The effect of the 2025 budget on the drinks, hospitality and leisure industry

On 26 November 2025 the Chancellor announced her 2025 budget to the country. In this article we have focused on changes to taxes and the minimum wage which will have an impact – be that positive or negative – on the drinks, hospitality and leisure industry.

Increase of minimum wage

Perhaps the most unsurprising decision has been to increase the national living wage from £12.21 per hour to £12.71 per hour effective from April 2026 for employees aged 21 and over. The minimum wage for apprentices, employees under the age of 18 and employees aged 18 to 20 have also increased as follows:

	18 to 20	Under 18	Apprentice
April 2025	£10.00	£7.55	£7.55
April 2026	£10.85	£8.00	£8.00

The increases are significant, and UK Hospitality estimates this will result in a £1.4billion cost to the sector.

Business rates

The changes to business rates have added an additional layer of complexity. The government states that the “high street will benefit from permanently lower business rates for retail, hospitality and leisure, funded by higher rates for the most expensive properties such as warehouses used by large online retailers”. This lower rate effectively provides a rate which is 5p lower than the standard rate.

However, every business property across the country will have a new rateable value from April 2026. It is this new rateable value to which the multiplier will be applied. The assessment on which the valuation is based is from April 2024, whereas the previous was from April 2021 during the Covid pandemic when the industry was largely closed down. This means that, despite the new reduced permanent rate, the increase to business rates across the sector is significant, with UK Hospitality quoting the following increases: 76% for accommodation businesses; 30% for pubs; and 14% for restaurants and cafes. Clearly this will have a significant impact on the sector, and could be the final nail in the coffin for struggling businesses.

Tourism taxes

English mayors will have the power to charge a levy on overnight stays pursuant to the new ‘tourist tax’. While this does not increase costs to the industry, it is another fee for customers to pay, which may result in fewer domestic holidays, affecting income generated within the industry. It is unclear which parts of the country will be targeted and how it will be levied.

UK Hospitality have been particularly damning of this new tax, as both the tax minister and tourism minister had previously confirmed that the government would not introduce tourism taxes.

Gambling taxes

A bit of positive news for the sector is an increase in rates of remote gaming duty. The increase will see rates rise from 21% to 40%, effective from 1 April 2026. Rates for face-to-face gambling have been protected, with Bingo Duty being abolished from April 2026.

Conclusion

The 2025 budget presents a mixed picture for the drinks, hospitality and leisure industry. While the overall impact will undoubtedly be challenging, the industry has long demonstrated resilience, adaptability and creativity – qualities that carried it through the pandemic and continue to shape its recovery. As businesses plan ahead for April 2026 and beyond, early budgeting, proactive engagement with advisers and close scrutiny of further developments will be essential.

For more information contact Samantha Turner