Government rolls out £85m tax relief for alcohol sector

New draught and small producer reliefs aim to support UK pubs and breweries, but concerns remain over industry tax burden and HMRC’s scrapped modernisation plans. 

Starting tomorrow, 1 February, the UK government will introduce two tax relief measures designed to “stimulate growth in the alcohol sector”. This comes as alcohol duty for certain ABV products is also increasing as of tomorrow.

The draught relief increase will reduce duty by 1p on draught pints, while an enhanced small producer relief aims to encourage innovation among small breweries. Collectively, these initiatives represent an £85 million investment in the industry.

Exchequer secretary to the treasury, James Murray, emphasised the importance of these measures, stating: “Our pubs and brewers are an essential part of the fabric of the UK and our brilliant high streets. Through draught relief, small producer relief, and expanding market access for smaller brewers, we will help boost sector growth and deliver our Plan for Change to put more money in working people’s pockets.”

Richard Naisby, chair of the society of Independent Brewers and Associates (SIBA), welcomed the government’s increased investment, noting: “The Government’s increased investment in Draught Relief means that draught beer sold in our community pubs has a lower rate of alcohol duty than beer sold in supermarkets and should encourage more people to support their local. At the same time by going further on Small Producer Relief, the Government can help small breweries to compete and grow their businesses.”

Industry concerns over tax hikes

These developments come amid wider concerns in the drinks industry over recent tax increases. The Wine and Spirit Trade Association (WSTA) has previously warned of a ‘double whammy’ tax rise affecting consumers and businesses, criticising the government’s decision to push ahead with duty hikes despite industry objections. The WSTA highlighted that the new excise duty rates, effective from 1 February, would result in a tax increase exceeding £175 million, coinciding with the end of the wine easement.

HMRC scraps alcohol production platform

In a further setback for the sector, HMRC has today (31 January) confirmed that its planned online alcohol production approval platform will not go ahead as planned following a government spending audit. Instead, producers will continue to use existing methods to apply for approvals and make changes, rather than benefiting from a streamlined digital process.

Matthew Clark, a customs, excise and international trade partner at BDO, commented: “Understandably, this decision has caused some consternation in the industry as the platform was a welcome improvement bringing excise approval management up to date from what was a very manual old-fashioned approach. Many operators have invested significant time and resources in preparing for the transition only to find that it’s been axed at the stroke of a pen.”

He added: “On the upside, the introduction of two tax reliefs from 1 Feb – draught relief and small producer relief – worth some £85m will be a benefit to the industry. But one is still left with the impression of giving with one hand and taking away with the other.”

Looking ahead

The government has also announced plans to consult on improving access to guest beers in pubs, aiming to support sector growth and provide consumers with greater choice. Meanwhile, the industry is awaiting further details from the Chancellor’s upcoming Budget, which may bring additional changes affecting alcohol taxation.

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