Reforms to alcohol duty introduced last summer were – according to then chancellor Rishi Sunak – designed to simplify a system that was “outdated, complex and full of historical anomalies”.

But according to UK wine merchants and industry figures – the opposite is true.

They claim the new system for wine – due in February 2025 after the cessation of an 18-month transition period – will increase costs for wine importers and merchants and push up shelf edge prices.

So what are the changes, and is the industry right to feel aggrieved?

Wine’s special tax status

The historical tax status of wine and other made-wine products has differed from that of beer and spirits. Up until August 2023, most still wine was subject to a flat rate of tax – £297.57 per hectolitre of product.

Now, however, all alcoholic products are to be taxed based on the litres of pure alcohol (lpa) in the finished product. This means a wine’s duty bill is now for the first time directly linked to its strength.

In theory, the changes make sense and align with the government’s stated aim to simplify the duty system and reduce alcohol consumption.

However, the reality for wine – according to the Wine and Spirits Trade Association (WSTA) is “categorically the opposite”.

That’s because it means moving from a single amount of duty paid on wines between 11.5-14.5% abv (which accounts for 85% of wine sold in the UK) to 30 different payable amounts; the equivalent of every 0.1% abv increment between these strengths.

In practise, duty on these wines could soon be anything from £2.45 – £3.10 per bottle, depending on abv.

For beers and spirits producers, this concept of calculating and recording the amount of duty payable based on abv and volume rather than just the volume is not new. So why the outcry that wine now must adhere to the same demands?

Alcohol by volume variance in wine

The problem – according to winemakers, importers and sellers – is that wine is an agricultural product, meaning abv is much harder to predict.

“We cannot predict or control the weather, nor the abv of the wines we order from around the world, which can vary with each vintage,” explains Majestic CEO John Colley.

It’s a quirk that means the number of wine SKUs on shop shelves in the UK is estimated to be in excess of 100,000, far more than any other alcoholic drinks category.

Variance in abv is especially prevalent among smaller, artisanal winemakers. A chianti made by a family-owned Tuscan winery could be 12.5% abv one year, and then 13.1% the next, depending on the conditions under which the sangiovese grapes from which it is made were grown.

A wine merchant in the UK importing this chianti will therefore need to calculate and pay a different duty on each vintage, and – quite possibly – sell them on shelf at different prices. And then do the same again for every other wine it purchases, and recalculate its duty obligation each time a new vintage lands on shelf.

For a small independent wine shop employing half a dozen staff and selling a hundred or so wines, that’s a huge administrative burden. And one that – in an age of elevated costs and fragile consumer confidence – could be the difference between staying afloat and going out of business.

Even for a much larger company like Majestic, which operates over 200 stores and sells over 1,500 different wines, the new system would require significant investment.

“We have serious doubts as to whether the systems required to administer the new tax regime would be possible to implement,” Colley says. “We are big enough as a business to shoulder the cost burden and continue to trade, but it would impact our ability to invest in our growth plan, to open new stores and to employ more people.”

What happens when wine duty easement ends?

The government – seemingly aware of the implications of its booze reform – has introduced an easement period in which all wines between 11.5-14.5% are taxed as though they are 12.5% abv.

However, when the easement period ends in February 2025, the industry says price hikes are inevitable. WSTA chief executive Miles Beale says its analysis shows 43% of wines will face an increase in their tax burden from next year, with higher-strength, predominantly red wines most impacted.

Industry figures have therefore been lobbying government hard to reconsider. At a Westminster Hall debate hosted by Conservative MP Will Quince earlier this month, parliamentarians including Priti Patel, Julian Sturdy and Stephen McPartland shared the industry’s concerns and urged the treasury to make the easement permanent.

“This seems to be a difficult case of unintended consequences,” McPartland told fellow MPs. “If the easement was to be made permanent rather than temporary, that could solve the problem.”

Patel added: “This is increasing red tape at a time when the government should be doing more to ease the costs on business.”

Such a move – industry figures say – would retain the principle of taxing products based on the amount of alcohol in them, but without the administrative burden being placed on importers and merchants to calculate the duty payable on every wine they sell.

“The short-term solution is clear and actually quite simple to enact: make the wise easement permanent,” Colley says. “This would not only save businesses from being lumbered with additional cost, complexity and red tape, but it would prevent further inflationary price rises for consumers.”

Will duty changes cost the government?

The government, however, appears committed to following through on Sunak’s policy. Gareth Davies, exchequer secretary to the treasury told the debate the easement was designed to give “the wine industry time to adapt” but added he was “confident the bureaucratic burden under the new system is manageable”.

This stance has been met with incredulity by the industry. Colley says the minister’s comments demonstrate “a worrying lack of understanding of our sector”.

Beale, meanwhile, points to HMRC’s latest figures for alcohol duty, which showed a £436m loss in excise duty receipts between September 2023 and January 2024 compared with the same period in 2022/23, as evidence alcohol duty reforms are hitting the industry hard.

“Consumers are more sensitive to price increases than the treasury takes into account in its forecasts,” he says. “This has been brought into stark focus with the massive decrease in wine receipts following the 20% duty increase on most wines last August.”

A change in government, therefore, could be the sector’s best chance of reversing the policy, with industry figures already thought to be sounding out Labour’s shadow chancellor Rachel Reeves ahead of a general election.

But with a date for polling day yet to be set, and easement’s end less than a year away, wine businesses have little choice but to prepare for the worst.