Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment she has made of the potential impact of (a) business rates, (b) VAT and (c) energy costs on small hospitality businesses.

The Government recognises the vital role that small hospitality businesses play in supporting the UK’s economy and communities.

As announced at Autumn Budget 2024, the Government will introduce permanently lower business rates multipliers for retail, hospitality, and leisure (RHL) properties with ratable values (RVs) below £500,000 from 2026/27. This permanent tax cut will ensure that small hospitality businesses benefit from much-needed certainty and support.

Ahead of the new multipliers being introduced, the Government has prevented RHL business rates relief from ending in April 2025, extending it for one year at 40 per cent up to a cash cap of £110,000 per business, and frozen the small business multiplier.

VAT is a broad-based tax on consumption, and the 20 per cent standard rate applies to most goods and services. The UK’s VAT rate of 20 per cent is close to the OECD average of 19.3 per cent. The UK has a higher VAT registration threshold than any EU country and the joint highest in the OECD, at £90,000. This keeps the majority of businesses, including many small businesses in the hospitality sector, out of the VAT regime altogether.

The government recognises the impact that energy costs can have on businesses, especially small businesses. To help with this, the Government announced in December 2024 a new Zero Carbon Services Hospitality trial which aims for Pubs, cafes, restaurants and hotels to receive free energy and carbon cutting advice to slash their energy bills as part of the government’s Plan for Change. The Government will continue to monitor the impact of energy costs on businesses.

The Government keeps all areas of the tax system under review. Any changes to the tax system are announced as part of the annual Budget process.