How Hospitality Operators Can Plan for Tax Hikes Without Squeezing Margins
By Joe Lennon, Partner at Wellers (www.wellersaccountants.co.uk), small business accountants, discusses how hospitality businesses can plan for potential tax hikes while managing rising wage and supplier costs.
Running a hospitality business in 2025 means constantly balancing rising costs, from wages to supplier prices and now, with rumours of tax hikes, another challenge could soon be added to the mix.
Recent data from the British Chambers of Commerce shows that 63% of firms now fear tax hikes more than Brexit, the highest level in nearly a decade. In an industry where margins are already wafer-thin, that sentiment rings painfully true.
As someone who works closely with hospitality owners, I see firsthand how tax uncertainty adds to the pressure of running kitchens, catering operations, and venues.. But while we can’t control government policy, we can control how ready we are for it. Smart, proactive planning is the difference between staying profitable and being blindsided by another round of cost increases.
The Current Financial Landscape
Inflation may have slowed, but it hasn’t eased the pressure.
The ONS reports that consumer price inflation sits around 3.8%, with food and energy prices still climbing faster than average.
On top of this, in April 2025, the National Living Wage increased to £12.21 per hour. This, coupled with the fact that nearly half of venues have less than three months’ cash reserves (according to UKHospitality), gives us a clear picture of the current state of play within the hospitality sector.
Many business owners tell me they’re holding off investment decisions until after the Budget, not because they don’t want to grow, but because uncertainty makes planning almost impossible.
And that’s a major issue: without visibility, it’s easy to react rather than prepare.
HowPotential Tax Hikes Could Bite
Tax changes tend to hit hospitality harder than most industries. This is because wages account for such a large share of overall costs, even a modest rise can make a noticeable dent in margins.
• Higher Corporation Tax or National Insurance would immediately impact payroll-heavy sectors like catering.
• Increases in VAT or business rates would squeeze profit margins even further.
• For small operators, every 1% rise in employer NI can translate to hundreds per month in extra costs.
It’s a fragile equation. A small change in employer costs can turn a profitable week into a loss. That’s why understanding your exposure, before the Chancellor announces the next move, is critical.
Practical Steps to Prepare
This isn’t about predicting the future, it’s about being financially fit for whatever comes next. Here are five actions I advise hospitality owners to take before the Budget lands.
1. Forecast payroll now
Model what a 2–3% rise in labour costs would mean for your business. Identify where rota adjustments or small pricing changes could offset that increase.
2. Review pricing and margins
Review your best-sellers first. Small, well-timed price changes protect your margins without deterring customers and steady, incremental increases are always smoother than a big one-off jump.
3. Revisit supplier terms
Negotiate where you can – longer payment terms, reduced minimum orders, or bulk deals. Explore local suppliers to cut transport costs and reduce volatility.
4. Use available tax reliefs
Don’t overlook the reliefs that already exist. Capital allowances can offset spending on refurbishments or new kitchen equipment, while R&D tax relief may apply if you’ve introduced new systems or processes.
5. Protect cash flow
Aim to maintain at least three months’ operating cash. Review payment terms with both suppliers and customers to keep cash moving.
Tax planning isn’t about loopholes. It’s about preparation and knowing your numbers so you can make clear, confident decisions when it counts.
When to Call in Expert Help
A qualified accountant can translate the Budget into practical next steps for you. That might mean modelling payroll costs, forecasting tax liabilities, or identifying allowances you’re entitled to but haven’t claimed.
After the Budget, I recommend asking for a short, focused review. You don’t need a 20-page report, just a clear picture of how any new measures will affect your costs, profits, and cash flow.
Accountants shouldn’t just tell you what your tax bill is; they should help you plan how to afford it.
Final Thoughts
Tax rises might be coming, but they don’t have to derail your business. The key is to focus on what you can control: payroll, pricing, supplier terms, and good financial housekeeping.
Take one small step this week: run a payroll forecast, review your capital allowances or schedule that post-Budget chat with your accountant.
The businesses that plan early aren’t just surviving, they’re staying profitable while everyone else likely scrambles to stay afloat.