Shoppers throughout the UK might soon feel the pinch at the checkout as the wine prices are set to increase due to upcoming changes in duty tax regulations scheduled for February 2025.
Industry analysts are keeping a close eye on these developments, anticipating a significant financial impact on consumers.
Changes on the Horizon for Wine Taxation
The government plans to introduce a sliding-scale alcohol duty system, which will affect many still wines for the first time.
This shift, along with tax increases tied to inflation, is causing trade representatives to alert the public to the possibility of steep price hikes.
The Wine & Spirit Trade Association (WSTA) has dubbed the potential impact a “double tax slam,” predicting an increase of as much as 80 pence for a bottle of red wine containing 14.5% alcohol by volume (ABV).
Industry leaders are advising consumers to prepare for this adjustment, noting that retailers might not be able to absorb the tax burden any longer.
Back in August 2023, the UK government established a new model for calculating alcohol duties based on the strength of the beverage.
Presently, a temporary rule allows still wines with an ABV from 11.5% to 14.5% to be taxed as if they were at 12.5%.
However, this provision is set to expire in February 2025.
Concerns from the Wine Industry about the New Duty Framework
Once the new tax structure is in place, the current single levy will be replaced by a more intricate system that features 30 different tax bands.
A bottle of still wine with an ABV of 14.5% could see its duty increase by about 20%, or roughly 54 pence, when accounting for inflation-driven hikes.
Meanwhile, wines with a 13.5% ABV may face a 12% increase, while those at 11.5% might actually experience a slight drop in duty of approximately 5%.
Notably, this new regime will lower taxes on beverages with lower alcohol content, an adjustment that some health advocates have greeted positively.
Trade representatives within the wine sector have raised alarms about the complexities that will arise from the new regulations.
One cofounder of a leading business likened the forthcoming challenges to “death by a thousand cuts,” emphasizing the difficulty of managing the diverse range of wines and their various ABV levels when it comes to calculating costs.
In light of these impending changes, merchants are proactively informing their customers and advising them to purchase wines or clear out their in-bond storage prior to the February deadline.
Retailer Strategies in Response
The Wine Society, a prominent retailer, has communicated to members that it plans to hold prices stable on its own-label wines, although other products may see an increase following the new regulations.
The CEO underscored that their business model has successfully kept prices steady amid various challenges, but the future price increases are no longer avoidable.
He pointed out that the absence of coordinated policy development means that these duty hikes will further compound the already hefty financial strains stemming from rising National Insurance contributions, business rates, and additional regulations, thereby appearing as a substantial burden on the wine industry as a whole.
Source: Decanter
