Hospitality tax burden hits 82p for every £1 of profit

UK hospitality businesses faced business taxes equivalent to 82p for every £1 of pre-tax profit in 2025/26, the highest burden among 11 sectors examined in research commissioned by the British Retail Consortium.

The findings have prompted the consortium and UKHospitality to press the Chancellor for business rates changes in the Budget scheduled for 28 October. Their joint demand centres on excluding high street retail and hospitality businesses from the government’s high-value business rates multiplier.

What happened

The research, reported by Startups.co.uk, measures business rates, VAT, employer National Insurance contributions and other government taxes against pre-tax profit. The 82p figure is therefore a combined measure of business taxation, rather than a corporation tax rate.

Retail had the next-highest burden among the sectors identified in the report, at 72p for each £1 of pre-tax profit. The average across all 11 sectors was 50p, while banking stood at 40.5p — less than half hospitality’s figure.

Hospitality and retail together accounted for £62bn in the business taxes covered by the research in 2025/26. The analysis also puts effective rates for both sectors higher again in 2026/27.

The findings cover a sector that includes restaurants, bars and cafés, where tax bills sit alongside other operating costs. For independent operators working with narrow margins, the comparison highlights the scale of those bills relative to the profit available to absorb them.

The background

Employment figures cited in the report show hospitality lost 93,000 jobs over two years, while retail lost 122,000. Those losses form part of the trade bodies’ case for reducing the cost of employing staff and operating premises.

A separate concern is the proposed tourist levy, which would allow mayors to charge for overnight stays in hotels and holiday lets. UKHospitality estimates that the measure could cost the sector up to another 33,000 jobs by 2030; that is a warning about a proposed policy, not a recorded loss.

The 2026 business rates revaluation is another focus of the sector’s lobbying. UKHospitality wants additional support for businesses facing the steepest increases, alongside a larger retail, hospitality and leisure discount.

Rates liabilities also carry a collection risk for businesses with unpaid bills. The separate case of Pembrokeshire council pursuing 97 businesses over unpaid rates illustrates that pressure at a local level.

What people are saying

UKHospitality chief executive Allen Simpson argues that the research demonstrates an excessive tax burden on the sector. The organisation wants revaluation support to reflect the help already provided to pubs, rather than leaving other hospitality operators without comparable assistance.

British Retail Consortium chief executive Helen Dickinson says the Budget presents a choice between adding to high street costs and allowing businesses more capacity to recruit, invest in growth and restrain prices. She points to the loss of more than 100,000 retail jobs over two years as evidence supporting the case for change.

The joint submission links retail and hospitality through their exposure to property and employment taxes. Removing businesses from the high-value multiplier is the immediate request, distinct from UKHospitality’s broader push to reshape rates support.

What happens next

The Budget on 28 October is the next stated decision point, but the relief sought by the trade bodies is not guaranteed. Operators cannot yet treat those proposals as confirmed reductions in their bills.

Businesses whose rateable values increased in the 2026 revaluation can check whether their valuations are accurate and use the government’s online service to challenge errors. That route concerns the assessment underlying an individual bill, rather than a change to national tax policy.

Eligible employers can also claim the Employment Allowance, which reduces employer National Insurance liabilities by up to £10,500 a year. Eligibility needs to be checked before including that reduction in a business’s cost forecasts.

Capital allowances offer another area for review. Qualifying expenditure on kitchen equipment, fixtures or energy-efficient equipment may be deducted from taxable profits through provisions such as the Annual Investment Allowance.

Smaller operators can review their VAT arrangements with an accountant, including whether the Flat Rate Scheme or cash accounting is suitable. Cash accounting can align VAT payments with customer receipts; any decision to switch depends on the business’s circumstances.