For those running pubs, restaurants, hotels or sports arenas, this year’s Budget was more of a warning light than a support package. While some short-term reliefs remain, the overall tone was one of restraint, and a subtle shift in how businesses might need to think about their staff costs, pensions and overheads.
Here, Beavis Morgan’s tax experts Neal Groves and Joanne Holland highlight what matters most for the sector.
Wage Costs Are Rising Again, Substantially
From April 2026:
- The National Living Wage(for those aged 21+) will increase from £12.21 to £12.71 per hour, up 4.1%.
- The rate for 18 to 20-year-oldsrises from £10.00 to £10.85, an 8.5% jump. An overall 65% increase in the last 5 years.
- For hospitality operators, this will trigger an automatic rise in payroll costs on top of the National Insurance increase from the last Budget especially for those relying on flexible, part-time and front-of-house workers.
UK Hospitality has estimated that this single change could add £1.4 billion in costs across the sector. And unlike food, drink or supplier contracts, wage costs can’t be paused or restructured, they’re legal obligations.
No VAT Relief, No Alcohol Duty Freeze
There had been quiet hope from some quarters that the Chancellor might reduce VAT for hospitality or introduce further alcohol duty cuts to ease pressure on pubs. Neither materialised, it is, therefore, expected the rate, which has been linked to the Retail Price Index (RPI) will increase in line with inflation.
Combined with the steady increases in energy bills, supplier costs, and rent reviews, many operators are now looking at a more expensive 2026 than they’d planned.
At Autumn Budget 2024, the government announced the intention to introduce permanently lower business rates multipliers (tax rates) for retail, hospitality and leisure (RHL) properties with rateable values (RVs) under £500,000 from April 2026. These multipliers will replace the temporary RHL business rates relief that was reduced to 40% from 75% in 2025-26. This relief has been rolled over at different rates year-on-year since the pandemic. The new RHL multipliers, will be set 5p below the national multipliers, and although provide certainty for businesses of the relief available it won’t be as generous as the current support.
Potential “Tourist Taxes”
Mayors in England, such as the Mayor of London, will be given powers to introduce a modest surcharge on overnight hotel stays (a tourist tax). This could affect domestic tourism demand in major cities including restaurants, hotels and the hospitality industry in general.
Pension Salary Sacrifice
At present, salary sacrifice allows employers and employees to reduce their NICs (National Insurance Contributions) when pension contributions are made via a pre-tax salary reduction. It’s a tax-efficient way to help staff save more — and helps employers manage costs too.
However, the Budget today confirmed that this relief will be capped at £2,000 per annum from April 2029, with anything in excess of that subject to National Insurance contributions.
This may have the effect of:
- Increasing net employment costs for operators already struggling with wage inflation.
- Make it harder to offer enhanced pensions or staff benefits as a recruitment tool.
- Remove one of the few remaining levers available to businesses to offset rising staff costs.
Final Thought
The 2025 Budget sends a clear message to hospitality businesses: the government isn’t stepping in with sweeping support. There are no VAT breaks, no energy subsidies, and wage costs are heading north.
Whether you run a rural pub, a city restaurant, or a stadium kitchen, the outlook is tighter margins and fewer financial levers. But those who act early, scrutinise their cost base, and plan for resilience will be better placed to adapt.
And if salary sacrifice is next on the chopping block, employers need to start planning now. Because once again, the burden won’t be shared, it will sit squarely on the shoulders of operators.
If you have questions about how these changes affect your business or personal tax position, the tax team at Beavis Morgan is available to support you. Contact Neal Groves and Joanne Holland or email [email protected].
