HMRC takes 61.1% of the price you pay for a bottle of craft gin

*update at bottom of post

Read the write-up of our progressive excise duty campaign here in the Spirits Business.

Earlier this year, the Scotch Whisky Association (SWA) found that 80% of the “purchase price” of a bottle of whisky sold in the UK is composed of Excise Duties and VAT. Thinking that 80% seemed a bit high, we made some similar estimates for the gin industry. 

A survey conducted by the Craft Gin Club (*the survey methodology can be found below) of 111 gins - a mixture of independent and mass produced brands although primarily independent - found that the average Duty and VAT cost on a bottle of gin is 61.1%: not quite 80%, but still a hefty amount. (You can download the survey by clicking on this link).

Logically, bottles that retail for less tend to have a higher percentage of their cost made up of VAT and Excise. For instance, Greenall’s London Dry’s Amazon retail price of £18.61 before shipping was composed of 73.4% VAT and Excise (31% VAT and 42.5% Excise - VAT is over 20% because at each step of the alcohol distribution chain VAT is added). On the other hand, Edinburgh Gin, a gin from an independent distillery at the same 40% ABV as Greenall’s had 59.8% of its £30.28 before-shipping retail price made up of Excise and VAT (33.7% in VAT and 26.1% in Excise). Both examples sell a 70cl bottle.   

The SWA is trying to protect its industry from what it calls “draconian” duties imposed by HMRC, duties which combined with the alcohol duty escalator have led to a 12% decline in Scotch whisky in the past 5 years with a year-on-year 7.3% drop in the first six months of 2014. The Association successfully lobbied to halt the escalator this year, but the UK still maintains the fourth highest excise taxes in Europe making beer, wines and spirits bought in the UK some of most expensive of the continent. 

The SWA has called for a 2% reduction on spirits taxes citing the decline in whisky and spirits sales as a problem for an industry that employs almost 500,000 people. The 2% reduction also stems from the fact that the Association does not view the fact that the tax on units of beer and wine are significantly lower than that on spirits, 48% lower in the case of beer, effectively making a pint of beer 48% cheaper than a shot of spirits.  

We would like to agree with the SWA and take our argument a step further in our support of the burgeoning movement of independent distillers - and for that matter brewers - in the UK by proposing a progressive excise duty based on production volume. High taxes and duties are a serious impediment to new players entering a drinks market dominated by huge corporations. To even the playing field, small producers should be granted lower duties to help offset their higher production costs and broaden their appeal to increasingly price-sensitive consumers. 

61.1% paid to the Crown for a bottle of small-batch gin is simply too much and hurts independent distilleries as well as responsible consumers that like to support small businesses while tasting spirits of excellent quality. 

*Update: It turns out in the US state of Montana where micro-breweries have been booming for some time and with the next logical step being micro-distilleries, the state has actually helped out spirits entrepreneurs by lowering the taxes on micro-distilleries and passing a law that clearly distinguishes between large distilleries and micro-distilleries. Read more here.


Our survey of 111 gins begins with the retail prices and works backwards to the cost of production by estimating the costs of the traditional alcohol distribution system:


In conducting this survey, we were able to see the costs at each step of the distribution chain working backwards from the retail price and including the markup at each step. Markups for each step of the chain vary but common markup percentages are generally considered as follows: 




For the most part, the retail prices we used came from on which a number of wholesalers have their own presence. In this case, technically the Wholesaler to Off-license step should be removed as Amazon and its stores are Wholesalers selling direct to consumer. But when we looked at other drinks sites and supermarkets, we found that for the most part Amazon’s prices are comparable, except when it has special deals as it has at the time of publishing on Hendrick’s (£24.70 with free shipping instead of £31.89 compared to the next cheapest of £26.50 + £4.95 delivery).