UK alcohol producers to face automatic late payment interest under new duty rules

Starting today, alcohol producers in the United Kingdom who fail to pay their alcohol duty on time will automatically face late payment interest charges. The new rule, effective from September 1, 2025, is part of a broader reform of the alcohol duty system led by His Majesty’s Revenue & Customs (HMRC). The change is designed to encourage prompt payment and ensure fairness among producers.

Under the new regulation, any producer who does not pay their alcohol duty by the 25th day of the month will be subject to interest charges on the overdue amount. This measure aligns alcohol duty with standard practices already in place for other taxes and duties managed by HMRC. The move follows a series of administrative updates that began earlier this year, including changes to alcohol approvals, returns, and payments in February 2025.

The regulatory change is set out in The Alcoholic Products (Repayment Interest Rate) (Alcohol Duty) Regulations 2025 (No. 947), which was prepared by HMRC and laid before the House of Commons. The instrument also introduces a repayment interest mechanism for businesses. In certain circumstances—such as when duty has been overpaid due to an error by HMRC or when a tribunal finds that duty was not owed—businesses will be eligible to receive repayment interest at a rate consistent with other HMRC-administered taxes.

Previously, each type of alcoholic product had its own administrative requirements, and there was no standard provision for repayment interest under the alcohol regime. Repayment interest was rarely applied, and paper-based processes made it difficult to ensure consistency. The new digital service for alcohol duty administration now allows for unified processes and easier application of both late payment and repayment interest.

The legislation applies across the United Kingdom and is intended to bring the alcohol duty system in line with modern tax administration standards. According to HMRC officials, these changes are expected to improve customer experience by compensating businesses fairly when errors occur and by promoting timely payment among all producers.

The policy shift follows three rounds of consultation as part of the government’s Alcohol Duty Review. While interest rates were not specifically discussed during these consultations, HMRC considers the introduction of automatic late payment interest uncontroversial and beneficial for industry fairness.

Guidance for producers has been updated on the government’s website to reflect these changes. The Alcoholic Products Technical Guide now explains both how repayment interest can be claimed in relevant circumstances and how late payment interest will be applied automatically if duties are not paid on time.

A Tax Information and Impact Note covering this regulation will be published on August 6, 2025, as part of a broader package detailing the impacts of the Alcohol Duty Review. HMRC states that there is no significant impact expected on businesses, charities, voluntary bodies, or the public sector beyond improving consistency and fairness in tax administration.

The new rules are part of ongoing efforts to modernize the UK’s alcohol duty system and align it with best practices across other areas of tax collection. Monitoring and evaluation of these changes will continue as part of HMRC’s wider review of alcohol duty reforms.