As the countdown begins to the UK Budget for 2026, the hospitality industry finds itself at a pivotal moment. After years of surging costs, Britain’s cafes, pubs, restaurants and hotels are watching closely for government action. With whispers of business rates reform, no imminent VAT cuts, and the spectre of higher labour costs still looming large, the stakes are high.
While we can’t say for sure what will be published in Budget 2026, here is what we may be able to expect:
National Living Wage
There is speculation that the NLW will rise to £12.70 an hour.
Rachel Reeves has been warned that this may push hospitality businesses over the edge: UKHospitality have said: “Businesses are already struggling to absorb all the costs from last year, two successive years of significant minimum wage rises and crucially NICs [national insurance contributions]. We have seen 100,000 jobs lost as a direct result of that.”
Salary Sacrifice Schemes
Salary sacrifice schemes allow workers to ‘sacrifice’ part of their salary in exchange for higher pension contributions. This is a symbiotic deal as both the employee and employer saves income tax and NICs on these amounts, which was a welcome relief after this april’s rise in NIC rates for businesses.
However, the budget for 2026 may see some limitations to this, which many are speculating after the HMRC published research into how employers might react should the rules be changed. It is important to have a backup plan in place, should this situation arise.
