Taxing the pleasure from wine

The cost of the average bottle of wine bought in the UK is apparently about to top £5 for the first time in a few months time. Research conducted by Accolade Wines puts the current average around £4.71 but it is another hike in alcohol duty that is going to push prices up much further over the next few years. The duty escalator, introduced by the previous government will result in tax rising by 2% above inflation. At the current levels that means a duty increase in excess of 7%.

Even at today’s levels and taking the £4.71 current average as our starting point, the proportion of tax (duty and VAT) is 55% at £2.59! That gives us £2.12 to produce, bottle, import, ship and sell the wine. That is not a lot of money when you think about it.

Now this may sound like bad news and clearly the disproportionate rise of duty on wine is far from good, but many consumers are taking it as a cue to find better value, rather than cheaper wine. As the duty element is fixed, for every pound you spend extra you get 80 pence that is spent on the wine and not the taxman. Spend an extra £2 and a wine costing £6.71 reduces the tax percentage to 43.6%. That leaves a lot more to be spent on the wine in the bottle. And it is the wine that matters and sometimes it pays to spend a bit more.

If you have an iPhone you can download a very handy ‘UK Wine Tax Calculator’ from the App Store to help you make an informed decision.