Excise duty is the tax HMRC charges on goods produced, imported or released for consumption in the UK that are considered harmful, energy-intensive or tightly regulated. The three big categories are alcohol, tobacco and energy products — including road fuel and the electricity and gas covered by the Climate Change Levy. Unlike import duty, which is calculated from a product’s commodity code, customs value and origin, excise duty is a domestic tax applied after goods have cleared customs. It is usually collected at the point of manufacture, importation or removal from an excise warehouse, and standard-rate VAT at 20% is charged on top of the duty-inclusive price.
For importers and logistics managers, the practical point is this: excise goods arriving in the UK need more than a standard customs declaration. They need warehouse approval, movement controls and — for alcohol and tobacco — an electronic Administrative Reference Code generated through the Excise Movement and Control System. Anyone moving these goods needs an EORI number for the customs side, but the excise side also brings its own registrations, records and duty-suspension rules. Getting the rate right matters because the sums are large. HMRC Alcohol Duty, fuel duty and tobacco duty together raise tens of billions of pounds for the Treasury each year.
Alcohol Duty after the 2023 reform
The UK Alcohol Duty system changed fundamentally on 1 August 2023. Before the reform, different drinks were taxed under different regimes — beer by the hectolitre per degree of alcohol, wine by volume, spirits by litre of pure alcohol. Since the reform, Alcohol Duty is calculated per litre of pure alcohol, with the rate depending on the product type and its alcohol by volume band.
This simplifies comparisons but it does not make all products cheaper. A 5% ABV lager and a 12% ABV wine both start from the same principle — litres of pure alcohol multiplied by the band rate — but the actual duty paid depends on where the ABV falls in HMRC’s bands. As of 1 February 2026, the standard Alcohol Duty rates are set out on GOV.UK and are shown below.
Standard Alcohol Duty rates (from 1 February 2026)
| Product | ABV band | Rate per litre of pure alcohol |
|---|---|---|
| Beer | 1.3% to 3.4% | £9.96 |
| Beer | 3.5% to 8.4% | £22.58 |
| Beer | 8.5% to 22% | £30.62 |
| Still cider | 1.3% to 3.4% | £9.96 |
| Still cider | 3.5% to 8.4% | £10.39 |
| Sparkling cider | 3.5% to 5.5% | £10.39 |
| Sparkling cider | 5.6% to 8.4% | £26.61 |
| Spirits and spirit-based products | 3.5% to 8.4% | £26.61 |
| Wine, spirits and other fermented products | 8.5% to 22% | £30.62 |
| All products | Stronger than 22% | £33.99 |
The “other fermented products” category covers drinks such as fruit cider, mead and perry that are not beer, cider or wine. HMRC publishes the full set of rates on its Alcohol Duty guidance page.
Worked examples
A pack of 18 cans of 5% ABV lager at 500ml per can contains 9 litres of liquid. Five per cent of 9 litres is 0.45 litres of pure alcohol. At the 3.5% to 8.4% beer rate of £22.58 per litre of pure alcohol, the duty is £10.16.
A 1-litre bottle of 40% ABV vodka contains 0.4 litres of pure alcohol. At the stronger-than-22% rate of £33.99 per litre of pure alcohol, the duty is £13.60.
A 75cl bottle of 13% ABV still wine contains 0.0975 litres of pure alcohol. At the 8.5% to 22% rate of £30.62, the duty is £2.99. That is why a £6 bottle of wine can carry nearly £3 in excise duty before VAT is added.
Draught relief
Pubs, bars and restaurants receive a reduced rate on draught products below 8.5% ABV. The relief is intended to support the hospitality sector. From 1 February 2026, the draught rates are:
| Product | ABV band | Draught rate per litre of pure alcohol |
|---|---|---|
| All products | 1.3% to less than 3.5% | £8.58 |
| Still cider | 3.5% to less than 8.5% | £8.95 |
| Sparkling cider | 3.5% to 5.5% | £8.95 |
| Sparkling cider | over 5.5% to less than 8.5% | £19.45 |
| Beer, spirits, wine and other fermented products | 3.5% to less than 8.5% | £19.45 |
HMRC’s own example for draught cider gives roughly 24p duty on a pint of 5% ABV still cider, which shows how sharply the rate drops for on-trade products.
Small Producer Relief and registration
Small producers making less than 4,500 hectolitres of pure alcohol per year can claim Small Producer Relief, which replaces the old Small Brewers Relief. The relief applies to products below 8.5% ABV and is calculated on a sliding scale. Any business that produces alcoholic products above 1.2% ABV in the UK must apply for HMRC approval before production begins and must then register for the “Manage your Alcohol Duty” online service to submit returns and payments.
Tobacco Duty
Tobacco Duty uses either a specific duty per quantity, an ad valorem percentage of the retail price, or both. Cigarettes carry the heaviest burden because they are taxed twice: 16.5% of the retail price plus a flat £7.07 per packet of 20.
The current Tobacco Duty rates, published by HMRC on the GOV.UK alcohol and tobacco page, are:
| Product | Rate |
|---|---|
| Cigarettes | 16.5% of retail price + £7.07 per pack of 20 |
| Cigars | £4.41 per 10g cigar |
| Hand-rolling tobacco | £15.11 per 30g packet |
| Other smoking and chewing tobacco | £5.82 per 30g packet |
| Tobacco for heating | £2.18 per typical packet of 20 sticks |
“Tobacco for heating” covers products designed for heated-tobacco devices. The lower rate reflects that these products do not burn tobacco in the same way as cigarettes, but they are still subject to excise control. HMRC requires fiscal marks on tobacco packaging and closely controls anti-smuggling measures, which is why tobacco imports attract additional checks at the border.
Fuel Duty (Hydrocarbon Oils Duty)
Fuel duty — more formally Hydrocarbon Oils Duty — is charged on petrol, diesel and other liquid fuels used in vehicles and machinery. As of August 2026, the headline rate for standard unleaded petrol and diesel is 52.95 pence per litre, according to the GOV.UK fuel duty rates publication. This includes the temporary 5 pence per litre cut introduced in March 2022, which has been extended until 31 August 2026.
The planned reversal is staged:
| Date | Standard petrol and diesel rate |
|---|---|
| To 31 August 2026 | 52.95p per litre |
| From 1 September 2026 | 53.95p per litre |
| From 1 December 2026 | 55.95p per litre |
| From 1 March 2027 | 57.95p per litre |
These figures restore the rates to roughly where they were before the March 2022 cut. The government has also cancelled the planned inflation-linked increase for 2026-27. Bioethanol and biodiesel for road use follow the same rates as unleaded petrol and diesel.
Rebated fuels, commonly known as red diesel, are taxed at much lower rates but their permitted uses were restricted from April 2022. Most sectors, including construction, mining and haulage for refrigeration, can no longer use red diesel for propulsion and must use fully taxed diesel instead. Agriculture, forestry, fishing, rail and non-commercial heating are among the sectors that retain the rebate.
Climate Change Levy
The Climate Change Levy is an energy tax paid by business and agricultural users of electricity, gas, solid fuel and LPG. It is not the same as fuel duty — CCL applies to the energy itself, while fuel duty applies to liquid road fuels. Domestic consumers and charities using energy for non-business purposes are exempt.
From 1 April 2026, the main CCL rates published by HMRC are:
| Taxable commodity | Rate from 1 April 2026 |
|---|---|
| Electricity | £0.00801 per kWh |
| Gas | £0.00801 per kWh |
| LPG | £0.02175 per kg |
| Other taxable commodities (coal, coke, etc.) | £0.06264 per kg |
From 1 April 2027, the electricity and gas rates rise to £0.00827 per kWh, LPG stays at £0.02175 per kg, and other taxable commodities rise to £0.06468 per kg.
Climate Change Agreements and Carbon Price Support
Energy-intensive businesses that hold a Climate Change Agreement receive a discount. From 1 April 2026, CCA holders get a 92% discount on electricity CCL, an 89% discount on gas CCL, a 77% discount on LPG CCL and an 89% discount on other taxable commodities.
A separate Carbon Price Support rate applies to electricity generating stations and combined heat and power operators. CPS rates are frozen from 1 April 2016 to 31 March 2028 at £0.00331 per kWh for gas, £0.05280 per kg for LPG, and £1.54790 per gigajoule for coal and other solid fossil fuels. Northern Ireland generating stations are exempt from CPS.
Importing, warehousing and duty suspension
Excise goods can be held in an approved excise warehouse without duty being paid. Duty becomes payable only when the goods are removed to “home use” — released for consumption in the UK. Movements between warehouses, or to export, can remain duty-suspended.
For alcohol and tobacco, duty-suspended movements within the UK must travel under the Excise Movement and Control System. The system generates an electronic Administrative Reference Code prefixed GB for Great Britain movements and XI for Northern Ireland movements. The ARC must accompany the goods and be producible to HMRC or Border Force on request. EMCS validates the movement before the goods leave the consignor.
Energy products do not use EMCS for intra-UK movements. They move under form W8 or a commercial equivalent. Anyone receiving excise goods into a warehouse must be an authorised warehousekeeper or registered consignee, and HMRC can auto-close a warehouse that has been inactive for 18 months.
This is where excise duty intersects with standard customs work. A container of wine arriving at a UK port may clear customs duty and VAT through the Customs Declaration Service, but the alcohol itself can be transferred in bond to an excise warehouse without Alcohol Duty being paid. The duty point arrives later, when the wine leaves the warehouse for the UK market.
Key Takeaways
- Excise duty is a domestic tax on alcohol, tobacco and energy products, separate from import duty and charged on top of it.
- Alcohol Duty has been based on litres of pure alcohol since the August 2023 reform, with rates varying by product type and ABV band.
- Cigarettes are taxed at 16.5% of retail price plus £7.07 per pack of 20; other tobacco products carry specific duties per packet, cigar or stick.
- Road fuel duty is 52.95p per litre until 31 August 2026, then rises in stages to 57.95p per litre by 1 March 2027.
- The Climate Change Levy applies to business electricity, gas, LPG and solid fuels, with CCA discounts of up to 92% for eligible energy-intensive users.
- Alcohol and tobacco movements in duty suspension must use EMCS with an ARC; energy products use form W8 for intra-UK movements.
Frequently Asked Questions
How is excise duty different from customs duty? Customs duty is calculated from the commodity code, customs value and origin of imported goods. Excise duty is a domestic tax charged on specific categories — alcohol, tobacco and energy products — regardless of where they were produced. Imported excise goods may attract both taxes.
Do I pay VAT on excise duty? Yes. VAT at 20% is charged on the total price including excise duty. This means excise duty is itself subject to VAT, so a product’s final price includes the product cost, the excise duty and then VAT on both.
Who needs to register for Alcohol Duty? Any business that produces alcoholic products above 1.2% ABV in the UK must be approved by HMRC before production starts. Once approved, the business must register for and use HMRC’s “Manage your Alcohol Duty” service to make returns and payments.
What is an excise warehouse? An excise warehouse is an approved premises where excise goods can be stored without duty being paid. Duty becomes payable only when goods are removed to home use. Movements into and out of warehouses for alcohol and tobacco must be tracked through EMCS.
Can imported excise goods stay in duty suspension? Yes. Imported alcohol and tobacco can be transferred in bond from the port of entry to an excise warehouse. The goods remain duty-suspended until they are released for consumption in the UK, at which point the relevant excise duty must be paid.