How much does your wine really cost?
The UK government charges £2.23 per bottle of wine in excise duty regardless of the final price of the wine. On top of that, there is 20% VAT which is £0.83 on a £5 bottle of wine.
This is one of the most frequent questions I get asked.
How much of the money you spend on wine is actually spent on the liquid?
If you think about wine and all the costs involved in winemaking, what comes to mind?
Many people will think about the cost of the land, farming, harvesting, making, and finally bottling the wine.
Other people may bring into the discussion the ageing of the wine in oak barrels, the type of closure, designer wine labels, and the cost of advertising.
Tax
All of which are valid and the things that most of us think about when we think of our favourite regions and vineyards or even favourite bottles of wine.
What doesn’t tend to come to mind is what makes up most of the cost of your bottle of wine which sadly is tax.
The UK government charges £2.23 per bottle of wine in excise duty regardless of the final price of the wine. On top of that, there is 20% VAT which is £0.83 on a £5 bottle of wine.
This works out as £3.06 on a £5 bottle of wine which is 61% of the overall price.
Packaging and distribution, along with the margins of importers, distributors, and retailers, all add to the cost.
In the end, the amount you spend on the wine in your bottle is a lot less than you'd like to think.
As you’d expect the more you pay the better wine you will be drinking.
I like to ask people what they would normally spend on a bottle of wine in a restaurant, if you spent that in a store, you’d get a far better wine.
In a standard store, the margins are around 23% whereas in a restaurant they can jump to 72%.
Restaurants and bars have much higher running costs which explain why the prices are higher, but if you translate that to the amount you’re paying for your wine, a £20 wine in a shop could cost up to £80 in a restaurant.
Where to spend that wine money?
Not that I'm encouraging people not to go out and enjoy dining out in a restaurant, bar, or pub, (especially after the past few years) just to think about how much you're willing to spend on your wine and what you get for your money.