Budget 2024: Impact for hospitality, retail and leisure

Here, Leighton Bower shares his summary and reaction to key points in the Budget for hospitality, retail and leisure businesses.

Employer National Insurance and wage rises

• The Government announced that it will increase the employer rate from 13.8% to 15% from 6 April 2025. The Government will also reduce the Secondary Threshold to £5,000 a year from 6 April 2025 until 6 April 2028, and then increase it by Consumer Price Index (CPI) thereafter.
• The Government has announced increased rates of the National Living Wage (NLW) and National Minimum Wage (NMW) which will come into force from 1 April 2025.
• The Employment Allowance currently allows businesses with Employer NICs bills of £100,000 or less in the previous tax year to deduct £5,000 from their employer NICs bill. From 6 April 2025 the Government will increase the Employment Allowance from £5,000 to £10,500, and remove the £100,000 threshold for eligibility, expanding this to all eligible employers with employer NIC bills.

Analysis by UKHospitality reveals that these employment tax measures will increase the cost of employing a full-time staff member by at least £2,500.

This breakdown of costs is based on a typical staff member, aged 21 or older, earning the National Living Wage and working 38 hours per week. In this example, an employers’ National Insurance Contribution will rise 53.9% from £1,863 to £2,869, with wage rises bringing this total above £2,500 for the year.

Further analysis reveals that it will be £2,100 more expensive to employ a single parent working 9am to 3pm, five days a week and £1,140 more expensive to employ a student working 14 hours at the weekend.

Business rates relief

• Businesses in the hospitality, retail and leisure sectors will receive 40% business rates relief in 2025-26 rather than the 75% relief they receive in the current year.
• From 2026, these businesses will have their rates calculated using “permanently lower multipliers”, which are yet to be confirmed. The Government has published a discussion paper and is seeking comments on its proposals by March 2025. The reductions in rates will be funded by increasing business rates on properties with rateable values of more than £500,000. The business rates multipliers for small businesses will be frozen at 49.9p for 2025-26, while the standard multiplier will increase to 55.5p.

Other matters

• Draught alcohol duty: The Chancellor announced that draught alcohol duty would not rise in line with inflation but would be cut by 1.7%. This equates to 1p for every pint in a pub. While welcome, this cut will do little to offset the rising costs of labour. The mandatory duty stamp on spirits will also be removed to support spirit producers. Rates on non-draught duties will still rise in line with the Retail Price Index (RPI) from February 2025.
• Fuel Duty frozen: Fuel duty has been frozen since 2011 and was further cut by 5p by the Conservative Government, a measure that was set to expire in March next year. However, The Chancellor has confirmed that the 5p cut will be retained and fuel duty frozen for another two years. This is positive news for UK hospitality, with delivery services and ingredient costs closely linked to the logistics industry.
• Corporation tax and tax reliefs: The Budget reaffirmed previously made commitments to maintain the headline rate of corporation tax at its current level and continue key incentives such as full expensing and the annual investment allowance. These provide tax reliefs on investments in qualifying assets such as fixtures, machinery, kitchen equipment and air conditioning system and costs linked to construction, modifications, fitting-out or refurbishments.
• No VAT incentive announced: The UK has one of the highest rates of VAT for hospitality in Europe and we saw the impact of a lower rate of VAT for hospitality when it was introduced during the pandemic – driving demand and generating revenue. Prior to the Budget, UKHospitality had called for a reform of the VAT system for hospitality businesses, however there were no further developments on this in the Budget.
• Stamp Duty Land Tax (SDLT): For hospitality companies and trusts purchasing residential property for example for Airbnb lettings, the higher rate of SDLT payable by those that purchase an additional dwelling is to increase from 3% to 5% from 31 October 2024. This is in addition to the normal SDLT paid on the purchase of a property.