The inconsistencies in how alcohol is taxed are particularly difficult to justify, writes BLAIR BOWMAN
The Government cannot credibly claim to champion growth, exports and British industry while repeatedly increasing the tax burden on one of its most successful products. Yet that is precisely what the Budget has done to Scotch whisky.
The Chancellor has announced another inflation-linked increase in alcohol duty from February 2027, the fourth consecutive annual rise. According to the Scotch Whisky Association (SWA), spirits duty will have increased by 24% since 2023. The excise duty on an average bottle of Scotch whisky alone will rise to £9.95. Add VAT and the total tax burden reaches £12.84, or an extraordinary 74% of the average retail price.
And lest we forget, VAT is charged on the price of the whisky including the excise duty, so we are quite literally paying tax on tax. All of this, of course, with money we’ve already paid income tax on in the first place!
The inconsistencies in how alcohol is taxed are particularly difficult to justify. Take, for example, two 330ml cans, one containing beer and the other a whisky based cocktail, both at 5% ABV. Each contains 1.65 units of alcohol. Same volume, same strength, same amount of alcohol. Yet the whisky cocktail attracts almost 18% more duty than the beer. How can that possibly be justified under a system supposedly designed to tax alcohol according to its strength?
The UK already has the highest spirits duty rate of any G7 country. According to comparisons supplied by the SWA, our rate is roughly double that of France, triple Germany’s, four times Italy’s and seven times Japan’s. It is a remarkable situation when a bottle of Scotch whisky can travel thousands of miles to Japan and still be cheaper to buy there than in Scotland, where it was distilled, matured and bottled.
Of course, governments need to raise revenue, and alcohol taxation has a legitimate role in public health policy. But the question is whether repeatedly increasing duty is actually achieving what the Treasury intends.
The evidence is hardly encouraging. Despite successive increases in duty, HMRC collected approximately £4.1 billion in spirits duty during 2025/26, down from around £4.2 billion the previous year. Higher tax rates do not automatically translate into higher tax receipts, particularly when consumers are already struggling with the cost of living and businesses are facing rising costs.
Mr Healey’s Budget also offers further support to small brewers and cider makers while excluding small whisky distillers from equivalent relief. I struggle to understand the logic of supporting one part of the drinks industry while continuing to penalise another, particularly one so important to Scotland’s economy and rural communities.
Mark Kent, chief executive of the SWA, described the announcement as a “disappointing blow” to the industry, warning that further increases would harm the supply chain, discourage investment and reduce Treasury revenue.
Scotch whisky is one of Britain’s great international success stories. It supports tens of thousands of jobs, sustains communities across Scotland and generates billions in exports. Yet successive governments have treated it as an increasingly convenient source of tax revenue.
There is something fundamentally absurd about a government celebrating the removal of trade barriers to Scotch whisky overseas while continuing to raise the barriers to enjoying it at home.
If the Government genuinely wants economic growth, it might start by reconsidering a tax policy that is placing ever greater pressure on one of the country’s most successful industries while failing to deliver the anticipated increase in revenue.
Blair Bowman is a whisky consultant
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