The duty on a bottle of wine is changing on 1st August 2023. This will increase the price of wine on the shelves of retailers.
What's the duty on a bottle of wine?
The Chancellor announced changes to wine duty in his spring budget. At the time newspapers focussed on of the savings on a pint of draught beer, thanks to the new Draught Relief. But, little has been said about the 20% increase in duty which will significantly affect the price of wine.
For comparison, in France you pay just 3p duty on a bottle of wine.
Before this increase, the UK rate of £2.23 was the world’s third-highest rate. From 1st August 2023, the average duty will be £2.67 per bottle.
The reform is designed to simplify the duty system.
Historically, wine, beer, and spirits have all been subject to different rates of duty. The government is moving to a system where all alcohol duty is calculated based on the strength (or ABV) of the drink.
This is a big change for the price of wine, which was previously charged at a single rate irrespective of the ABV. As an iterim measure the new rates assess wine between 11.5% and 14.5% as if they have an ABV of 12.5%. This will change again in 2025.
Duty Rates on Wines from 1st August 2023
| Style | ABV | Old Rate | New Rate | Change |
| Still | 11% | £2.23 | £2.35 | +12p |
| Still | 11.5%-14.5% | £2.23 | £2.67 | +44p |
| Still | 15% | £2.23 | £3.21 | +98p |
| Sparkling | 11.5%-14.5% | £2.86 | £2.67 | -19p |
| Fortified | 20% | £2.98 | £4.28 | +£1.30 |
So, how does that translate to the purchase price of a bottle of wine?
Firstly, it doesn't matter where you're buying your wine from. All bottles, whether from a discount supermarket, online wine club or high-end wine merchant, are subject to duty at the same rates.
Secondly, all wine is subject to 20% VAT.
How much tax are we paying on wine?
Let's look at the maths and assume the wine you buy has an ABV between 11.5% and 14.5%.
When you spend £5 on a bottle of wine, there's £2.67 duty and 20% VAT. That's £3.67 straight to the exchequer, leaving just £1.23 to cover packaging, bottle, transport, retailer margin, and, of course, the wine. If we're generous, 30p might end up going towards the wine. The most important bit, the wine, gets only about 5% of your original £5.
We'll do the same exercise for a £10 bottle.
Duty is constant at £2.67 and VAT at 20% accounts for £2. £4.67 goes off to the tax man, leaving £5.23. Packaging, bottle, and transport cost about 60p. Take off the retailer margin and there is about £2.86 to go toward the wine. We've doubled the amount spent, but the quality of the wine has increased eleven times.
There are two small positives from the recent duty changes:
- Sparkling wine (previously charged at a premium of £2.86), has been brought in line with still wine. From 1st August there has been a reduction of 19p to £2.67. A boon for any Champagne Charlie's out there.
- Duty on wines under 11.5% is now charged relative to their strength. This means a wine of 10% ABV will incur duty of £2.19 (down from £2.23). This is excellent news, though best of luck finding many wines at 10%. Of course, we will be on the look-out for lower alcohol wines that meet our high quality standard, watch this space!
How much should I spend on a bottle of wine?
It’s a question I get asked all the time and one that does not have a simple answer.
It depends on multiple factors, how much value do you place on sustainability, convenience, shopping locally or supporting independent retailers.
What is true though is that the more the price of wine, the more money goes into the wine in the bottle.
In my personal experience, the best value and the most noticeable improvement in quality comes when you spend between £10 and £15 on a bottle of wine.
With the new duty regime, this is more true than ever.
Full details of the changes can be found on the HMRC website.
