Tax revenues from sales of spirits have overtaken those from beer for the first time amid record sales of gin, according to HM Revenue & Customs.
British drinkers downed 12% more gin last year, while beer revenue – despite the boom in craft beer – has fallen flat. Duties from spirits, which includes whisky and gin, rose by 7% to £3.37bn for the tax year 2016-17, while beer duty edged up by just 1% to £3.32bn.
However, the Treasury still pockets more from wine than either beer or spirits, with quaffers paying nearly £4.17bn in tax, up 5% on the year.
British drinkers bought 40m bottles of gin in 2016, in a spending spree that outstripped sales growth in beer and sparkling wine, enough to make 1.12bn gin and tonics, or 28 for every person of legal drinking age in the UK.
On the average bottle of gin priced at £13.66, a total of £10.33 in duty and VAT goes to the government. This compares with the £2.48 the Treasury picks up from the average £5.56 bottle of wine, and 44p from a 330ml bottle of beer selling in supermarkets for 73p.
The gin boom has fuelled a surge in the number of distilleries, with about 40 opening in 2016. The Dyfi artisan distillery, near Machynlleth in Wales, opened early last year and co-founder Pete Cameron said after an initial production run of 12,000 bottles it was selling as much as it could produce.
“For years the industry was held back by the minimum size still for a licence, but that has eased. We produce three different gins, all based on local aromatic plants from a valley with breathtakingly diverse flora,” Cameron said.
“There is obviously now far more variety available in the gin market and more people are getting interested, it’s becoming a self-sustaining thing. But actually I think we are now producing for a demand that was always there.”
He added that while tonic was added to at least 90% of gin, drinkers’ habits were changing. The highball glass is giving way to the balloon-shape, while drinkers are increasing the amount of gin from one part to eight parts tonic, to about one part to three.
The Wine and Spirit Trade Association said a freeze in spirit duty in the 2016 budget helped spur sales. But it added that a 3.9% rise in duty announced in the March budget had added 30p to a bottle, stoking fears that the fizz could go out of sales this year.
The association’s chief executive, Miles Beale, said The gin boom has had a large part to play in the windfall for the Treasury. The 7% increase on revenue takings came as a result of the chancellor freezing spirit duty in 2016 and allowing the industry to grow and invest.
“It proves the point that cutting or freezing spirits duty brings rewards, which is why the inflation-busting rise in duty this year was such a disappointment and threatens the industry’s ability to invest, grow and export.”
Spirits duties in the UK are the fourth highest in Europe after Sweden, Finland and Ireland.
