Chancellor makes significant changes to fuel duty and alcohol duty

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In his Autumn Budget speech, Chancellor Rishi Sunak made significant changes to fuel duty and duty rates on alcohol.

The government will keep fuel duty frozen at 57.95p per litre across the UK for 2022/23 in recognition of the significant cost that fuel represents for households and businesses.

The alcohol duty system will undergo a major simplification. Drinks will be taxed in proportion to their alcohol content, making the system ‘fairer and more conducive to product innovation’ in response to evolving consumer tastes. Additionally, a new relief that recognises the importance of pubs and supports responsible drinking will be introduced, with duty rates on draft beer and cider being cut by 5%.

A radical simplification of the system will see the number of main rates reduced from 15 to just six. All alcohol categories will move to a standardised set of bands, with rates for products between 1.2%-3.4% alcohol by volume (ABV), 3.5-8.4% ABV, 8.5-22% ABV and above 22% ABV. The government stated that above 8.5% ABV, all products across all categories will pay the same rate of duty if they have the same proportion of alcohol content.

Commenting on the changes, Kate Smith, Associate Director at the Institute for Fiscal Studies (IFS), said: ‘The reforms to alcohol duty . . . are a very welcome step. Moving to a system that taxes all drinks in relation to their alcohol content is sensible.

‘However, one anomaly from the previous system remains, with cider still taxed much more lightly than other drinks under the proposed reforms.’