to support exports and investment needed for long-term sector growth, particularly for those looking to sell more alcohol through pubs and supermarkets.

Increases for Non-Draught Products

While the alcohol tax cuts are welcome news for those who drink draught products, the picture is less positive for non-draught products. The government has increased alcohol duty rates on bottled and canned drinks in line with Retail Price Index inflation, affecting equivalent non-draught products such as beer, cider, wine, and spirits.

This increase reflects a commitment to budget responsibility and maintaining public finances while still offering targeted support for draught products served in pubs and bars.

Balancing Growth with Responsibility

The new alcohol duty system seeks to balance sector growth with responsible alcohol consumption and public health outcomes. By aligning duty rates more closely with pure alcohol content, the government aims to reduce alcohol harm while providing less tax for lower-strength fermented products like sparkling cider and still cider.

These updates form part of a wider effort to modernise the duty system, encourage qualifying draught products, and align alcoholic drinks sold with the public finances and sustainability goals outlined in both the Autumn Budget and upcoming Spring Budget.

What This Means for Businesses

For small producers, breweries, and distilleries, understanding these duty system changes is critical. Reviewing your duty rates, qualifying draught products, and eligibility for small producer relief will help ensure your business benefits from tailored tax reliefs.

Herbert Lewis Williams & Associates can help you assess how these changes affect your alcoholic products, manage tax compliance, and plan for future sector growth under the new system.

Source: HM Treasury | 03-02-2025