Rachel Reeves has announced her budget today, making some big promises to reduce borrowing and kerb inflation without a return to austerity measures. Her goal is to rebuild the UK economy and lower the cost of living.
Here’s the key points from the budget for hospitality owners:
Minimum Wage
From April 2026, minimum wage for over 21s will rise to £12.71/hr. For workers aged 18-20, minimum wage will rise by 85p to £10.85, and for under-18s and apprentices it will rise by 55p an hour to £8.
UKHospitality has warned that this increase will be reflected in prices, with the costs being passed onto customers.The changes are projected to cost the industry an extra £1.4b.
Extension of Tax Threshold Freeze
Reeves has today announced that the freeze on tax thresholds, which was introduced by the previous government, will be extended for an additional three years. This means that until 2031, tax bands will stay the same even as wages rise. Reeves says that she understands this will push many workers into a higher tax bracket, but says she is asking for ‘everyone to contribute’.
As it stands, workers have a personal allowance of £12,750 that’s not subject to tax. Anyone earning below £50,270 is subject to 20% income tax, with a higher rate of 40% for anything above this.
VAT Rate
The current hospitality VAT rate of 20% will remain in place, with no reduction. This rate towers above the current European average of 12.8% for hospitality. UKHospitality have long called for a reduction in VAT to help businesses keep up with rising costs, however Reeves has decided to keep the rate as it stands.
NIC rates will also remain untouched, with NIC for employers currently standing at 15%. A reduction in NIC rates has also been requeested by UKHospitality, but to no avail.
Business Rates
In her budget, the chancellor reconfirmed plans to introduce permanently lower tax rates for retail, hospitality and leisure properties worth less than £500,000. This will be paid for by a higher multiplier on properties worth over £500,000.
