UK: Alcohol duty rises again as pubs get lifeline

The drinks industry has condemned another inflation-linked rise in alcohol duty announced in the 2026 Budget, warning that higher taxes will put further pressure on producers and consumers. However, hospitality businesses have welcomed changes to business rates, including additional relief for pubs and thousands of smaller premises, the drinks business reported on October 28.

The drinks industry has condemned another inflation-linked rise in alcohol duty announced in the 2026 Budget, warning that higher taxes will put further pressure on producers and consumers. However, hospitality businesses have welcomed changes to business rates, including additional relief for pubs and thousands of smaller premises.

Alcohol duty will increase in line with the Retail Price Index (RPI) from 1 February 2027, Chancellor John Healey has confirmed, prompting criticism from the wine and spirits industry.

The increase comes despite calls from trade bodies for a duty freeze due to rising production costs and continued pressure on consumer spending.

Miles Beale, chief executive of the Wine and Spirit Trade Association (WSTA), said: “No-one will be toasting yet another RPI increase on top of rising inflation. Instead of providing breathing space in a cost of living crisis the Chancellor’s alcohol tax hikes will further stifle British business and serve up nothing for consumers.”

Beale argued that successive increases had failed to deliver the additional Treasury revenue intended, while making alcoholic drinks less affordable.

“Increasing alcohol duty is not boosting Treasury funds, but it is closing down businesses and pricing consumers out of a bit of joy in their shopping basket,” he said.

The Scotch Whisky Association (SWA) described the announcement as a fourth consecutive increase in spirits duty. Its chief executive, Mark Kent, warned that the tax burden on an average bottle of Scotch whisky would rise to 74%.

“Another duty increase – the fourth in as many years – will see the tax burden on the average bottle of Scotch Whisky rise to 74%,” he said.

Jen Heeley-Wiggins, owner and director of Spirit of Manchester Distillery and spokesperson for the UK Spirits Alliance, called the Budget “a sad day for the nation’s distillers, pubs and the wider hospitality sector”.

“This Budget will push businesses on the brink over the edge,” she said.

There was more positive news for hospitality operators, with the government increasing business rates relief for qualifying pubs, social clubs and live music venues in England from 15% to 35% from April 2027.

The threshold for full Small Business Rate Relief for qualifying retail, hospitality and leisure properties will also rise from £12,000 to £18,000 in rateable value, while tapered relief will extend to £21,000.

According to the Treasury, the changes will remove business rates bills for a further 70,000 retail, hospitality and leisure businesses. Rates increases for other qualifying properties will be capped at CPI inflation for two years.

Allen Simpson, chief executive of UKHospitality, said: “This is the first Budget in several years to deliver any positive news for hospitality at all, and it shows that forceful, sustained sectoral campaigning works.”

However, he maintained that further reform, including a VAT reduction, remained necessary.

“We have a hill to climb: today was a first step towards fairness, and we have to be clear that there is a lot more to do,” he said.

The Association of Convenience Stores also welcomed the higher relief threshold, with chief executive Ed Woodall describing it as “a major step forward” for smaller retailers.

The Budget also includes £10 million annually in additional support for more than 2,000 small alcohol producers through changes to Small Producer Relief.

From February 2027, the government will introduce a more generous discount taper for drinks below 3.5% ABV and increase the marginal discount for products between 3.5% and 8.4% ABV by RPI plus 10%.

The Treasury also intends to introduce a guest beer provision in the Pubs Code in England and Wales, giving tied pub tenants greater flexibility over the beers they stock.

The SWA criticised the small producer changes for excluding spirits producers.

The measures follow mounting concern about pub closures. As previously reported by the drinks business, British Beer and Pub Association figures suggest 360 pubs could close during 2026, putting approximately 5,000 jobs at risk.

30 October, 2026