UK duty on wine went up by 10p a bottle to £2.60 (£2.16 plus Vat) in the Budget this month. You’d be forgiven for not picking up on that, as it’s customary for the Chancellor of the day to confuse the media with a short burst of twaddle. “I will make no changes to previously planned upratings of duties on alcohol” is what he said. What he meant was that all alcohol duties were to increase by the chunky rate of inflation (RPI) of 3.9%.
The rise of 8p plus VAT, which came into effect on 13 March, is actually a significant whack on the cost price of your average bottle in a supermarket or in a pub. And completely out of line with what you pay on the continent; here are some facts:
- The 8p rise is more than double the entire duty on a bottle of still wine in France, Germany, Italy and Spain and 11 other EU countries put together.
- The UK duty on wine has increased by two thirds in 9 years, compared to just 15% in the 8 years before that. In those 9 years the buying power of the pound has tumbled, despite improved rates in the year before 23 June 2016.
- The only time that UK duty on wine didn’t go up in the last decade was in the 2015 Budget when it was ’frozen’, while beer duty was reduced fractionally – just before the General Election. Funny that.
£3 of a £5 bottle is now tax. Think of this five pound bottle having the same net value as this pot of jam or four cans of baked beans (on which there’s no tax).
- Unlike Vat, which is paid after the sale has been made, duty is usually an upfront cost as it is charged when the wine leaves customs or a customs-controlled warehouse. VAT is charged on the final price including the wine, duty and margin.
- The duty of £2.16 per bottle costs more than the ex-cellars price for at least 80% of bottles sold in the UK, by volume. The average price for a bottle of wine sold in the UK is apparently just £5.40 (57% tax).
- On a £6.50 bottle – a quid more than the national average – 50% is tax. Spend more than that and the proportion of tax decreases (although whether there’s an increase spent on the actual wine is a matter for the reseller).
- £13 is the retail price at which there’s likely to be a three-way split – £4.33 each – between the tax man, the shipper/merchant/retailer, and the producer/producer’s agent.
- Coupled with the weaker pound, wine now costs 7-11% more than June 2016, without including any price increase from producers. Allow 10-15% if inflation is applied to producers’ prices. (If you normally spend, say, £7, consider spending £8.)
- Britain is one of just four EU countries with duty of more than £2 or €2 per bottle. Ireland has the highest, while the UK and Finland vie for second spot depending on the exchange rate.
- Duty on sparkling wine, whether it’s Champagne, Cava, Crémant, English or Prosecco, costs more at £2.77 – or £3.33 with the vat on the duty. That’s £40 duty on a dozen. (Sparkling wines below 8.5% have slightly lower duty.)
- Her Majesty’s Government is hardly helping the English wine industry as English wine is subject to the same duty, notably the higher rate on sparkling wine. It is cheaper to buy English sparkling wine in France than it is in the UK.
- It’s not all about wine producer lobbies. British negotiators in Brussels can enjoy wine for less: wine duty in Belgium is less than a quarter of what it is in Britain (49p v £2.16 plus Vat).
- HM Government trousers a whopping 70% of all still wine duty paid in the EU (figures published July 2016), or 66% with sparkling wine included. Each country has complete control over their respective level of alcohol duty.
- For all the Government’s talk of future free trade agreements around the world, the EU tariff on wines imported from outside the EU is 25 times less than UK duty of £2.16. The EU tariff per bottle is 8.5p (9.8 eurocents) for 13% vol or less, or 10p (11.55 eurocents) for wines between 13% and 15%. So, the 8p increase in UK wine duty in this Budget alone is on a par with the entire EU tariff for wines of 13% or less. Meanwhile, there is no EU tariff on wine from Chile and more than half of South African wine that comes into the UK has no tariff, based on a new quota deal with the EU.
- When Britain leaves the EU, the current allowance of being able to bring back as much wine as you like from the EU will end. There is no limit to the amount you can bring back now for personal consumption without having to pay UK duty. (Some people mistakenly think the limit is 90 litres – 120 bottles – but that is simply the amount above which a customs officer can ask if the wine is for your own use.) It seems unlikely that the Chancellor will condone any ’uprating’ of the current allowance for bringing wine into the UK from outside the EU from just 4 litres.
- Finally, in UK pubs and restaurants, the cost of the duty is more than the cost of the wine itself for the vast majority of house wine sales. Take a bottle listed at £20. After Vat of £3.33 is taken out, a typical restaurant margin is 70%. In this case, the ’duty paid delivered’ cost price to the restaurant, ex Vat, is £5. Of that, if we allow 35p for delivery, and a slim 10% supplier margin of 50p, that leaves £2.16 for duty and under £2 for the wine – including bottling, packaging, shipping, storage and so on. With less duty, you could expect far, far better quality, exponentially, for your £20 – plus any service charge. Or, of course, a lower price.
UK duty on still wine is now £2.16, or £2.60 including Vat. That’s up from £2.08 (£2.50 including Vat), while duty on sparkling wine is higher at £2.77 (£3.33 incl), up from £2.67 (£3.20 incl). Duty is, in fact, charged per 100 litres and for still wine it’s now £288.65 per 100 litres and sparkling costs £369.72. All alcohol duties went up by the rate of inflation via the RPI at 3.9%.