Budget Offers Hospitality Businesses Relief but No VAT Cut

Hospitality businesses have welcomed changes to business rates in the latest UK Budget, but disappointment remains over the Government’s decision not to reduce VAT.

Chancellor John Healey announced that the threshold for Small Business Rates Relief for eligible retail, hospitality and leisure properties in England will increase from £12,000 to £18,000 from April 2027. The Government estimates that the change will bring an additional 70,000 businesses into the category of businesses paying no business rates. The measure is intended to ease property costs for smaller operators facing continued financial pressure.

The Budget also includes a two-year real-terms freeze on business rates bills for English hospitality and leisure properties. This is intended to provide greater certainty for businesses planning their finances and managing overheads. However, the precise benefit will depend on individual properties, their rateable values and eligibility for the available relief. Businesses outside the qualifying categories may not receive the same level of support.

Despite the changes, the hospitality sector’s main demand for a reduction in VAT has not been met. Campaigners have called for the standard hospitality VAT rate to fall from 20% to 10%, arguing that a lower rate could help businesses manage costs, protect jobs and invest in their premises. The proposal was a major focus of industry campaigning ahead of the Budget, but no reduction was announced.

The campaign, known as #VATsTheProblem, has attracted more than 400,000 signatures from people supporting a lower VAT rate for hospitality. Industry representatives argue that the current tax burden limits the money available for investment and makes it harder for venues to absorb increases in wages, energy and food costs. They have urged the Government to continue discussions about wider tax reform for the sector.

UKHospitality chief executive Allen Simpson described the business rates changes as meaningful progress, while making clear that further action is needed. The organisation has argued that hospitality businesses carry a substantial tax burden relative to their earnings. It says additional reform could help operators invest, create employment opportunities for young people and support growth across the wider economy.

The Budget also includes changes affecting wages and alcohol duty. The National Minimum Wage for workers aged 18 to 20 is due to rise by 3.9%, from £10.85 to approximately £11.27 an hour. Small British brewers and cider makers will receive £10 million in annual alcohol duty relief, although wider alcohol duty rates are scheduled to rise in line with inflation from February 2027. These measures could have different effects depending on the type of business.

For pubs, restaurants, cafés and accommodation providers in Cumbria, the impact of the Budget will depend on their individual circumstances and eligibility for the announced support. Smaller businesses may benefit from reduced or frozen business rates, while operators with higher property costs and substantial staffing expenses may continue to face pressure. Rural venues can also have additional challenges linked to seasonal demand, transport costs and the need to maintain services in smaller communities.

The response from the sector highlights the continuing debate over how best to support hospitality businesses while maintaining public finances. Although the Budget provides targeted assistance through business rates, industry representatives are continuing to call for broader changes to taxation. For many operators, the key question will be whether the announced relief is enough to support investment, protect jobs and ensure that local hospitality venues remain sustainable.

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