Tax hikes on wine comes into effect tomorrow

The price of wine is set to rise in the UK tomorrow, as the Chancellor’s new tax hike comes into force.

In October, the Chancellor announced the duty on wine would rise in line with inflation, putting around 7p per bottle onto the price of a bottle of wine.

This means that the UK duty on still wine will be £2.23 a bottle plus VAT (£2.68), up from £2.16 (£2.60 inc VAT), while sparkling wine duty increases from £2.77 to £2.86 (£3.43 inc VAT).

Meanwhile taxes on beer, cider and spirits were frozen to support British pubs, saving an average of 2p on every pint of beer, 1p on a pint of cider, and 30p on a 70cl bottle of whisky.

Higher strength ciders and perrys are also set to see an increase, as the new tax banding for ciders with an ABV of 6.9% to 75% comes into effect to limit the harm of cheap, white ciders and encourage companies to lower the ABV levels.

According to numbers crunched by Bordeaux-based winemaker and industry expert Gavin Quinney, duty on still wine has doubled since 2000, with a marked acceleration in the last ten years. Duty on still wine in the UK has gone up 72% over the last 10 years, compared to 15% in the 8 years before that – and now accounts for around 61% on the cost of a £5 bottle of wine. Sparkling wine has fared little better, rising 70% in the last ten years, compared to just 4% between 2000-2008.

Quinney noted that you’d have to pay more than £6.70 to pay less in tax than on the wine itself.

Across Europe, only Ireland and Finland have higher taxes on booze than the UK, while 14 countries – mostly wine producing nations – have duty of less than 4p, which is levied primarily through VAT.

Earlier this month MPs heard that this unfair system has been viewed as a “provocative” move by big wine importing nations such as Australia with whom the UK hopes to sign trade agreements after Brexit.

The Wine & Spirit Trade Assocation’s (WSTA) European and International affairs director Simon Stannard warned the Commons international trade select committee yesterday that the Chancellor’s decision to single out wine for a tax increase had upset Australian producers, who viewed it as favouring domestic beers and spirits over imported wine.

“We know it’s gone down very badly in Australia in terms of setting the mood for future trade relations if one of Australia’s major agricultural exports is being seen to be treated unfairly,” he told MPs.

There is also a strong possibility that the Chancellor may deliver a spring budget in the wake of a no-deal Brexit on 29 March.