Alcohol has played a significant role in British culture and commerce for centuries. In the United Kingdom, the taxation of alcohol is governed by two distinct mechanisms: Value Added Tax (VAT) and alcohol duty. While these two taxes serve different purposes, they both contribute to the final cost of alcoholic products available to consumers. People have always had this question in their mind: “Is VAT Chargeable on Alcohol?”.
Understanding whether Is VAT is chargeable on alcohol is vital for individuals and businesses alike, particularly for those involved in the sale, import, or manufacture of alcoholic beverages.
In this article, we’ll explore the VAT treatment of alcohol, clarify how it differs from alcohol duty, and provide guidance on how to calculate VAT, including the use of our free VAT Calculator.
Is VAT Chargeable on Alcohol in the UK?
Yes, VAT is chargeable on alcohol in the United Kingdom. Most alcoholic beverages sold in the UK are subject to VAT at the standard rate of 20%.
This includes popular drinks such as beer, wine, cider, and spirits. The VAT is charged on the final retail price of the product, which typically already includes alcohol duty.
In practical terms, this means that consumers are paying both VAT and alcohol duty when purchasing alcoholic beverages. For businesses, it’s important to accurately apply and report VAT on all eligible sales.
🔍 Not sure how much VAT applies to your alcohol sales? Use our VAT Calculator to work out the exact amount in seconds.
Alcohol Duty vs VAT: What’s the Difference?
Although both VAT and alcohol duty increase the cost of alcoholic beverages, they function differently:
| Tax Type | What It’s Based On | Who Pays It | Rate Type |
| VAT | Retail sale price | End consumer (via seller) | 20% standard rate |
| Alcohol Duty | Volume and alcohol strength | Manufacturer/importer | Variable rates |
- VAT is a tax on the value added at each stage of production and distribution.
- Alcohol duty is an excise tax, calculated per litre of pure alcohol.
Read Our more Detailed Guides on VAT:
- What is VAT and How VAT Works?
- What is VAT Exempt in the UK: All VAT Exempt Items
- Are Books VAT Exempt in the UK? A Complete Guide for 2025
How Is VAT Calculated on Alcohol?
The VAT calculation for alcohol is straightforward if you know the retail price:
Formula:
VAT = (Price ÷ 100) × VAT Rate
Example:
If a bottle of wine is priced at £12 and is subject to the standard 20% VAT rate:
VAT = (12 ÷ 100) × 20 = £2.40
So, the price excluding VAT is £9.60, and the total amount paid includes £2.40 VAT.
🧮 Use our interactive VAT Calculator to simplify this process instantly.
What About Non-Alcoholic and Low-Alcohol Drinks?
Drinks with less than 1.2% ABV (Alcohol by Volume) are generally not classified as alcoholic for VAT purposes. Many of these products are subject to the reduced VAT rate of 5% or, in some cases, are zero-rated.
Examples include:
- Non-alcoholic beers and ciders (e.g. 0.5% ABV lagers)
- Low-alcohol wines (e.g., under 1.2% ABV)
- Alcohol-free spirits and mocktails
These products have gained popularity among health-conscious consumers and are often more affordable due to the lower tax rate.
🔧 Want to know the VAT rate for a low-alcohol product? Check it using our VAT Calculator.
Are Tobacco and Vaping Products Also Subject to VAT?
Yes. Both tobacco products and vapes (e-cigarettes and vaping liquids) are subject to VAT at the standard rate of 20%.
- Tobacco (cigarettes, cigars, rolling tobacco): 20% VAT + tobacco duty + NHS levy
- Vapes and e-liquids: 20% VAT (no current excise duty, though under review)
It’s essential for retailers to properly apply VAT and, where applicable, account for other levies when selling these items.
VAT Compliance for Alcohol Sellers
If your business sells alcoholic beverages, you must:
- Register for VAT with HMRC if your taxable turnover exceeds the threshold.
- Charge VAT on sales of alcoholic beverages at the correct rate.
- Keep VAT records and submit VAT returns.
- Pay HMRC the VAT you’ve collected.
Failing to do so can result in penalties, interest, and reputational damage. Even small businesses and online sellers should ensure compliance.
🧾 Unsure how much VAT to charge or reclaim? Our VAT Calculator can help you get it right.
Summary: Is VAT Chargeable on Alcohol?
To summarise:
- Yes, VAT is chargeable on most alcoholic beverages at the standard rate of 20%.
- Alcohol is also subject to the alcohol duty, calculated separately.
- Low-alcohol and non-alcoholic drinks may qualify for reduced or zero rates.
- Tobacco and vape products are also taxed at 20% VAT.
- Businesses must ensure they apply VAT correctly and comply with HMRC regulations.
🎯 Want to simplify your VAT calculations? Try our free VAT Calculator today and save time on manual computations.
Final Thoughts
Hope you have got the answer to your question “Is VAT Chargeable on Alcohol?”. Understanding the VAT rules around alcohol is key for consumers looking to make informed decisions and businesses seeking to maintain tax compliance.
With the added complexity of alcohol duty and differing VAT rates for low-alcohol alternatives, staying on top of tax obligations can be a challenge, but the right tools and guidance can make all the difference.
The content provided on TaxCalculatorsUK, including our blog and articles, is for general informational purposes only and does not constitute financial, accounting, or legal advice.
