The Chancellor’s Budget has landed, and the reaction across hospitality has been a mix of cautious relief, frustration, and the usual dose of “wait and see.” Some parts of the industry were hoping for bold moves; others were braced for more pain. The truth — as ever — sits somewhere in the middle.
This was not a Budget that fixes the pressures hospitality faces today. In fact, several of the biggest asks went unanswered. But buried within the detail are long-term structural changes that could reshape the operating landscape over the next few years.
Here’s what actually matters for hospitality — not the spin, not the headlines, but the realities that will affect your business, your team and your take-home pay.
IN SHORT (The TL;DR)
- No VAT cut — the sector’s biggest ask was refused.
- National Insurance thresholds frozen, increasing costs for both employers and workers as wages rise.
- National Living Wage rises to £12.71, pushing labour costs up further.
- Business rates relief drops to 40% in 2025–26, meaning rates increase next year.
- New, permanently lower business-rates multipliers begin in 2026, marking a major long-term win for hospitality and high street venues.
- Full expensing now includes leased assets, making equipment upgrades and refurbishments far more tax-efficient.
- Planning reform promises quicker decisions, easing second sites, takeovers and change-of-use.
- Alcohol duty rises with inflation
- Warehouse rate increases will push some supply-chain costs higher.
- Consumer confidence isn’t booming, but anxiety is easing, supporting small, frequent treats rather than big spending.
- And P.S. Employment law reforms are coming, with major implications for hiring, rotas and zero-hours contracts — Countertalk guidance to follow.
What We Didn’t Get: The Big Losses
No VAT Cut — A Missed Opportunity
Hospitality campaigned loudly and consistently for a sector-specific VAT reduction. Despite compelling evidence that a hospitality VAT reduction would boost the economy, encourage hiring and protect venues, the Chancellor made it clear this was not even under consideration.
No reduction
No temporary relief
No sign of future movement
For an industry built on wafer-thin margins this will feel like the most disappointing part of the Budget: the government recognises the pressures on the sector but declined to pull the one lever that would have provided instant breathing room.
National Insurance: No Reversal, and a New Pressure
There was no U-turn on the NI hike from the previous Budget. Employers stay locked into the higher contribution rates that have already raised labour costs.
Worse, the Chancellor has frozen the thresholds at which NI becomes payable. As wages rise due to inflation, competition and the increase in National Living Wage:
More of each salary becomes NI-liable
Employees lose more to NI
Employers pay more NI on every hour worked
This is an ongoing cost rise that will be felt in every payroll cycle.
What Did Change: The Moves Behind the Budget
A Real Structural Win: Business Rates Reform
Reeves has delivered something genuinely meaningful: from April 2026, hospitality, retail and leisure will move to permanently lower business-rates multipliers. This is a significant long-term win: a more predictable tax environment that recognises the value of the high street.
But before the reform arrives, things get harder.
Why do rates rise in 2025–26?
Because three things collide:
1. The discount drops from 75% to 40%.
This temporary relief has been shielding businesses since the pandemic. A 40% discount, capped at £110k per business (not per site), replaces it.
2. The permanent lower multipliers don’t start until 2026–27.
The help arrives later than the hardship.
3. Higher Rateable Values now hit at full strength.
The 2023 revaluation increased the rateable value of many venues. The old 75% relief softened that impact. The new 40% relief does not. It’s not that the government raised your RV this week — it’s that the cushion underneath it has been removed.
In simple terms:
2025–26: rates up
2026–27: rates fall and stabilise
This is why UKHospitality described the Budget as a “short-term squeeze with long-term structural gain.”
The National Living Wage: A Significant Cost Riser
From April 2025, the NLW increases to £12.71 per hour.
For workers, it’s a welcome and overdue uplift.
For employers, it’s a substantial additional cost — especially when paired with frozen NI thresholds.
The combined effect means the cost of every hour worked rises sharply. Labour forecasting for 2025 needs careful recalibration.
Alcohol Duty and Supplier Costs
Alcohol duty will rise with inflation, which will gradually be reflected in your bar margins.
But the bigger story is upstream. Warehouse and logistics sites — the backbone of food and drink supply chains — will see their business rates increase.
This is a deliberate rebalancing: the Treasury is shifting more of the tax burden onto online-heavy, warehouse-driven business models in an attempt to arrest steady high street decline; but this will directly affect many of your suppliers and producers, who may have to increase cost of goods accordingly. Dry store goods and drinks are likely to be first felt, and over time, this is likely to trickle into:
higher wholesale prices
delivery fees creeping up
stricter minimum order requirements
less flexible drop schedules
The supply chain absorbs change slowly, then passes it on. It won’t hit immediately, but it will hit – and the ‘pint inflation’ headlines that we are likely to see as a result of both of these measures are likely to affect consumer spending and perception more than the real changes seen on the bill.
Corporation Tax Stays Frozen — but Full Expensing Opens a Door
The headline rate of corporation tax remains unchanged, but the extension of full expensing to leased assets is an under-the-radar win for hospitality.
Major capital investments — kitchen equipment, refurbishments, leased fit-outs — can now qualify for a 100% tax write-off in the first year, even if the asset is leased rather than purchased outright. For operators considering upgrades, expansions or long-delayed maintenance, this can create significant cashflow advantages.
It won’t transform margins, but it does make reinvestment more financially viable at a time when many businesses are weighing whether to improve, expand or consolidate.
This means that if a refit, new extraction system, equipment upgrade or second-site fit-out is already on your horizon, there is now a strong argument for bringing that spend forward into the full-expensing window.
Planning Reform — Smoother Paths for Hospitality Growth
The Government has also committed to speeding up planning decisions and easing the process for commercial-to-hospitality conversions. This won’t make new sites appear overnight, but it does chip away at two problems: long, unpredictable planning timelines, and empty high streets.
A quicker, clearer planning environment reduces friction for:
Opening second sites
Taking over closed or distressed units
Converting underused retail or office spaces
Repositioning urban spaces for food and drink
In a market where agility is increasingly a competitive advantage, this shift favours independent operators who can move quickly when opportunities arise.
Consumer Confidence: Who Will Spend, Who Will Hold Back
Confidence and Caution in Equal Measure
There’s no meaningful boost to disposable income in this Budget, but there is a slow return of predictability, and in hospitality confidence often matters more than cash. Consumers won’t feel wealthier in 2025, but people don’t always need to feel richer to go out; they just need to feel less worried.
Inflation is easing, mortgage panic has softened, and rents may begin to rise more slowly as housing supply measures take effect. The 1p employee NI cut remains in place. And crucially, this Budget didn’t introduce any new shocks for typical earners. The result is not more money in pockets, but a small reduction in day-to-day financial anxiety, which might be enough to influence small discretionary treats like coffees, lunches and occasional dinners out. Hospitality thrives when people feel safe spending small amounts regularly, even if major discretionary spending remains subdued.
Renters
Renters have been hit hardest in the last three years. While the Budget doesn’t directly lower rents, the government’s push to increase housing supply could begin to slow rental inflation over the coming year. Even a hint of stability helps renters feel more in control — and therefore more willing to spend.
HENRYs (High Earners, Not Rich Yet)
HENRYs — dual-income households earning £70k–£130k — emerge from this Budget as one of the least confident groups - which matters, because they are a crucial consumer sector for much of our industry.
Frozen tax thresholds are pulling them into higher tax bands through fiscal drag, where take-home pay shrinks simply because wages rise but tax bands don’t. More HENRYs are being pulled into the £100–£125k marginal rate, where the personal allowance tapers and the effective tax rate hits 60%.
Layer that with mortgage resets and childcare costs as free hours disappear post-£100k, and this group — despite high incomes — is tightening discretionary spend. They won't stop going out, but they might trade down: fewer midweek meals, less premium wine, fewer spontaneous plans.
£100k+ earners
For those earning above £100k, fiscal drag (see above) is particularly punishing. More people are losing part of their personal allowance and slipping into higher tax brackets without any real sense of a “pay rise.” They remain active spenders, but more selective and value-conscious.
How This All Lands: The Real-World Impact on Hospitality
2025 is shaping up to be another year of tight margins. Wage costs will rise. Employer NI will rise. Supplier prices will edge upward. VAT stays frozen. And business-rates relief shrinks before the new system arrives. This is not a “good news” Budget. But there are signs of a more workable — and slightly more confident — landscape ahead.
Consumer spending power isn’t increasing, but financial anxiety is beginning to ease: inflation is stabilising, mortgage panic has softened, renters may see slower price rises, and no new personal tax shocks were introduced. This won’t create a surge in demand, but it may support a modest return to small, everyday treats — the kind of spending that underpins daytime and neighbourhood hospitality.
Alongside this, several changes point to a more functional operating environment. Extending full expensing to leased assets makes investment in equipment, refurbishments and fit-outs far more tax-efficient — a rare chance for operators to upgrade without crippling cashflow. And proposed planning reforms promise faster decisions and easier change-of-use, reducing friction for second sites, takeovers and new concepts - great for boosting the flagging high-street.
Combined with the structural business-rates reform arriving in 2026, these shifts hint at something hospitality hasn’t had in years: a more stable, predictable environment in which independents can plan, invest and grow.
The optimism isn’t about the pressures of 2025 — it’s about the foundations finally beginning to move in the right direction.
Making This Budget Work for You
Plan with precision, not hope
With rising NLW and frozen NI thresholds, every hour worked becomes more expensive. Now is the time to revisit labour forecasts, rota patterns and training plans to ensure every shift is productive and fair.
Strengthen your team culture
As staffing costs rise, retention becomes the best cost-control tool you have. Fair rotas, clear communication, progression pathways and staff meals aren’t “nice extras” — they’re economic strategy.
Talk to your suppliers now, not later
Ask how changes to warehouse business rates will affect pricing or delivery schedules. Understanding this early lets you adjust ordering, menus and stock management before you’re forced to.
Shape your offer around consumer confidence
Think about how to adjust your offering to accommodate smaller, more frequent visits, with accessible ways for people to enjoy your venue which will all add up on your bottom line; or for larger spends focus on clear value and generous hospitality.
Use full expensing to your advantage
With full expensing now extended to leased assets, 2025–26 is a more tax-efficient window to invest in equipment, refurbishments or overdue upgrades. If you’re already considering new kit or a refresh, bringing that spend forward could significantly improve cashflow.
Move quickly on planning opportunities
With planning decisions set to speed up, independents who act early will have an edge. Keep a close eye on vacant sites, distressed units or change-of-use possibilities in your area — a smoother planning process makes second sites, takeovers and concept shifts more achievable.
Get ahead of 2026
If you’re weighing a refurb, second site or lease renegotiation, the future business-rates environment should shape your timing. Lower, permanent multipliers from 2026 will materially change the economics of operating — and landlords are already factoring that in.
THE FINAL WORD
This Budget won’t take the pressure off hospitality overnight, but it does mark the beginning of a more stable, more predictable landscape. As ever, Countertalk will be here to help you navigate what comes next.
Additionally there are major employment law reforms coming up which will reshape how our sector hires, trains and supports its people. Stay tuned for our guidance on those changes.
As ever, please reach out to us with your experiences, questions or concerns. The more we hear from you, the better we can advocate for the realities of running and working in hospitality today.
