John Healey has instead targeted support at smaller businesses, with the Small Business Rates Relief threshold for retail, hospitality and leisure businesses in England set to rise from £12,000 to £18,000 in rateable value.
According to the chancellor, half of all retail, hospitality and leisure properties will pay no business rates as a result.
A real-terms freeze means bills can still rise in line with inflation.
The package will be funded by tackling non-compliance on online marketplaces, increasing gambling tax on higher-risk machine games, and extending a 1p supplement for businesses that have seen reductions or smaller increases in their business rates bills.
#VATsTheProblem
Earlier this year, trade bodies including UKHospitality joined forces with chef Tom Kerridge to launch the #VATsTheProblem campaign, calling for hospitality VAT to be cut from 20% to 10% to protect jobs, keep prices affordable and support investment.
In February, while still mayor of Greater Manchester, prime minister Andy Burnham said he would “argue for a VAT rate more consistent with what you find in Europe”.
But that support has yet to translate into policy, with today’s Budget offering no reduction in hospitality VAT.
For larger businesses, the Budget does little to address rapidly rising costs.
Hospitality businesses have faced higher employment costs since April 2025, when employer National Insurance contributions (known as NICs) rose from 13.8% to 15% and the annual earnings threshold fell from £9,100 to £5,000 per employee, placing particular pressure on a labour-intensive sector with a large part-time workforce.
“For British businesses, big and small”
Addressing the House of Commons this lunchtime (28 October), Healey described his Budget as being “for British businesses, big and small”, delivered amid global uncertainty and pressures affecting people at home.
“[This is] a budget built on fiscal discipline, which matches immediate action today with clear direction for the future,” he says.
The chancellor also announced £10m in annual alcohol duty relief targeted at small British brewers and cider makers.
However, wider alcohol duty rates will rise in line with retail price index inflation from 1 February 2027.
Healey also confirmed yesterday’s report that both the national living wage and the national minimum wage for 18 to 20-year-olds will rise by 3.9%.
From 1 April 2027, the national living wage will increase from £12.71 to £13.21 an hour, while the rate for 18 to 20-year-olds will rise from £10.85 to £11.27.
Changes for business owners
The chancellor also revealed that entrepreneurs’ relief is being renamed and scaled back. Now called Business Asset Disposal Relief (BADR), its lifetime limit will fall from £1m to £500,000 from 6 April 2027 (the figure is the amount of qualifying capital gains eligible for relief, rather than the sale price of a business). The Government says three-quarters of claimants will still receive relief on their entire gain.
A new Founders’ Relief will offer a 10% capital gains tax rate on up to £10m of lifetime gains, covering qualifying share disposals from 6 April 2027. It targets founders and significant early investors in ‘high-growth, innovative UK companies’.
Eligibility is subject to technical consultation. It is currently unclear whether hospitality businesses will qualify.
Tariffs and fuel duty
Import tariffs will also be removed on more than 100 products, including gherkins, baked beans and chocolate.
The move could provide some relief on ingredient costs, although the benefit to operators will depend on their sourcing and whether suppliers pass on savings.
The 5p fuel duty cut will be extended, with the planned inflation increase deferred until 1 July 2027, providing continued support for deliveries, catering transport and supply chains that could filter down to hospitality operators.