Budget business-rates cut falls 'far short' for hospitality

UKHospitality welcomes permanent business-rates reform, but warns that the changes “fall far short” as costs continue to rise.

The 2025 autumn Budget this week confirmed the most significant structural change to business rates for bricks-and-mortar hospitality in over a decade.

From April 2026, retail, hospitality and leisure (RHL) venues will move onto a permanently lower business-rates multiplier, funded by higher rates applied to high-value commercial properties such as large distribution warehouses. The government says more than 750,000 premises will benefit from the new lower multiplier.

The reform replaces the temporary Retail, Hospitality and Leisure (RHL) relief scheme and is intended to create a “fairer system” that supports high-street operators competing against online retailers.

Properties with a rateable value (RV) below £500,000 will qualify automatically for the lower multiplier under the new framework, now written into law and due to take effect following the 2026 revaluation.

However, while the reform provides long-term clarity, significant questions remain over the actual value of the discount, with early indications suggesting the lower multiplier will result in a 5p reduction — far below the 20p cut floated by government during consultation.

Still being taxed out

UKHospitality — the UK’s leading trade association representing pubs, restaurants, hotels and bars — welcomed the move toward a permanent lower multiplier but warned the measures fall well short of what the sector needs.

Chair Kate Nicholls said: “Bricks and mortar hospitality businesses are being taxed out, and they have been penalised by the broken business rates system for far too long.

“The chancellor recognised the importance of hospitality and provided a permanently lower multiplier for hospitality businesses – reforms secured by UKHospitality.

“However, the 5p discount is only a quarter of the maximum 20p discount the government proposed last year.

“This is particularly frustrating given changes to business rates valuations will mean that many hospitality businesses’ tax bills will still significantly rise, alongside increases to the minimum wage adding extra cost. Business tax rates for hospitality must continue to fall for the rest of this parliament.

“The government has heeded our calls for significant transitional relief for businesses, which will mitigate the worst impacts of the revaluation.

“Hospitality remains under significant cost pressures, with the highest tax burden in the economy. We will continue to campaign for additional support for the sector, including further business rates discounts.”

The transitional relief referenced by Kate will cap the year-on-year increase in bills for venues facing a sharp valuation rise after the 2026 revaluation — softening, but not eliminating, the impact of higher rateable values.

“Urgent overhaul still needed”

Michael Shapiro, commercial property partner at Spencer West LLP, warned that the Budget still leaves major challenges unaddressed.

He said: “It’s evident this is a ‘political’ budget without producing anything to stimulate the mantra of ‘growth, growth, growth’.

“Despite lowering business rates for many retail and hospitality businesses through higher rates on warehouses used by online retail companies, the fact remains that the local high street has many empty retail and hospitality premises.

“Speaking with many commercial landlords and tenants which make up my client base, the main driver is the level of business rates, and the way that the business rating system works.

“While an overhaul is scheduled for April 2026, this is something that needs to be addressed with urgency.

“Hospitality and retail businesses continue to struggle through the current system, which is further compounded by the rise in NI in the last Budget and the incoming rise to the minimum wage in January.

“The domino effect of this on retail and hospitality workers, builders, and tradespeople cannot be underestimated, and the impact is clear to see by walking along any high street.”

Rachel Reeves explanation

Chancellor Rachel Reeves defended the shift in property taxation, saying: “This Budget backs our high streets by introducing permanently lower business rates for retail, hospitality and leisure.

"These reforms are funded through higher rates on the largest properties, including the warehouses used by online giants. This modern system will help level the playing field, support local businesses and protect jobs.”