Budget Press Releases – Will the beer tax cut be enough for the struggling pubs sector?

Alison Horner, Head of Indirect Tax MHA
There was a significant cheer from the House when the chancellor announced that there would be a 1.7% cut in tax on draught beers with an ABV of less than 8.5%.

The cut will reduce the tax rate from £19.08 per litre of alcohol to 18.1%. For a pint of beer with an ABV of 4%, this means the tax will reduce from £36p to £34p.

In addition to the tax cut, the chancellor has also announced that there will be an increase in the discount provided to small producers of non-draught products and continue the assistance to small producers for draught products via cash discounts.

Introduced in 2023, the Draught Relief allows the chancellor to align alcohol duty to help support the UK’s pubs and significant brewing sector. The relief covers beer which is packaged into large containers such as kegs and casks and mostly sold across the bar in pubs so the cut will not impact sales of beers in shops and supermarkets.

This is sure to be welcomed by the pub industry as they continue to face a difficult market, but will this be sufficient to help stem the tide of pub closures in the UK which has, according to recent CAMRA data, continues to increases year-on-year with 2024 estimates being 1200 closures.

With the raft of tax increases announced by the chancellor, this cut may get lost and the price of a pint will not cost you less. Typically the customer does not always benefit from the cut with the industry retaining the benefit. This was certainly be the case with the cut to VAT and the hospitality sector during Covid.

For non-draught beers, the chancellor announced that the tax would increase in line with the Retail Prices Index (RPI). For beer with an ABV between 1.3% and 3.4%, the tax will, using the current RPI of 2.7%, increase from £9.27 per litre of alcohol to £9.52. For a 500ml can of beer with a 4% ABV, this will mean an increase in tax from 18.54p to 19.04p.

It was also announced that there will be a ‘Guest Beers Consultation’ which will be a forum for small brewers to expand their access to UK pubs and enhancing drinker’s options at the bar. This appears to be a positive move by the Government to assist small brewers with getting their products to the market.

In more news which will affect the beer industry, it was announced that Alcohol Duty Stamps will be abolished from 1st May 2025 after the review conducted by HMRC confirmed these were no longer necessary. Legislation will be introduced in the Finance Bill 2024-25 to end the scheme. This will be appreciated by the industry as this proved a costly exercise.

Autumn Budget 2024