The pub industry has been through a lot in the past two or three years; already feeling the pressure from supermarket alcohol sales even before 2020, the COVID lockdowns, social distancing and restrictions on how many customers could be accommodated at a time hit pub income hard. Once the restrictions imposed to cope with the threat of the pandemic were eased, many pub owners thought that the worst was behind them – but they were in for a nasty surprise with dramatic increases in energy prices which dealt many a severe blow and one from which more than a few have not recovered.
Expectations for the 2023 Budget were high, therefore and the eyes of many pub owners turned to the House of Commons this month. They were not to be disappointed, as the Chancellor announced plans to deliver a much-needed boost to the pub industry.
In the Budget, the government announced that it would be raising the duty rates for alcohol products in line with the Retail Price Index from 1st August 2023. This was expected, and had been announced in December 2022, following a freeze on duty rates since Autumn 2020. This includes all alcoholic products produced in, or imported into, the UK.
An announcement was also made that the value of Draught Relief would be raised from 5% to 9.2% for qualifying beer and cider products and from 20% to 23% for qualifying wine, other fermented products (previously made-wine) and spirits. As with the increase in duty rates, this change will also take place from 1st August 2023.
The changes mean that from August, the draught duty on beer and cider in pubs will be up to 11 pence lower than that in supermarkets.
The government said that it had taken the move on Draught Relief to support the hospitality industry, recognising the role that pubs play in the social life of communities.
What might this mean for businesses?
As well as the ongoing financial effects of the increase in Draught Relief, there could be one-off costs to businesses, which include:
- Familiarisation with the new process of calculating duty on their alcohol products and updating their processes.
- Updating the software used to calculate and track their alcohol duty obligations
- Training staff who are responsible for managing their alcohol duty
It should be added that because of the recent agreement known as the Windsor Framework, the change will also apply to Northern Ireland.