We’re now one week into 2026, which means the budget changes for 2026 have started to kick in. For hospitality, November’s budget provided a lot of disappointment, with costs set to multiply throughout the year. Here are the changes you need to be aware of now that 2026 is under way.
Higher Living Wage
From April of this year, the NLW (National Living Wage) will increase to £12.71 an hour for workers aged 21 and over. For staff aged 18-20, the NLW will increase to £10.85/hr, and for those under 18 (and apprentices) it will rise to £8/hr.
This will significantly add to payroll costs, with UKHospitality estimating that the increase will ad £1.4bn in extra annual costs for the sector, and projecting that this will lead to businesses either raising prices or cutting staff to reduce costs.
Business Rates
From April 1, 2026, Reeves has announced that the temporary Retail, Hospitality, and Leisure (RHL) business rates relief will be replaced by new, permanently lower RHL multipliers for eligible properties in England with a rateable value (RV) below £500,000. The goal is for this to be paid for by higher multipliers for larger businesses, and those with an RV above £500,000.
This has received severe backlash recently, with operators of large pub and restaurant chains arguing that it will cut into their margins and pile on to existing business costs.
Other Cost Pressures
Despite hope, the VAT rate for the hospitality industry has not been reduced and will remain at 20% – towering over the EU average of 9%.
Tax thresholds will also remain frozen for another 5 years, pushing more workers into higher tax brackets. This will affect costs for both employees and employers.
Tourist tax is also looming over the heads of hospitality operators, with UK mayors being given the powers to decide on whether or not to implement additional tax/rates for overnight stays in hotels, hostels and b&bs.
