2025 Autumn Budget Guide for Hospitality Businesses

What the Hospitality Industry Campaigned For 

Before the 2025 UK Autumn Budget, the hospitality and leisure sector made its priorities clear: 

• VAT reduction from 20% to 15% - bringing back the temporary COVID-era relief
• Business rates freeze and reform - Hospitality businesses pay more than their fair share. After a 6.7% increase in April 2024, the industry asked for a freeze on further rises.
• Relief from rising employment costs - With National Living Wage increases squeezing margins and chronic staff shortages, the industry called for help through lower employer NI rates, increased Employment Allowance, or better apprenticeship incentives.
• Capital allowances extended - Tax relief when you buy new equipment or upgrade facilities; the industry pushed to keep the full 100% write-off on investments like new kitchens or refurbishments. 

The question was: how much would the UK government actually put on the table? 

What Hospitality Businesses Actually Got: The Autumn Budget Breakdown 

VAT Relief: Denied 

The standard 20% VAT rate remains unchanged. Without VAT relief, managing margins becomes more critical than ever. Simon emphasised: "EPOS and AP automation systems give you a lot of data to drill into and understand where you're making your money or where you're not." 

Business Rates: The Mixed Bag 

Business rates reform did arrive, but the results are far from the overhaul operators hoped for. 

Here's what changed: 

• Under £500K wins, over £500K pays more. From April 2026, hospitality properties valued under £500K get permanently lower rates - 38.2p or 43p, depending on size. This applies whether you own or rent. Cross the £500K threshold, and this jumps to 50.8p - an increase that hits larger venues hardest.
• COVID relief ends, and valuations rise. The 40% pandemic relief disappears in April 2026. Property valuations are updating from 2023 to 2025 figures, pushing many venues - especially in London and the Southeast over that £500K. 

Simon's advice: "This isn't something most accountants handle day-to-day. If you're above £500K rateable value, in London or the Southeast, or operating from a listed building, you need specialist rates advice now, not in March when the bills arrive." 

Employment Costs: The Triple Hit 

The national living wage rises to £12.71 from April 2026, a jump from the current £12.21. 

Employers are also still dealing with the employer National Insurance threshold frozen at £5,000 - a level that was reduced from £9,100 in 2024 and will now stay frozen until 2031. This means you pay employer NI at 15% on almost all employee earnings above £5,000. 

But There's a Hidden Cost: Fiscal Drag. 

Personal tax thresholds remain frozen until 2031. As wages rise with inflation, more employees get pulled into higher tax brackets. 

How it works in practice: A manager earning £45,000 in 2020 might earn £52,000 in 2028 after inflation-matching rises. But because tax thresholds are frozen, they'll now pay a higher tax on part of their income, something they didn't face in 2020. This means their take-home pay hasn't kept pace with their salary increases. 

Declan explains that "employees may want even greater pay rises to offset against the indirect tax impact".  

Capital Allowances: A Bright Spot for Hospitality 

Capital allowances provide tax relief when you invest in equipment and facilities. Spend money improving your business, and you can reduce your tax bill. 

The 100% first-year allowances and 50% relief for qualifying items stayed intact, crucial for hospitality businesses planning significant investments. 

What can you actually claim? 

• 100% relief: Kitchen equipment, refrigeration units, furniture, fixtures and fittings for new fit-outs
• 50% relief: Heating and cooling systems, electrical installations, and certain structural improvements 

However, standard writing down allowances (the default tax relief for equipment) dropped from 18% to 14% annually.  

Declan's advice: "Make sure you can claim the 100% or 50% relief for your business where possible. It's a technical area, but it's worth getting right because it may be very valuable for you, especially in this economy."  

Your Autumn Budget Action Plan 

1. Focus on Your Peak Season 

Don't panic. The changes don't all hit at once—they're phased across 2025, 2026, and 2027, giving you time to plan strategically. Declan advises thinking it through: Not everything applies to your business, and not everything needs immediate attention.

The immediate priority? December. As Simon and Declan emphasised, this is where the majority of hospitality revenue comes from, setting you up for the rest of the year. Nail your peak season first, then use January to implement the right systems and strategies that will support you amidst the changes ahead.

2. Build Your Technology Foundation 

Without VAT relief and already tight profit margins, you need absolute clarity on where money is coming from and where it's going.  

For Simon, this is achieved by having the right software suite working together: EPOS for sales data and margins, payroll systems for labour costs, and accounting software for cash flow forecasting.  

The missing piece for many hospitality businesses is accounts payable (AP) automation: Software that handles supplier invoices automatically. 

What is AP Automation? 

AP automation replaces the manual process of receiving invoices, chasing approvals, entering data into your accounting system... or frantically trying to find invoices for your accountant for month-end. Instead, invoices are sent digitally, approvals happen on a mobile app, and everything syncs to your accounts in real time. You get spending visibility as it happens, not weeks later when someone works through the paperwork pile. 

Lightyear is an AP automation platform built for this. It integrates with the likes of Xero, QuickBooks, Sage, NetSuite, and various EPOS systems, giving you a complete picture of your finances without manual effort.  

3. Take Control of Cash Flow 

AP automation gives you the ultimate cash flow control. You can freeze invoice approvals during low cash flow periods, and set limits on who can approve an invoice or raise a PO based on value. Crucially, you can time supplier payments around tax obligations, spot duplicate invoices before they're paid, and catch errors before they hit your bank account. 

Outside of AP automation, Menzies advises keeping on top of your tax schedule, as it can change as your business grows.  

"You don't want to get a nasty surprise that you've already missed two tax instalments", Declan warned, "And then get charged late payment interest over 6% when your cash reserves are low". 

That visibility also strengthens your supplier relationships. Simon's advice: "Everyone would rather get paid for something than not at all, so have the conversation."  

Negotiate payment terms, approach HMRC proactively if needed, and use your AP data to have conversations from a position of knowledge. 

4. Reduce Costs Without Cutting Quality 

There are practical steps you can take to manage rising costs.  

"Whether it's tweaking the menu, trimming your rota and staffing approach, negotiating with suppliers, there are lots of things you can do”,  says Simon 

AP automation supports all of this. Manual invoice processing costs £15-30 per invoice: chasing approvals, keying data, fixing errors all take time and money. Lightyear reduces this to under £3 per invoice. For a business processing 200 invoices monthly, that's £15,000-£25,000 back in your pocket annually, offsetting those NI increases and wage rises. 

Future savings are found in what you can see and forecast with AP automation. Real-spend data lets you spot supplier price rises, catch over-ordering patterns, and identify where money is leaking. 

As Simon noted: "If you're throwing away half of your products at the end of the evening, then something's going wrong”. 

5. Focus on Staff Retention 

"If you're losing staff, you need to understand why", Simon emphasised. The cost of constant recruitment far exceeds investment in retention. 

Simon highlighted: "Give staff software that reduces stress when they're on the job and improves their day-to-day to prevent churn, improve onboarding and conduct exit interviews to get feedback." 

AP automation typically handles the work of one or two full-time staff members. By removing these time-consuming tasks, you can empower your existing team to start analysing data and making strategic decisions.

6. Find New Revenue from Existing Assets 

You won't succeed just by cutting costs. Simon shared an example of a city-centre pub dead at weekends that now hosts movie screenings with themed three-course dinners. "It just made it more of an event and more of an experience", he explained. 

AP automation frees up resources for revenue-generating activities. When your back-office team isn't drowning in invoice processing, and management isn't chasing paperwork, they can focus on exploring new offerings, partnerships, and creative uses of your space during off-peak hours.  

7. Claim Capital Allowances Strategically 

If you're planning a significant investment: new fit-outs, equipment, or refurbishments, now's the time to maximise the tax relief explained earlier. 

Lightyear streamlines documentation for capital allowance claims, keeping your records audit-ready and making it easier to work with your tax adviser. 

8. Use Your Advisors Proactively 

"You want to be talking to your accountant before small concerns become proper red flags", Simon stressed. 

On the tax side, Declan emphasised the importance of real-time dialogue: "Tax advisers should be speaking to their clients in real time to actually know what's going on in the business. That way, you can pinpoint what is relevant and what isn't relevant." 

Check your business rates position: From April 2026, the Valuation Office Agency will automatically revalue all properties. Those under £500K rateable value will benefit from lower rates. Properties over £500K will pay a higher rate.

Draft valuations will be published in late November/early December 2025. Check yours immediately. Most accountants don't handle business rates, so if you are near or above £500K, get specialist advice before the changes take effect.

Lightyear's real-time reporting makes these proactive conversations possible. Share live data with your accountants and tax advisers, no data silos, no delays. When they can see what's actually happening in your business, they can provide relevant, timely advice tailored to your current situation. 

The Bottom Line: Don't Panic, Do Plan & Seek Expert Advice

Yes, costs are rising, and margins will tighten, but you have time to respond strategically. There are practical steps you can take, from menu adjustments to rota optimisation and tax relief advice.

Maximise your peak period, then use the New Year to explore AP automation that will give you the visibility and control to navigate 2026 and beyond.

Ready to Take Action?

Talk to the experts: Discuss your specific situation with Simon Armstrong or Declan O'Connell at Menzies.