The recent Budget 2025 published by the UK government includes a mix of tax changes aimed at supporting retail, hospitality and leisure operators.
On paper, the new business-rates multipliers for hotel and hospitality properties appear generous, offering permanently lower rates for some.
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In practice, many hotel operators warn the changes could still add pressure — particularly for larger or higher-value properties — leaving the sector facing a difficult environment even with the promised relief.
Permanently lower business rates — but only for smaller hotels
From April 2026 the government will apply new “Retail, Hospitality and Leisure” (RHL) business-rates multipliers on eligible properties, offering a discount of 5 p in the pound compared with the national standard.
For small RHL properties, the multiplier will drop to 38.2 p; for other eligible properties under the threshold, it will be 43 p.
The change is expected to benefit more than 750,000 retail, hospitality and leisure premises across England. The government estimates the relief will be worth nearly £900 million per year. GOV.UK+1
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By GlobalDataFor smaller independent hotels or modest accommodation businesses with rateable values under £500,000 these measures could reduce business-rate bills compared with previous years.
Sharp rise in rateable values erodes benefit for many hotels
While the headline multipliers have been reduced, newly published rateable-value assessments paint a harsher picture for many hotels and larger hospitality sites.
According to UKHospitality, average business-rates bills for hotels could increase by as much as £28,900 next year. Over three years, some hospitality businesses face a potential rise in rates of 115%.
For many operators — especially those with larger premises or several sites — this translates into a material increase in costs. As one industry trade body put it, the modest 5 p multiplier discount is being “wiped out” by rising rateable values and other recent cost pressures.
Broader cost pressures compound business-rate burden
Business-rate changes are only one part of a broader cost squeeze on the hotel sector. According to recent reports, the sector must contend with rising wages: from April 2026 the National Living Wage will rise to £12.71 and pay for 18- to 20-year-olds will increase to £10.85.
Many hotels have already faced a wave of cost increases — from higher staffing expenses to energy and supply-chain costs. Critics say that without deeper relief, many may struggle to balance rising overheads while keeping prices competitive, particularly as consumer demand remains uncertain.
While Budget 2025 introduces what appears to be permanent business-rate relief for eligible hospitality premises, the benefit seems confined to smaller hotels below the £500,000 rateable-value threshold.
For larger hotels and chains, sharply increased rateable values — combined with rising wage and cost pressures — may offset or outweigh any savings.
Many in the hotel sector remain cautious, warning that the changes could deepen financial strain rather than deliver the promised respite.
