Question to the HM Treasury:

To ask the Chancellor of the Exchequer, whether her Department has made an assessment of the potential impact of (a) VAT rates and (b) other fiscal measures on the relative pricing of (i) alcohol-free and (ii) alcoholic drinks.

Alcohol-free drinks are already tax advantaged compared to alcoholic drinks because they do not attract alcohol duty, which is charged only on products containing 1.2% alcohol by volume (ABV) or more. This reflects the Government’s intentions to encourage healthier lifestyle choices.

VAT is a broad-based tax on consumption, and the 20 per cent standard rate applies to most goods and services. VAT is the UK’s third largest tax, forecast to raise £180 billion in 2025/26. Tax breaks reduce the revenue available for vital public services and must represent value for money for the taxpayer. Exceptions to the standard rate have always been limited and balanced against affordability considerations.

Soft drinks and non-alcoholic drinks are subject to the standard 20 per cent rate of VAT. Further information about the VAT treatment of soft drinks and non-alcoholic drinks can be found here: https://www.gov.uk/guidance/food-products-and-vat-notice-70114

The Chancellor makes decisions on tax policy at fiscal events in the context of the overall public finances. The Government welcomes representations from relevant stakeholders in advance of the Budget.