Grape to Glass - The Majestic Wine Blog » tax

How much do you pay for a bottle of wine?

Majestic — Wed, 24 Aug 2011 16:01:14 +0000

This is a question which has stirred much conversation in the news over the last few weeks. Are the British wine discount junkies? And people who know about wine, are they wine snobs? Mike from Majestic Peterborough reveals the basic facts to how far your money goes on a bottle of wine… How much do you pay for a bottle of wine?

£5? £6? £7? Nope, I’m afraid your wrong, and I’ll tell you why.

Every bottle of wine that is imported into the UK is taxed by HMRC. It is about £2 per bottle (regardless of the value of the wine) and this is just one of the costs involved so lets break it down.

Take one £5 bottle of wine & minus the £2 import tax, then minus shipping costs, minus bottling, minus insurance, minus wages, minus the cost of growing & harvesting the grapes, minus profit for the winemaker etc etc and you could end up buying only 50p worth of wine after costs. Now this is true of all wines so don’t be put off, however, look at it like this. For every pound extra you spend, you’re getting a large increase in the quality of wine. That £6 bottle of wine on the same basis would mean that rather than 50p worth of wine you’re buying £1.50 worth (that’s 3 times as good)!

Obviously there are a few exceptions to the rule, one-off parcels and special deals aside. So next time you’re at Majestic ask a member of staff to find you a wine that is £1 more expensive than what you’d usually spend and I believe 8 out of 10 times it will be significantly better than your usual. I have done this with several of my customers and so far all I’ve heard is good news!!

Let me know how you get on, tweet me @majesticpeterb or email us on pet@majestic.co.uk
Enjoy!

Filed under: Majestic News, Staff Articles

Thanks Alistair

Jeremy Palmer — Tue, 25 Nov 2008 12:29:47 +0000

Speculation about Alistair Darling’s pre-budget decrease in VAT had us all on tenterhooks yesterday morning. However, much to our surprise (no leaks in this direction) he partnered the 2.5% decrease in VAT with an 8% increase in the rate of excise duty on wine. The effect of this rise is to more than offset the decrease in VAT, so there is no saving on drinks to pass on to the customer. To quote the pre-budget report:

The Government will increase the overall duty on alcohol from 1 December so that the total VAT and duty remain broadly unchanged following the reduction in VAT to 15 per cent. The increase in duty will be maintained when the VAT rate is returned to 17.5 per cent in January 2010

While perhaps slightly disappointing from one point of view, it does mean that there is no reason to hold off from stocking up for Christmas. Unlike electrical retailers (which must be pretty quiet this week – would you want to buy a television today when you know it’s likely to be significantly cheaper next week?) we can now concentrate on getting ready for the December rush. Our message – it’s business as usual. Do your bit and get out and shop!

Posted in Wine News

The public mood?

Jeremy Palmer — Mon, 17 Mar 2008 15:38:51 +0000

Since the budget sales have soared, and it’s clear that our competitors are experiencing a similar uplift too. While the increase in duty is significant, and will have a very real effect on wine prices, the size of the uplift has taken us by surprise. Is this a sign that the consumer doesn’t like a wagging finger, and is simply stocking up to avoid paying the new tax more as a protest than anything else? Discuss…

Budget day

Jeremy Palmer — Wed, 12 Mar 2008 08:41:00 +0000

The big news this week will obviously be the amount of extra duty Alistair Darling dares to put on wine. Over the last few years the Chancellor has largely chosen to leave spirits and sparkling wines alone, but has consistently loaded the duty onto still wine. This year however we are expecting a hike on everything as he seeks to mollify the health lobby and refill the government’s coffers.

When you read that there has been x pence (insert the final number) added to a bottle of wine, what won’t be made clear is that we also have to pay VAT on that tax. This means that when a customer buys wine they use their taxed income to pay a tax, with a further value-added tax on top of that! All this means we are holding our breath until 12.30 …

… [Update, 1.45 PM, Wednesday 12th March] The numbers are now available following the Chancellor’s speech. Duty on still wine rises by 14p per bottle (remember this is a rise in the cost price to us and all our competitors, not simply the retail price), 55p on spirits, 4p on a pint of beer and 3p on cider. Not perhaps as bad as we feared, but still punitive.

… [Update, 10.04 AM, Thursday 13th March] Some good news. Although the duty increase applies from midnight on Sunday, Majestic will not be changing any prices until at least 7th April. Despite our best efforts there will have to be some changes thereafter, so our recommendation is to shop now and beat the budget.

The price of wine

Richard Weaver — Tue, 19 Feb 2008 12:15:15 +0000

Saturday’s Times included an interesting article by Jane MacQuitty discussing the current pressures on wine prices: the strength of the euro, drought in Australia and, of course, next month’s budget.

Britain has one of the highest levels of tax on wine in Europe and since you are likely to hear a lot about duty and the price of wine over the coming months it’s worth explaining how the different charges work.

Firstly, excise duty is currently £1.33 per bottle (or £1.71 for sparkling wine). On wines from outside the EU, a further tariff (the Common Customs Tariff) is also payable, which varies between 7p and 10p depending on alcoholic strength (17p for sparkling wine). As retailers, we pay these charges at a flat rate for every bottle we buy, meaning they form a far more significant part of the cost price of cheaper bottles than more expensive bottles.

The next significant tax element is VAT, which works out at about 15% of the retail price. We price wines based on their cost to us, and so effectively VAT is charged on the duty as well!

The effect of this tax regime is that the more you pay for a wine, proportionally less goes to the tax man. When you pay £2.99 for a wine (from Europe), 45p is VAT and £1.33 is duty, a total of £1.78 in taxes – very nearly 60% of the total. Trade up to a £3.99 wine and the taxes total £1.92, or 48% of the total. At £4.99 you’re paying 41% in taxes, at £9.99 it’s 28% and if you splash out on a £19.99 wine “only” 22% is tax.

I’ll hold up my hands here, you’d expect a wine retailer to suggest you pay more for your wine! But remember, the less that goes on tax, the more goes in to the production of the wine itself – very very roughly, the actual cost of the wine in a £3.49 bottle is half that of a £4.99 bottle. Spending just 50p or £1 more can make a significant difference to the quality of the wine you get.