You’re not imagining it; hospitality is taxed more than any other UK sector. We break down why, and how you can ease the pressure before the Budget.
- Hospitality businesses paid 82p in business taxes for every £1 of pre-tax profit in 2025/26, the highest effective rate of any of the 11 UK sectors analysed by the BRC
- Trade bodies are urging the Chancellor to cut hospitality’s business rates burden in the 28 October Budget
- Relief isn’t guaranteed, but businesses can act now by challenging their rateable value, claiming the Employment Allowance and reviewing their VAT scheme
If you’ve had a feeling that your tax bill is getting higher – you’re not making it up. New analysis from the British Retail Consortium (BRC) found that hospitality businesses are paying 82p in business taxes for every £1 of pre-tax profit, making it the highest effective tax burden of any major UK sector.
That figure covers business rates, VAT, employer National Insurance contributions and other government taxes, and compounds other costs felt by independent cafés, pubs and restaurants, many of which are already running on razor-thin margins.
With the Budget due on 28 October and industry bodies pressing the Government for relief, we cover some practical ways businesses can ease the pressure in the meantime.
If you’ve found yourself drowning in tax bills, you’re far from alone. The research, commissioned by the BRC, found that hospitality businesses like restaurants, bars and cafés pay the highest tax share of the 11 UK sectors analysed.
For every £1 of pre-tax profit in 2025/26, hospitality paid 82p, compared with 72p for retail. Across all 11 sectors, the average effective rate was 50p in the pound, while banking paid just 40.5p.
Together, hospitality and retail paid a total of £62 billion in business rates, employer National Insurance contributions, VAT and other government taxes this year, and the effective tax rates for both sectors rose again in 2026/27. According to UKHospitality chief executive Allen Simpson, these figures prove the sector is “vastly overtaxed”.
The impact is particularly clear in the jobs market. Hospitality has lost 93,000 jobs over the past two years, according to The Caterer, while retail has lost 122,000. UKHospitality has also warned that the proposed tourist levy, which would give mayors the power to charge on overnight stays in hotels and holiday lets, could cost the sector up to 33,000 more jobs by 2030.
Efforts have been made by Prime Minister Andy Burnham to cut business rates bills for pubs, social clubs and live music venues across England from April next year. Yet, it’s clear more support is needed to ease sky-high costs, particularly for restaurants and cafés that sit outside the scheme.
With the Budget due on 28 October, trade bodies are using the figures to press their case. The BRC and UKHospitality have jointly urged the Chancellor to “reduce the cost burden on these two sectors”, starting by removing high street retail and hospitality businesses from the government’s high-value business rates multiplier.
UKHospitality is also calling for a wider rethink of business rates. It wants a bigger retail, hospitality and leisure discount, plus support for the businesses hit hardest by the 2026 revaluation, in line with the help already given to pubs.
BRC chief executive Helen Dickinson framed the decision as a choice between piling more taxes onto high streets or giving businesses the “breathing space” to create jobs, deliver growth and hold down prices. She pointed to more than 100,000 retail jobs lost in two years as evidence of what’s at stake.
For owners, the problem is that relief, if it comes, won’t arrive overnight, and nothing is guaranteed until the chancellor stands up on the day. That’s why it’s worth looking at what you can do now.
- Challenge your business rates bill – If your rateable value rose in the 2026 revaluation, check it’s accurate and challenge it through the government’s online service if not.
- Claim the Employment Allowance – Eligible employers can cut their employer National Insurance bill by up to £10,500 a year. Check if you’re eligible here.
- Make the most of capital allowances – Spending on kitchen equipment, fixtures or energy-efficient kit may be deducted from your taxable profits through schemes like the Annual Investment Allowance.
- Review your VAT scheme – The Flat Rate Scheme or cash accounting could suit smaller operators, as you only pay VAT once customers have paid you. An accountant can tell you if switching would save money.
