Autumn Budget 2025:

By alisonfraser|Nov 28, 2025|11:00 am GMT

I don’t remember a run-up to a Budget more frenetic than this one. It’s standard for the Government to trial different proposals in the press, but never have I seen so many proposals (not all from the Government), leaks, speculations, and rollbacks in the weeks running up to the Budget. So it was probably fitting that this was the first Budget in history to be leaked in its entirety before the Chancellor even got to the dispatch box.

Regardless of its delivery, yesterday’s Budget was substantial and is forecast to raise £26.1bn by 2029-2030. The OBR revised growth estimates for this year up to 1.5%, but downgraded those for 2026-2029. It also forecast that, by 2030-31, the UK will have a record-high tax burden of 38%.

For hospitality operators, it was a story of increased costs. As UKHospitality’s Kate Nicholls pointed out in response, “Wage rises, holiday taxes and monumental increases in rateable values have put even further pressure on hospitality businesses, as a result of this Budget.”

Though many operators will welcome the additional clarity around Business Rates and the new, permanent relief introduced yesterday, there are plenty of updates that will concern the sector. Here, we summarise the headlines from the 2025 Autumn Budget and take a look at how this will impact the UK hospitality sector.

National Minimum Wage

April next year will see another increase in the hourly rate for younger workers as the Government seeks to close the minimum wage gap between age groups. The hourly rate for over 21s will increase by 4.1% to £12.71, minimum wage for those aged 18-20 will rise 8.5% to £10.85, and under 18s and apprentices will get £8 an hour, a 6% increase.

Chair of the industry trade body UKHospitality, Kate Nicholls, noted that the rise for under 21s was higher than expected and highlighted that, “Increases to minimum wage rates are yet another cost for hospitality businesses to balance, at a time when they are already being taxed out.”

For operators, the increase in hourly rates is only half the story. A rise in the national minimum wage (NMW) will also increase the amount they need to pay towards Employer NI, employer pension costs, and holiday accrual.

Under these new changes, the cost of hiring a 21-year-old, full-time on NMW will increase by £1352.52 a year. That’s down to a £20 weekly pay increase, a £3 weekly increase in employer National Insurance Contributions (NIC), £2.41 extra in holiday accrual, and £0.60 in additional pension contributions a week. Hiring a 19-year-old on NMW will cost an additional £39.12 per week, or £2034.24 a year, in pay, holiday accrual, and pension contributions, though there’s no employer NI to pay for them until their pay crosses the secondary threshold for contributions.

The impact will inevitably be fewer jobs for younger workers, who are now significantly more expensive to employ.

Income Tax

The fiscal rules mean day-to-day spending must be funded by taxes rather than borrowing. The Chancellor’s first budget was hampered by a manifesto promise not to increase taxes for ‘working people’ and, while there’s been some debate that she would indeed increase income tax, this wasn’t borne out today.

Instead, the Chancellor has frozen income tax thresholds for a further three years from 2028. It might seem counterproductive for a Government that needs to raise capital, but it will mean the Treasury benefits from a process called ‘fiscal drag’. As wages go up, more people will be dragged into higher tax brackets. The move is expected to generate an additional £8.3bn annually by 2029/2030.

For hospitality operators, the implications are mixed. Hospitality staff who aren’t dragged into a new tax bracket by today’s NMW changes may find themselves in a higher tax bracket in the future as pay reviews roll around and wages increase with inflation. This increased tax burden on some staff may create upward pressure on pay at a time when labour costs are already tight.

Salary Sacrifice

One of the biggest tax overhauls in yesterday’s Budget was the change to salary sacrifice. Salary sacrifice allows workers to swap a portion of their income, before tax and national insurance, for employer-provided benefits, reducing the total income tax and national insurance contributions they pay.

The Chancellor announced a £2,000 NI-efficient threshold, meaning anyone who contributes over that amount will be subject to national insurance. This will come into force from April 2029, and the OBR estimates it will raise around £4.7bn in 2029/2030.

For operators with staff paying more than the minimum contribution, this will result in a larger NI bill. In practical terms, it will also likely mean many staff choose to pay less into their pension, and could lead employers to reconsider the pension contributions they offer as well.

Electric Vehicle pay-per-mile

A new tax is under consideration that will charge electric vehicle owners on a per mile basis. This tax is to ensure electric vehicle owners contribute towards the upkeep of public roads. Any hospitality owners currently offering a salary sacrifice scheme for electric vehicle purchase may see uptake reduced, resulting in more wages being subject to national insurance contributions. Another potential impact is an increase in costs for any operators running a fleet of electric vehicles.

Apprenticeships

The Government introduced £720m to help support apprenticeships, fully funding training for under-25s for small and medium-sized businesses. This is good news for hospitality, which has a younger workforce than average, and the initiative could help operators to train and develop younger talent at a much reduced rate.

Alcohol Duties

The Chancellor’s hesitance to raise income tax means alcohol duties were primed for an increase, and we were widely expecting a rise in line with inflation. The Budget confirmed the duty will be uprated with RPI, currently at 4.3%, from 1 February 2026. There was no direct mention of draught relief.

Business Rates

Current business rates are due to expire next year, and we were expecting confirmation of the 2026-2027 rates yesterday.

The Chancellor confirmed a reduction in rates for 750,000 hospitality, leisure, and retail properties with a rateable value below £500,000. This will be funded by a higher multiplier on commercial properties worth over £500,000 – including warehouses used by e-commerce giants like Amazon.

Full details of the Business Rate changes were published after the budget, and provide more clarity to operators – though there are still questions to be answered, among them the actual values of the multipliers, which need to be re-evaluated for 2026.

However, the new rates will remove temporary relief and introduce a permanent multiplier for retail, hospitality, and leisure (RHL) qualifying premises, while levelling the playing field with online retailers. However, Fourth’s possible projections based on the currently available multipliers suggest a mixed bag for hospitality operators.

A small pub, for example, that is RHL-qualifying with a rateable value of £30,000 would have been paying around £16,200 with no relief, and then £4000 for years when RHL relief was at 75%, and £8000 for the years it was at 50%.

Under the new system, the same pub will pay £14,700, which is a reduction on pre-pandemic costs.

A mid-sized restaurant fares a little better. Assuming it is RHL-qualifying and has a rateable value of £130,000. It would have paid £70,200 before temporary relief. With the new, reduced multiplier for RHL, the rate due is £65,650 per year.

By contrast, a large, city-centre pub or venue with a rateable value of £520,000 (i.e., above the £500k threshold) can expect to pay more under the new system. Where previously they’d have paid £280,800 a year in business rates – temporary relief has always been limited or phased out for larger properties – this business can now expect to pay £291,200.

The real win here isn’t the rates per se, it’s the stability these permanent multipliers offer businesses. They will end the debate year-to-year about how much the relief might be, and give operators certainty over what they’re paying.

UKHospitality’s Chair, Kate Nicholls, was unimpressed with the update and said in response: “A 5p business rates discount is simply not enough to offset these costs and redress the damage [this Budget] will do to business viability and job opportunities.”

VAT

A reduction in VAT (Value Added Tax) for hospitality is always a topic for speculation ahead of any Budget, and the industry has long lobbied for lower VAT rates for pubs and restaurants. Such a reduction was always unlikely – it would cost the Treasury dearly – so it was no surprise when the Chancellor confirmed that the headline rate would stay at 20%.

Soft Drinks Levy

Initially introduced in April 2018, the soft-drinks industry levy is a tax on manufacturers and retailers of high-sugar soft drinks intended to encourage companies to reduce sugar content or raise prices on products that exceed set sugar thresholds.

The Health Secretary announced earlier this week that the levy would be extended to include more pre-packaged products, including milkshakes, flavoured milks, and some plant-based drinks. The amount of sugar necessary to trigger the tax will also be reduced.

Critically, this only applies to drinks sold through retail channels. Those sold through cafes, restaurants, pubs, and other hospitality venues are exempt, meaning the expanded levy will not impact hospitality operators.

National Licensing Policy

This Budget expressed support for the National Licensing Policy framework, a Government commitment to modernise the system and support business growth. Based on the recent Licensing taskforce consultations that closed in November, it encourages licensing authorities to take a measured, pro-growth approach and make it easier for operators to innovate and invest.

Visitor Levy

The Government acknowledged the importance of devolved authorities and gave city Mayors the option to introduce a levy on overnight stays in their cities, subject to consultation.

It’s far too early to determine what impact this might have on hospitality operators in these cities. UKHospitality’s Allen Simpson has warned that these funds are unlikely to be reinvested in tourism and points out that countries with tourism taxes generally have lower VAT rates.

However, the London Mayor’s team has estimated the city could raise an additional £200m with the measure, while Manchester has already shown that additional revenue from such levies can be successfully reinvested to drive tourism and infrastructure development.

Building Resilience

The delivery of yesterday’s Budget was chaotic, and as the dust settles, operators will be taking stock of changes that yet again increase employment costs. The additional uncertainty around Business Rates will be playing on many, though the promise of reduced rates for smaller properties could offer some relief once more details are available.

As a sector, hospitality has proven itself incredibly resilient and, with economic growth forecasts slowing and the Government’s growth agenda seemingly off the table, now is the time for the industry to prove once again that it can innovate, adapt, and survive.