The Budget 2022: What Does it Mean for Hospitality Businesses?
Last week’s Budget announcement saw the Chancellor, Rishi Sunak, announce some important new changes which will affect hospitality and leisure businesses, with several additions to be aware of if you are running an enterprise within the sector.
New measures announced by Mr Sunak included the introduction of a new revaluation cycle that will be delivered from 2023, as well as a new investment relief to encourage businesses to adopt green technologies like solar panels.
To find out more about how these range of measures announced in the 2022 Budget will impact businesses in the hospitality and leisure sector, we spoke to Jackie Kirsopp, Chartered Accountant at Dodd & Co, based in Carlisle.
1. New Business Rates Improvement Relief
The chancellor unveiled a new 50% business rates discount for businesses within the hospitality industry for the next financial year - April 2022 to March 2023.
The new ‘business rates improvement relief’ means that, from 2023, firms will be able to make property improvements. For example, a holiday let property can add extra bedrooms and pay no extra business rates for the following 12 months.
The new relief applies to businesses in the retail, hospitality, and leisure sectors, including pubs, music venues, cinemas, restaurants, hotels, theatres, and gyms. Eligible businesses will be able to claim a discount on their bills of 50% up to a maximum of £110,000.
Speaking to us about the new business rates improvement relief, Jackie from Dodd & Co told us:
“The extension of the business rates relief is very positive news for the British hospitality sector, which has been under considerable pressure in recent times.
It is certainly a silver lining when taking into account other impacts that are coming next Spring, such as the national living wage increase, additional national insurance contributions of 1.25% and the temporary VAT rate increasing back to 20%.”
2. New revaluation cycle
Additionally, the Government’s new revaluation cycle means that these will take place for non-domestic properties every three years from 2023 instead of the current system of every five years, a move which has been welcomed throughout the industry.
3. Increase in national living wage
There were also other announcements which will affect those working in the hospitality and leisure sector, including the 6.6% increase in the national living wage to £9.50 per hour. In real terms, this represents a rise of £1,074 extra a year before tax for those working full-time and is one of the most significant increases.
4. VAT rate to return to 20% in April 2022
However, what wasn’t included in the Budget was the much-anticipated extension to VAT of the current 12.5% rate for hospitality businesses as it was announced that this will most likely return to 20% in April of next year.
5. Reform of alcohol duty
The Chancellor also announced a reform of alcohol duty from February 2023 to create a system that, as Mr Sunak put it, is “simpler, fairer and healthier”.
This includes the largest cut to beer duty for 50 years, with duty on draught beer and cider served from containers of 40 litres cut by 5%.
Jackie shared her perspective on this change with us:
“This is another positive worth noting, especially for the pub industry. The future reduction in duty on draught beer and cider may start to level the playing field slightly between retail and pubs.”
Summary: how will the changes affect the hospitality industry from April 2022?
To summarise what the changes mean for the hospitality industry over the next 12 months, Jackie comments:
“Overall, the 100% business rates improvement relief for 12 months is very welcome news indeed and we have some clients who will benefit from this as they look to refurbish or extend their hospitality properties, and therefore make them even more appealing to their customer base.
Additionally, capital gains tax rates didn’t increase, and this is a positive within a moving market where we are looking for new entrants to the hospitality market to keep it buoyant.”
Scott McKerracher, Head of Commercial at The Cumberland added:
“It’s good to see some positive changes coming next year which will hopefully be beneficial to our customers and the wider hospitality tourism sector in Cumbria, Scotland and across the whole of the UK”.