What The 2025 Budget Means For Hospitality

On the 26^th November 2025, the Chancellor of the Exchequer delivered her budget to the House of Commons.

Oddly enough, it wasn’t as sh*t as I thought it would be.

Last month, I wrote about the theoretical changes that the government could make to the landscape of VAT to increase tax revenues (shocking stuff), but fortunately enough, none of it has come to fruition.

I woke up this morning in a bad mood thinking “how are we going to get f*cked this time?” But actually, it wasn’t all bad.

Minimum Wage Increases

Yes, the National Minimum Wage is going up from £12.21 to £12.71 for those aged 21 and over, from £10 to £10.85 for those aged between 18 and 20, and from £7.55 to £8 for those under 18 years of and apprentices.

That’s an increase of:

·       4.10% for employees aged 21 or above,

·       8.50% for employees aged 18 to 20, and

·       5.96% for employees below the age of 18, and apprentices

Compare this with last year’s increases in National Minimum Wage of:

·       6.73% for employees aged 21 or above,

·       16.28% for employees aged 18 to 20, and

·       17.97% for employees below the age of 18, and apprentices

Whilst it’s clear from both current and historic increases that successive governments are aiming to bring minimum wage in line for all adults regardless of age (in April 2020 we had a separate bracket for those aged 25 and over, then it was pulled back to 23 and over in April 2021, and then further reduced to 21 and over from April 2024), this budget doesn’t pose “as big of a hit” as its predecessors.

Business Rates Relief

Another big win for a lot of hospitality businesses is that the government has stated that they will permanently lower business rates across the hospitality, leisure, and retail sectors.

Although there is currently an “interim” discount of 40% in place, this figure should not be relied upon for future comparison. The discount could remain in place, be increased, or be lowered, but there was no clear indication of what this will look like. The only certainty was that businesses that have a rateable value of less than £500,000 will positively feel the permanent reduction, and that businesses with a rateable value of more than £500,000 will pay a higher amount. Given that no set percentage or amount was stated, I’m inclined to believe that the future permanent reduction will be lower than the 40% currently in place, and that the government will likely explain this as “the current 40% discount is temporary, and the rates applicable from April 2026 will be permanent, so affected businesses will come out better in the long run”.

Property, Savings, and Dividend Income

The above are not subject to National Insurance, and there are no plans to change this. However, the government has announced that they are increasing the amount of tax collected on the above categories by 2 percentage points.

Tax on dividends will increase from 8.75% to 10.75% at the basic rate, and from 33.75% to 35.75% at the higher rate. However, there are no changes to the additional rate which is currently 39.35%.

Now, I appreciate that I’ve gone into full accountant mode without explaining the tax bandings, so the following might be a bit more useful to you:

Many people often quote the basic rate band as being any income below £50,000 a year (well, £50,270 to be exact), but this isn’t entirely accurate.

The basic rate band is any the first £37,700 earned over your tax-free allowance. For most people, this is a total of £50,270 with £12,570 of this being tax free (a tax code of 1257L. However, not everyone has a standard tax code- some people have a lower tax code if they’ve given part of their personal allowance to a spouse or if they’ve underpaid tax in previous years, others may have a higher tax code if they receive the Blind Person’s Allowance, uniform allowance, or any number of adjustments.

The higher-rate band is the next £74,870 earned over the initial personal allowance and the basic rate band of £37,700, and the additional rate band is anything over and above this.

You most commonly see it set out as something like this:

Band/Allowance	Taxable income range	Tax Rate
Personal Allowance	Up to £12,570	0%
Basic rate	£12,571 - £50,270	20%
Higher rate	£50,271 - £125,140	40%
Additional rate	Over £125,140	45%

This is how it is usually displayed, but if your personal allowance is different, then so are the thresholds at which you being to pay different amounts of tax. Also, you lose £1 of your personal allowance for every £1 that you earn over £100,000 per year which then impacts it all over again.

Anyway, the point of all of this was that you’re going to pay more tax on dividends from April 2026, and on property (the new rates for property tax as of April 2027 are; 22%, 42%, and 47% respectively). There’s no point in harping on about tax on savings as it’s similar to the above, and there aren’t many people out there that are earning enough interest outside of an ISA to declare it.

The Personal Allowance

This one is a bit of a nasty stealth tax (and it’s not even stealthy anymore). The personal allowance is the amount that you can receive before paying any income tax (and since July 2022 it is also the amount you can receive before paying any personal National Insurance contributions). The standard personal allowance in the UK is £12,570. This has been in place since the 2021-22 tax year, and it will now remain the same until 2031- a 10-year freeze. The reason behind this is that as National Minimum Wage increases, it pushes more people into the 20% tax bracket which raises more revenue for the government.

But it also has another effect. £1 in 2021 is roughly equivalent in purchasing power to £1.22 in 2025 (in other words, what you could buy for £1 in 2021 now costs £1.22)- cumulative inflation of 22.4% over that period. To be able to afford the same amount of stuff that £12,570 could afford you in 2021, you’d need £15,385 in 2025. Assuming a steady 2% CPI each year from 2026-2031, you’d need £17,300 in 2031 to afford the same stuff that you could buy with £12,570 in 2021. To work it backwards, £12,570 in today’s money was worth £10,270 in 2021, and by 2031, £12,570 will be worth around £9,120 in 2021.

To Polish a Turd

VAT, National Insurance, and Corporation Tax aren’t increasing (we’ve already been shafted on two out of three of these), so whilst this budget doesn’t save hospitality, it doesn’t kick it down the stairs either.

Costs are still increasing (but not as much as they were as inflation has come down), minimum wage is increasing (as it does every year), and consumer spending is still a bit tight, but compared to the catastrophes we’ve dealt with coming out of Covid, this budget almost feels “civil”. Hospitality isn’t fixed, but the next 12 months should give us time to steady the ship rather than patching new holes in it every week, and that alone is worth acknowledging.

We’ve survived lockdowns, labour shortages, inflation, energy crises, huge rises in Minimum Wage, and more political U-turns than a learner driver. A year without fresh chaos counts as a small victory.