Ask any publican, café owner or restaurant manager what’s eating their margin this year, and tax will be near the top of the list - before energy, before wages, before the drinks bill. Now, there’s a number to back up the gut feeling: for every £1 of pre-tax profit a hospitality business makes, 82p of it goes straight back to the Treasury.
That’s according to new joint analysis released on 1 October by UKHospitality and the British Retail Consortium (BRC), and it puts the UK hospitality tax burden above every other major sector in the economy, including retail (72p) and more than double the rate paid by banking (40.5p). Across the whole economy, the average effective tax rate sits at 50p in the pound. Hospitality isn’t just paying more than its high street neighbours; it’s an outlier even among sectors that are supposed to be in the same boat.
The timing is not an accident. Chancellor Rachel Reeves delivers her Autumn Budget on 28th October, and this data has landed squarely inside the pre-Budget lobbying window, designed to put the hospitality tax burden back on the Treasury’s desk before the numbers are finalised.
The numbers behind the headline
Hospitality businesses paid £22.9 billion in tax during 2025/26, UKHospitality says - part of a combined £62 billion bill shared with retail that covers VAT, business rates and employer National Insurance contributions, among others. Rising employer NI costs and a narrowing of business rates reliefs over the past two years have both been cited as recent pressure points, on top of a 2026 business rates revaluation that has pushed bills up further for many operators.
The human cost sits alongside the fiscal one. Hospitality has shed an estimated 93,000 jobs over the past two years, and the BRC says one in seven high street properties now stands vacant - evidence, both bodies argue, that the tax burden is shrinking the sector rather than simply redistributing its profits.
With more than 80% of every pound made going back to Government, it is no surprise that our ability to create jobs, drive growth and regenerate has been severely damaged.
- Allen Simpson, Chief Executive, UKHospitality
This punishing tax burden has clear consequences: job losses, shuttered shops, and a missed opportunity to drive growth.
- Helen Dickinson, Chief Executive, British Retail Consortium
Why hospitality gets hit hardest
Part of the answer is structural. Hospitality is property-intensive and labour-intensive in a way financial services simply isn’t, so when business rates rise and employer National Insurance costs climb, the exposure lands disproportionately on sectors already running thin margins. Retail and hospitality between them account for close to a third of all business rates revenue collected in the UK - a far bigger share than their contribution to overall economic output would suggest.
Layer the 2026 rates revaluation on top, and plenty of operators (particularly those on town centre and city sites where rateable values have moved sharply) are now absorbing a tax bill that has grown even as trading conditions stayed flat or worsened.
What the industry is asking for
UKHospitality and the BRC are putting a specific, pre-Budget ask to the Treasury: increase the business rates discount available to retail, hospitality and leisure properties, extend support to businesses hit hardest by the 2026 revaluation and, more structurally, remove hospitality and retail properties from the government’s high-value business rates multiplier altogether. The push sits alongside UKHospitality’s wider Taxed Out campaign, which has spent much of 2026 trying to keep sector taxation on the political agenda through successive fiscal events.
Whether any of that lands in the 28 October Budget is genuinely open. Previous Budgets have delivered partial relief - a rates discount here, a threshold tweak there - without resolving the structural imbalance this data is designed to highlight.
What this means for your business
For individual operators, none of this changes overnight, and no single Budget announcement is likely to either. None of this is comfortable reading for an industry that has spent much of the past two years managing cost pressure from every direction at once. But knowing exactly where you sit (82p in every £1) at least makes the conversation with your accountant, your landlord and your local MP a more precise one.
Practical takeaways:
- Model your rates bill under the current rules now, so you’re not caught out if revaluation transition relief tapers, or a discount changes on Budget day.
- Treat 28 October as a cash-flow planning point, not just a news story. Changes to rates relief or National Insurance thresholds typically take effect at the start of the next tax year, giving you a short window to adjust pricing or staffing plans.
- Add your voice through trade bodies like UKHospitality, or your local pub, bar or restaurant association, since campaigns like this one are built from member data, and individual operator figures carry weight.
- Look past the headline rate to the detail - reliefs, thresholds and revaluation transition rules often matter more to your site’s actual bill than the percentage figures making the rounds in the press.