Autumn Budget 2024: What It Means for Hospitality
The Autumn Budget 2024 has unveiled several critical changes that will impact businesses across the UK, particularly in hospitality and retail. Focused on creating a sustainable fiscal framework, addressing public service needs, and investing in long term growth, the government's approach introduces a mix of opportunities and challenges for businesses and individuals.
If you haven’t yet had time to read through the budget and understand some of the changes that could affect you and your business, we’ve detailed some at a glance below.
The Budget at a Glance
The government aims to:
- Strengthen public finances with new fiscal rules and adjustments to tax, welfare, and spending.
- Increase departmental spending by 2% annually in real terms until 2029-30 to support public services, including reducing NHS waiting lists.
- Commit over £100 billion to capital investment in transport, housing, and research and development (R&D) to fuel long term growth.
While these priorities signal significant investment in infrastructure and public services, the ripple effects on hospitality and retail are primarily tied to tax and wage changes, as well as adjustments in business rates.
Key Changes for Hospitality and Retail
National Minimum Wage Increase
What’s changing?
- From April 2025, the National Minimum Wage will rise to £12.21/hour (up 6.7%).
- For younger employees aged 18-20, the rate will sharply increase to £10/hour.
Impact on businesses:
- Expect wage banding to increase across the board, translating to approximately a 6% rise in wage costs.
- Combined with other cost increases (outlined below), this could result in a total wage bill hike of around 8.5%.
Employer’s National Insurance (NI)
What’s changing?
- The Employer’s National Insurance rate will rise to 15% in April 2025.
- The threshold for paying NI will be lowered from £9,000 to £5,000.
Impact on businesses:
- Most employers will see an increase of approximately 2.5% in wage bills.
Business Rates Relief
What’s changing?
- The existing retail and hospitality relief remains but will be reduced to 40% in 2025.
- Longer-term reforms are planned from 2026/27 to permanently lower business rates for the sector.
Impact on businesses:
- While short-term relief is reduced, the long term reform offers hope for fairer rates in the future. However, businesses must prepare for interim financial strain.
Overall Cost Increases
- Combined, the changes to NI and wage costs will increase the average hospitality or retail wage bill by 8.5%.
- To offset this, businesses may need to raise menu prices by 3% or find savings elsewhere in their profit and loss statements.
Staff costs
National Insurance Contributions (NICs)
What’s changing?
- From 6 April 2025, the employer’s NIC rate will rise from 13.8% to 15%.
- The threshold at which NICs become payable will decrease from £9,100 to £5,000 and remain frozen until 2028, after which it will increase in line with the consumer prices index (CPI).
Impact on businesses:
- These changes will increase payroll costs substantially. Lowering the threshold means that more of the wage bill will be subject to NICs, adding to the financial strain.
National Living Wage and National Minimum Wage
What’s changing?
- From 1 April 2025, the National Living Wage will rise by 6.7% from £11.44 to £12.21/hour.
- For employees aged 18–20, the National Minimum Wage will see a sharper 16.3% increase, from £8.60 to £10/hour. This aligns with the government’s goal of gradually equalising the two rates.
Impact on businesses:
- Wage increases will place upward pressure on overall salary banding. Combined with NIC changes, these adjustments contribute to an overall 8.5% rise in staff costs for many businesses.
Employment Allowance Relief
What’s changing?
- The Employment Allowance, which reduces an employer’s NIC liability, will increase from £5,000 to £10,500 in April 2025.
- This relief will now be available to all employers, removing the previous restriction and limiting it to businesses with an NIC liability of less than £100,000 in the prior tax year.
Impact on businesses:
- The expansion of this relief provides some mitigation, especially for smaller employers. However, for larger organisations, it’s important to consider that this will only partially offset the increased NICs costs.
Tax Deductions
What’s changing?
- Wages and employer’s NICs remain deductible for corporation or income tax purposes. Businesses with taxable profits can reduce their tax liability through these deductions.
Impact on businesses:
- While helpful, the extent of the relief depends on the business's profitability. Those with limited taxable profits may see little benefit from this mitigation.
A Difficult but Manageable Path Forward
While there are some negatives to consider, it’s not entirely doom and gloom. Compared to successive 10% wage increases in prior budgets, the 6.7% rise provides some breathing room. The government’s focus on long term growth through infrastructure and research & development investment may also result in indirect benefits for businesses in the coming years.
That said, there’s no escaping the immediate challenges for the hospitality industry currently. As the hospitality and retail sectors brace for these changes, strategic planning, innovation, and adaptability will be crucial for your business to weather the storm.
Your marketing partner
We hope you’ve found this blog useful and we wish the best for every business within the industry in these tough times. If you’d like to read more from us, you can check out our blog, and if you’d like specialist marketing advice and guidance from our team, please get in touch today!