Hospitality businesses brace for alcohol duty increases from February

The hospitality industry is bracing for another squeeze as the government prepares to raise alcohol duty rates from 1 February 2026.

Margins on alcohol sales could get tighter, as rates will increase in line with the Retail Price Index (RPI) at 3.66%. Pubs, bars, and restaurants aren’t directly responsible for paying alcohol duty tax, but the increase in cost could be passed on from suppliers to land on operators who are already facing intense financial pressure. 

As pubs across the UK continue to campaign for wider government support for the sector, including business rates relief, another hike won’t be the news they were hoping for. But with many hospitality businesses already under pressure, it’s important to be aware of the potential increases to alcohol prices in the coming weeks, and to plan ahead where possible.

What’s changing with alcohol duty — and when

This upcoming increase in alcohol duty rates was first announced in November’s Budget, with rates set to be uprated by 3.66% from 1 February, in line with inflation (RPI). The Telegraph has reported that this could result in a £400m-a-year tax rise on pints, wine, and spirits.

It’s worth noting, of course, that the cash discount available under Small Producer Relief (SPR) will also be increased, so the relative discount smaller alcohol producers receive will remain intact.

Why pubs and hospitality businesses are worried

The government acknowledged the change could have “some impact on the hospitality industry”, with alcohol suppliers likely to charge pubs, bars, and restaurants increased prices to cover the duty rates increase.

The Treasury calculated the 3.66% increase to affect approximately 10% of pubs’ costs, which amounts to a less than 0.5% increase overall. But even minor increases can have a tangible impact on pubs working with already tight margins.

UKHospitality’s Allen Simpson told The Caterer that the sector’s cost burden was already “growing at an unsustainable rate”.

“Increases to alcohol duty, while not paid directly by operators, are another pressure if it is passed onto businesses through higher drinks prices,” he said. “We strongly urge suppliers to show restraint, recognising the economic pressure the sector is under.”

The increase is unfortunately timed, as many hospitality businesses are currently up against high energy bills, rising food costs, staffing pressures, and the end of pandemic-era financial relief.

What this means for hospitality SMEs

With suppliers and producers likely to pass the cost of the duty increase on to pubs and restaurants, stocking alcohol may be more expensive from February. Passing these costs on to customers is an option, but it likely won’t land well with price-sensitive consumers, especially those who are already moving away from alcohol. 

That said, many pubs are simply not in a position to absorb additional costs without putting further pressure on their bottom line.

While the duty rise alone may not be a major blow, it’s yet another facet of the cumulative burden facing pubs across the UK. With the increase now effectively locked in, pubs may turn their attention towards the Chancellor’s promised support package, particularly the business rates relief, which could have a much larger impact on how pubs fare in 2026.

Discover the ales and ails of hospitality

Planet of the Grapes founder Matt Harris has over 25 years of experience in hospitality. Read his bi-monthly column for Startups now.

Read Whining and Dining