Rishi Sunak said this will include cutting the price of a pint in a pub by 3p as part of a new lower duty rate.
The Chancellor told MPs in his Budget speech that the planned increase in duty on spirits such as Scotch whisky, wine, cider and beer will be cancelled from midnight.
He said this alone will represent a tax cut worth £3 billion.
Mr Sunak criticised the current system of alcohol taxes as outdated and too complicated, as he revealed a raft of changes.
“We are taking advantage of leaving the EU to announce the most radical simplification of alcohol duties for over 140 years,” he said.
“We’re taking five steps today to create a system that is simpler, fairer, and healthier.”
The Chancellor said changes to duties will see taxes increase on some higher strength drinks, such as some red wine and “white ciders”.
However, consumers of some lower strength products, such as rose, fruit ciders, liqueurs, and lower strength beers and wines, “will pay less”, he said.
Mr Sunak also specifically targeted the “irrational” duty level of 28% of sparkling wine, saying that the tax will be reduced on champagne, prosecco and other sparkling wines which are typically lower strength.
Pubs and bars will also benefit from a new “draught relief” which will cut duty on beer and cider sold in pubs by the most since 1923, the Treasury said.
A new Small Producer Relief was also announced, extending a similar tax subsidy to Small Brewers Relief across to those making cider and other alcoholic drinks of less than 8.5 ABV across the UK.
Miles Beale, chief executive of the Wine & Spirit Trade Association, said: “The decision to freeze wine and spirit duty comes as a huge relief to British businesses, the hospitality sector – including its supply chain – and consumers, giving everyone a much-needed break to help them recover from the pandemic.
“Chancellor Rishi Sunak should be commended for listening to our calls for support and understanding that punishing tax hikes are not the best way to reinvigorate the sector.
“By offering continued respite to the UK wine and spirit sector his actions will help save jobs and – in time – replenish revenues to the Treasury through growth in our potential-filled sector.”
Emma McClarkin, chief executive of the British Beer & Pub Association, said: “Pubs, brewers and beer drinkers will be toasting the Chancellor today for a range of business-boosting measures.
“Pub goers will also be toasting the Chancellor today for announcing a 5% lower duty rate on draught beer worth £62 million.
“This is great news for our local pubs and recognises the crucial role they play in our economy and society.
“However, the overall beer duty rate in the UK remains amongst the highest in Europe.
“It is vital for Britain’s brewers, a world class homegrown manufacturing success story, that the overall beer duty burden is reduced – not just duty on draught beer in pubs.”