Four out of five British cider makers would be put out of business after a new ruling by the European Commission.
The UK government was formally told last week to change its current excise duty, which means cider makers that produce less than 70 hectolitres (12,000 pints) a year do not have to pay duty.
Changes to the 39-year-old exemption is likely to affect 80 per cent of Britain's 480 cider and perry makers, according to the National Association of Cider Makers (NACM).
In a statement, the European Commission, said it was 'unanimously agreed' that the UK excise duty scheme contravenes EU legislation.
It said: 'EU excise duty rules oblige Member States to levy an excise duty on alcohol and alcoholic beverages.
'There are no provisions which would provide for an exception to the general obligation to levy excise duty in respect of cider and perry made for sale by small domestic producers.'
David Kaspar runs a small apple juice, cider and perry business in Brookthorpe, Gloucestershire, and makes under 170 hectolitres of cider from the 16 acre orchard to sell at markets and a pub.
He told the Observer the tax introduction would be 'another nail in the coffin'.
'The exemption is fundamental to keeping craft cider-making going. If we had to pay an extra £2,500 it would probably stop us risking making wooden-barrel cider and perry because it's too fragile. Mail.
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