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2023 WINE DUTY CHANGES IN THE UK & WHAT THEY MEAN

Duty changes 2023 from Wines With Attitude

If you have been burying your head in the sand recently you may have missed an upcoming important deadline for wine-drinkers – 31st July 2023 – after which, despite much lobbying by the drinks industry and despite the government’s stated desire to control inflation, higher rates of duty will be applied to most still wines.

THE 2023 CHANGES IN DUTY ON WINE

From 1st August it is estimated that 90% of still wine will see duty rise by at least 9% from its current level of duty – £2.23 per bottle. Duty on a fairly average 13% ABV bottle of wine will increase by 20% to £2.67 and for still wine with 15% ABV the rise in duty will be a whopping 44% to £3.21 per bottle (these rates exclude VAT which applies to the duty charged as well as to the wine itself). Fortified wines like port at 20% ABV will attract a duty increase of £1.30 per bottle to £4.28 and the highest increase of £1.73 will apply to a fortified wine with 22% ABV. This compares with extra duty of 82p on a bottle of 37.5% ABV vodka.  

See table below for some examples of increases – and decreases in duty from 1st August: 

Table of 2023 Wine Duty Changes by Wines With Attitude

I have written in the past about the unfairness of taxation on wine compared to other alcoholic beverages so will not reiterate those thoughts in this blogpost apart from to write that when the government has frozen duty rates on alcohol, there is evidence that revenue from wine duty in the UK grows – and, to be fair, duty rates have been frozen since the Autumn Budget of 2020. Conversely wine duty receipts usually fall after an increase in the rate of duty on wine and so it seems strange that the Chancellor has now decided to increase duty at this moment in time – and in this way.

WHY THE DUTY CHANGES WILL NOT MAKE THE SYSTEM SIMPLER

One of the stated aims of the government’s Alcohol Duty Reforms is to simplify the current system – the broad idea being to tax alcohol depending upon its alcoholic strength which does not seem unreasonable. But, after a number of hours spent calculating the new rates and comparing them to current rates, the system does not feel simpler at all. There is the added complication of some Transition Rates which will apply to all wines between 11.5% and 14.5% ABV until 31st January 2025, after which some rates will increase and some will decrease – although this assumes that the actual rates do not rise in line with inflation which unfortunately is another of the Government’s stated aims.

All in all the detail of the system is going be cumbersome for wine businesses to manage – and costly. The Wines & Spirit Trade Association estimate £250m extra costs to the industry to handle the changes. Alcohol levels in wine vary according to the vintage – warmer weather usually means more of the sugar in grapes converts to alcohol – and so the duty rate is expected to change for most wines every year. Every wine retailer therefore needs to be prepared to adjust prices for every wine every year.

The increases in duty generally will be hard for customers to stomach especially in the current economic climate, never mind the extra costs of administration that are no doubt going to have an impact on the general cost of wine for the consumer.

Currently the system for duty charges can be described fairly succinctly:

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– £2.23 per bottle for most still wines, certainly all those between 5.6% ABV and 15%

– £2.86 per bottle for most sparkling wines, certainly all those between 8.5% and 15%

– £2.98 per bottle for all wines between 15.1% and 22% ABV which includes most sherries and port wines

Of course there are exceptions to these three bands but they correspond to the vast majority of wines sold in the UK. Under the new regime with alcohol taxed according to its strength and increasing for every 0.1% ABV, there will effectively be many more bands.

THE WINES THAT WILL SEE LOWER DUTY RATES

The seemingly good news is that there will be decreases in some rates of duty. From 1st August 2023 the following will see a decrease in the rate of duty payable:

– any wine between 1.3% ABV and 3.6% ABV

– any wine between 4.10% and 5% ABV

-any still wine between 5.6% and 10% ABV

– any sparkling wine between 5.6% and 14.5% ABV

Not exactly easy to follow. Apart from a few quirks in the system (wines between 5.1 and 5.5% ABV seeing higher rates for example), you can see the logic. The government is trying to encourage better health by lowering rates on lower alcohol wines.

However, whether intentional or not, they are penalising those who don’t favour sparkling wines and off-dry white wines – as these tend to be lower in alcohol than most other wines. The grapes for sparkling wines tend to be picked before they are fully ripened partly to retain good levels of mouth-watering acidity. Less ripe grapes mean less sugar is available to develop into alcohol during fermentation. For off-dry wines, fermentation is stopped early by removing the yeast so that some sweetness is retained in the wine.

THE WINES THAT WILL SEE HIGHER DUTY RATES

Although it might initially appear that several bands of wine will see a decrease in duty, the vast majority of wine sold in the UK is between 11.5% and 15% ABV and so most of the wine we are used to purchasing will see an increase. This includes:

– any wine between 3.8% and 4% ABV

– any wine between 5.1% and 5.5% ABV

– any still wine between 10.5% and 14.5%

– any wine with 15% or higher ABV

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As has been alluded to above, grapes for still wines generally tend to be picked at a higher level of ripeness than grapes for sparkling wines and therefore most still wines will be over 10.5% and will therefore attract a higher rate of duty. Grapes for white wines tend to be lower in alcohol than black grapes and tend to be picked at a lower level of ripeness; grapes for red wines tend to be left on the vine until fully ripened and so are likely to lead to higher alcohol wines, generally 12.5% – 15% ABV. Wines like Amarone where sugars are intensified by drying the grapes frequently have 15%+ ABV.

2025 DUTY CHANGES

After 1st February, under Stage 2 of the system changes, the Transition Rates will no longer apply and duty on all wines between 12.5% and 14.5% ABV, both still and sparkling, will see further increases in duty, even if the actual rate per litre does not change. Duty on wines between 11.5% and 12.4% ABV should come down a little but, since the Government is expected to increase duty in line with inflation each year, that decrease may not happen.

THE IMPACT OF THE DUTY CHANGES

We could all change our drinking habits and stick to sparkling and off-dry wines to keep costs down but we would miss out on so many fabulous wines. We could stick to wine from cool climate areas where alcohol tends to be lower but with global warming ABVs could rise there too.

If winemakers see more demand for lower alcohol in wine – and there is some evidence that we are already moving away from the big blockbusters – there are ways to reduce alcohol in wine which I will cover in a future blogpost. Manually reducing alcohol is not as easy as it sounds and it is more likely to happen with wines at the lower end of the market where there is generally more intervention in the wine-making process. Most discerning wine drinkers prefer to see more natural wines with minimum intervention.

There is a chance that the choice of wine available in the UK decreases. For example wine from hotter climate areas which naturally produce higher alcohol wines may be withheld from the UK market if winemakers feel their wines are being penalised by the system.

And there may be fewer wine retailers around. It is estimated that many smaller wine businesses similar to Wines With Attitude may find these duty changes – along with the added increases in costs of importation and the rising cost of wine itself – a step too far and let’s not forget the hospitality sector which will also be impacted by the changes just as it is finding its feet again after the pandemic.

Protest against increases in wine duty from Wines With Attitude

The industry body, the Wine & Spirit Trade Association or WSTA, has been actively campaigning to scrap the new system and abolish increases in duty which will increase wine prices and simply fuel inflation. They have calculated that this is the biggest single duty increase since 1975. But the government is simply “not for turning”, perhaps hoping that people will focus on the decreases in duty rather than the increases – as has been mentioned, most sparkling wine should come down in price or remain at current levels as duty decreases.

It is likely that the real impact of the price changes will not be seen for a few months, except perhaps some immediate fanfare around a decrease in bubbly prices. Some wine businesses like Wines With Attitude are trying to mitigate the duty increases – at least for now – firstly by paying upfront the duty and VAT on wines that have been bought under bond (i.e. where duty and VAT are usually only paid when the wine is sold). If however they have bought sparkling wines duty paid, they may not be able to decreases their prices to take account of the decrease in duty on those. If you are holding any wines under bond, I suggest you talk to your bonded warehouse about doing the same especially for still wines between 10.5% and 14.5% ABV and for any wines with 15% ABV or higher.

In addition some retailers are purchasing stock upfront and paying duty ahead of the rise but this of course may mean the cost of storing the wine for longer outweighs the advantage in paying duty at the current rate. Sorry to be the bearer of bad news but it is inevitable that most wine prices will increase in the next few months.

Cheers!

I am passionate about good quality wine and set up Wines With Attitude to share that passion with other wine lovers. If you’re feeling sociable why not follow me on social media or share my blog with others?


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