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When the alcoholic content rises, the tax increases with it – that was the crux of the government’s new beer duty rules when they kicked in last August.
The split was set as:
duty on all alcoholic products less than 3.5% alcohol by volume (ABV) = £9.27 per litre
duty on beer at least 3.5% but less than 8.5% ABV = £21.01 per litre.
Jason Croke, VAT director at Rayner Essex, noted that on the back of this, there was “very quickly” an incentive for producers to make a beer that is 3.4% in strength, thereby landing itself in the lower threshold.
Whose round is it?
Enter Aldi and the Hop Forward Beer, specially produced for the retailer with a percentage of – you’ve guessed it – 3.4%. This followed Carlsberg outlining plans last year to reduce the strength of its Danish Pilsner from 3.8% ABV to 3.4%.
So are more brewers eyeing a lower ABV?
Nik Antona, national chairman at the Campaign for Real Ale (CAMRA), said that the lower tax bracket of under 3.5% ABV “could potentially encourage innovation in lower-strength beers”.
He added that this could particularly be the case with independent brewers “who are struggling to survive against spiralling costs of goods and employing staff, rising energy bills and customers continuing to tighten their belts due to the cost of living”.
Choice at the bar
An announcement was later made in November 2023 that the alcohol duty regulations would be frozen until August 2024. At the time, Chris Jowsey, chief executive of Admiral Taverns, welcomed the measures, noting that both the freeze and an extension to the business rates relief would “reduce the unfair tax burden and provide many pubs with an opportunity to trade out of this economic crisis”.
Emma McClarkin, chief executive of the British Beer and Pub Association, added the call would “save our sector around £350m”.
So far as innovation goes, is that also set to be a positive for the beer industry?
Antona noted that a higher ABV “is integral for certain beer styles”, adding that it “would be a concern if the production of stronger types was reduced”.
“Consumers deserve to have a choice at the bar, taproom or bottle shop, and it would be a shame to see tax bands create any form of limitation to that choice.