Most consumers are aware that wine is commonly taxed, and that in the UK this level of tax is particularly high. For many, the first awareness of exactly how high this level of tax is, comes from holiday trips to Europe. There, wine seems insanely cheap. 

I remember childhood camping trips to France and Spain where my parents would bring wine home with them because it was so much cheaper there. And as a young adult, I used to do the occasional Calais booze run, where you’d cross the channel just to load your car up with wine and spirits at prices far lower than anything you’d get in the UK.

The lay of the land

This wine tax is known as 'duty'. It’s levied at the point of production or importation of any drink with more than 1.2% alcohol. So, if you make wine in the UK, you pay duty when you move the wine out of the winery (which is ‘bonded’), and if you import wine, you pay the tax when you move it out of the bonded warehouse that you bring the wine into.

An aside: when you buy from fine wine merchants, often the wine will be listed as ‘ib’ for ‘in bond’. Even years after its production a wine can stay in a situation where duty isn’t paid, so you can buy the wine, keep it and re-sell it without any duty involved. But when you want to drink it, you pay the duty. And then VAT is levied on the duty-inclusive price of the alcoholic drink in question. So that means there’s 20% tax on the tax!  

Across Europe, there are 15 countries – including Spain, Portugal, Germany, Austria, Greece and Italy – where there is no government tax on wine, except for VAT. France levies €0.03 per bottle, and the Netherlands €0.66. Ireland is the most expensive, with €3.19 per bottle, but almost everywhere the tax is much lower than the UK.

A brief history

Here in the UK duty isn’t a new thing. A version of it dates to 1150, but as it has been changed and modified through the ages, some anomalies have arisen, largely because it has been applied differently to different classes of alcoholic drink. The product-specific anomalies meant that you could be paying the same amount of duty for significantly different amounts of pure alcohol.

In 2023 a major revision to wine duty took place, with a view to harmonizing duty across different product classes. There was also some pressure from the neo-prohibitionist health lobbyists who have tried to convince the government that raising the price of booze is a way of reducing alcohol harm. The way these reforms are described in the government releases sounds sensible (it is described as simplifying duty and aligning it with public health goals), but in practice they are anything but, and represent a significant problem for the wine industry.

So, what is different about the new system?

The main aspect to it is that the alcohol in each of the drinks, including wine, is taxed at a consistent rate of duty. For products between 8.5% and 22% alcohol, the level is £29.54 per litre of pure alcohol, and for products at 3.5% to 8.4% the duty is £25.67 per litre of alcohol.

This seems logical, but for wine it’s very complicated. Spirits and beers are effectively manufactured drinks, and it’s possible to make them at a targeted level of alcohol, to keep this level consistent over time. For most whiskies, gins and vodkas, the spirit is diluted down to the target, which is often 40% alcohol by volume.

With wine, the alcohol volume varies among wines, and also across vintages for the same wine. The reason why most wines have reported levels of 13% or 13.5%, or 14% on the label is because there is a degree of latitude offered to producers by their local regimes, so they are able to round up or down the actual alcohol level. It’s an approximation. And because in most cases no money revolves around the level then few really care about the accuracy. The US, for example, gives a 1.5% margin of error below 14%, and a 1% margin of error above this, and the tax for wine increases after 14%.

Because of the complexity of wine’s alcohol levels, and the many potential brackets that come from reporting alcohol levels in 0.1% increments, there was a wine easement from 2023 until February 2025, where all wines in the 11%-14.5% bracket were taxed as if they were 12.5% alcohol, at £2.67 per bottle. But last February, when this ended, wine was taxed by actual alcohol level to the nearest decimal point.

This has created somewhat of a grey area. If you buy a wine from France with the declared alcohol level of 13%, what do you do as an importer? The easiest thing is to run with the alcohol level that’s declared. It’s the responsibility of the importer to declare the correct alcohol level and at the moment, this is a bit like filing a tax return: it’s down to you to tell the truth.

Why does it matter?

The result is that most wines are now more heavily taxed than ever, and this is becoming a big issue, especially for less expensive wines. A wine at 13% alcohol will have £2.99 duty added to its price, and then there’s 20% VAT on top of that. One at 14.5% alcohol will be taxed at £3.21. As is made clear in the Bibendum Vinonomics chart , for an inexpensive wine this is a significant – the most significant – chunk of the price.

What about sub £5 wines? If you scan the shelves of the two major discounters, you’ll still find quite a lot of wines below £5, even after these duty increases. How is it possible to sell wines so cheaply, when so much of this will be tax? The answer is that it’s impossible to do this in a sustainable fashion, and astonishingly little will be spent on the actual wine.

These wines often come from distressed sales where producers have got tanks full of wine they need to get rid of, or from producers who have already covered the costs of their winery and production facilities, so this extra wine is regarded as a marginal cost, or where the retailer is taking a slight hit to lure wine-loving shoppers in with the bait of very cheap wine, knowing that they will also be spending enough to make their visit a profitable one for the retailer. It’s not good for wine because it keeps consumers addicted to cheap wine and muddies to water for those trying to build a sustainable wine business.

There are no winners

Duty makes the government a lot of money. From wine sales, the government made £4.9 billion in 2024/25, and from alcohol sales overall they made £12.5 billion, according to the Office for Budget Responsibility. But as often happens with taxes, raising them doesn’t always translate to increased revenue.

Now the new duty rates for wine have kicked in, estimates are that for 2025/26 the revenue from duty will dip to £4.3 billion. So, the only people pleased with this will be the public health lobbyists who mistakenly believe that the way to reduce alcohol harm is to tax more and get people who are drinking at perfectly healthy levels to drink less because they can’t afford it anymore. 

One of the main messages here is that because of duty levels, and the recent rises, the more you spend on a bottle of wine, the more ‘wine’ you will get. Currently, the average selling price of a bottle of wine in the UK is £7.07 (figures from October 2025), and of this, 9% goes to the producer. That means you get only 63p worth of wine. In contrast, if you spend £100 on a bottle of wine, given normal importer and retailer margins, then 60% of this goes back to the producer.

What it means in the restaurant

The duty increases have made life even more difficult for restaurants. Faced with rising staff costs, increased rents and higher energy prices, now they have been hit with a higher tax on wine, which is often a profit driver. And wine is a discretionary purchase: many customers are happy to skip it, especially at lunchtime.

The challenge for hospitality venues is to keep wine as a revenue stream, and as the duty increases are compounded at this level – the margins of both the importer/agent and the restaurant or bar both involve the cost of the wine with duty included – the hit is bigger here than at retail. And higher wine prices are more likely to make customers think twice about what they drink.

One alternative is for restaurants to downgrade the quality of the wines they are listing in order to keep the price points the same, but this risks alienating customers who have just spent quite a lot to get a very ordinary wine. The better option is to work harder with the list, making it more compelling and interesting, and rewarding those who are willing to head further up it by moving more towards a cash margin than gross profit. After all, it’s the money made from each customer (or bottle sold) that matters, rather than maintaining a strict GP. It seems a shame to offer amazing food and then see it accompanied by very average wines.

So, rather than simplifying things, these new changes in duty have made life complicated for the wine industry, and have a particularly significant impact on less expensive wines. It looks like this complicated duty system is here to stay though, and that it will be increased each year in line with the retail price index. And it also looks like these tax increases are actually going to reduce the sum made by the treasury. A true lose-lose situation.