Spirits shut out of UK's new £10m duty relief as fourth rise looms

The chancellor, John Healey, announced on 28 October that Small Producer Relief would become "more generous", worth £10 million a year and reaching more than 2,000 producers. The relief regime, introduced in 2023 as part of alcohol duty reform, keeps its ceiling at 8.5% ABV.

Products above that strength, which covers the whole of the spirits trade, gain nothing. Healey also confirmed that alcohol duty rises again in line with the Retail Price Index from 1 February 2027. Duty has been linked to inflation since February 2025.

Mark Kent, chief executive of the Scotch Whisky Association, called the increase "a disappointing blow to the Scotch whisky sector, its supply chain and the local communities it supports". It is the fourth rise in as many years.

Kent put the tax burden on an average bottle at 74%, up from 72%, and said duty on Scotch whisky has now climbed 24% since 2023. The association will study the duty evaluation report published with the Budget and press the Treasury for "systemic reform".

"Further support has been offered to small brewers and cider makers, excluding small producers in the spirits sector which is hugely important to the Scottish economy," Kent said. Consumers who do not drink pints, and the hospitality businesses that pour spirits, are being "unfairly penalised", he added.

What the Budget changes by strength

Under the new rules, products below 3.5% ABV receive a more generous relief, and the marginal discount for the band between 3.5% and 8.5% ABV rises by RPI plus 10% from February. At 4.55%, that RPI is record-breaking, trade bodies said.

Miles Beale, chief executive of the Wine and Spirit Trade Association, called it "a breathtaking hike". He said no one would toast the record 4.55% RPI "on top of rising inflation", and that most of all British consumers will pay.

Beale's arithmetic is blunt: the duty rise adds 14p to a bottle of prosecco, 18p to a bottle of 14.5% ABV red wine and 49p to a bottle of gin. "Increasing alcohol duty is not boosting Treasury funds," he said, "but it is closing down businesses and pricing consumers out."

The association's own figures support him. Tax receipts for April 2025 to January 2026 show spirits revenue fell by £154 million, or US$206.6m, year on year. Volumes are down too.

Citing NIQ Off-trade Retail Measurement Service data, the WSTA said wine volume sales have fallen 8% since 2023, while spirits volumes are down 15%. The duty system's reform, also dated to that year, is the comparison point.

The WSTA converted the changes into shelf prices. A 700ml bottle of 40% ABV Scotch rises by 52p in February 2027, and by £2.29 measured against July 2023, before the reform. A vodka and diet cola ready-to-drink at 5% ABV rises just 2p.

Against July 2023, that RTD's price actually falls by 1p. The gap between the two outcomes is the whole story of the new regime: lighter, lower-strength products are protected, while anything bottled over 8.5% absorbs the full inflation-linked increase.

What hospitality got instead

The on-trade fared better. The Budget adds a further 20% business rates cut for pubs, music venues and social clubs, and raises the Small Business Rate Relief threshold so another 70,000 retail, hospitality and leisure firms pay no business rates.

Rates for other hospitality businesses are frozen for two years, and the VAT cut on electricity runs to July 2027. Healey also confirmed a 3.9% rise to the National Living Wage and National Minimum Wage, plus expanded parental pay, covering self-employed fathers and partners for the first time.

Allen Simpson, chief executive of UKHospitality, called it "the first Budget in several years to deliver any positive news for hospitality at all". The sector pays "82p in business taxes for every pound it makes", he said, and the campaign now turns to a VAT cut.

"Today was a first step towards fairness, and we have to be clear that there is a lot more to do," Simpson added. His warmth was not universal. Michael Kill of the Night Time Industries Association said the measures offered "some recognition of the pressures", but limited wider impact.

Kill said the chancellor had not gone far enough on VAT and employer National Insurance contributions: "We cannot confuse limiting further damage with repairing the damage already done." Marc Crothall of the Scottish Tourism Alliance said the Budget had disappointed and repeated the call for VAT at 10%.

Dom Metcalfe, managing director of the Great British Drinks Company, welcomed the £10 million relief for small brewers and cider makers but said it "doesn't make a dent" in an industry under pressure from rising costs and red tape. Another opportunity, he said, had ended in the drip tray.

Metcalfe pressed for Draught Relief to be expanded so beer sold through pubs is supported, alongside business rates reform and the cut to 10% VAT.

Small Producer Relief, set at the same 2023 reform, applies to makers producing under 4,500 hectolitres of pure alcohol a year, beneath the same 8.5% threshold. The Budget widened that relief without once moving the ceiling, which is where spirits live.

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Images: Scotch Whisky Association