The Autumn Budget, announced at the end of last month, was not well-received by the wine industry. While UK Chancellor Phillip Hammond chose to freeze duty on beer, spirits and cider, wine was singled out for a tax rise – a rise that will come into effect from 1 February 2019, less than two months before the UK leaves the EU. From this point, duty will be £2.23 per bottle of still wine and £2.86 per bottle of sparkling.
Since 2012, no other alcoholic drink has paid as much into the treasury as wine, which has seen duty rise by an average of 5% per year in the 17 years to 2017. The annual rate of inflation, meanwhile, averaged 2.2% over the same period, so it’s little surprise that The Wine & Spirit Trade Association (WSTA) called the move “grossly unfair”. According to the WSTA, the Budget effectively adds up to a 3.1% rise in wine duty, and will cost the industry an extra £90 million.
Alcohol duties – largely bolstered by wine – are expected to deliver £11.6 billion to the public purse in the 2018/2019 tax year, according to a March 2018 forecast by the Office for Budget Responsibility. This represents 0.5% of projected national income – a not-insignificant figure, and one that dwarfs corresponding duty forecasts throughout the rest of Europe. The UK has the third highest rate of duty in the EU after Ireland and Finland, and we pay about £1.10 more in duty per bottle of still wine than Lithuania does, and about £2.42 more per bottle than France.
If the full duty increase is passed directly onto consumers, it’ll add up to an extra seven pence on a bottle of still wine and an extra nine pence on a bottle of sparkling wine. This is hardly a make-or-break price hike for the average shopper, but duty increases of any kind do call into question the issue of value, and this is where it pays for wine drinkers to be savvy.
The tax you pay in the UK is the same on every type of wine (still or sparkling), no matter how expensive. So whether you spend hundreds on a bottle of Lafite, or less than £10 on a bottle of Tesco Finest, the same £2.23 will go on tax. The average retail price of a bottle of wine in the UK is £5.39, so once the tax (which accounts for more than half of the price of the bottle, in this instance) is stripped away, you’re left with £3.16. As the above info-graphic illustrates, a further £2.63 is then spent on a combination of VAT, packaging, logistics and margins, leaving just 53p spent on the wine itself.
Spend £10 on a bottle of wine, however, and you’ll get £2.70 worth of wine for your purchase. Splash out £20 and you’ll get £7.03. A £20 bottle may be four times the cost of a £5 bottle, but the quality of the drink increases by 23 times. Of course, this applies to your everyday wine purchases, and not expensive investments involving prestige chateaux that can command higher margins thanks to their reputation and critical acclaim. But it’s something to keep in mind next time you’re in the wine aisle. Tax is inevitable, but understanding it at least helps you get more bang for your buck.