Budget 2021: Rishi Sunak Announces Hospitality Business Rates Discount, National Insurance Changes & Return to 20% VAT.

Rishi Sunak announced today that the government will provide a 50% discount on business rates for the retail, hospitality, and leisure sectors. 

In his Spring Statement, the Chancellor announced that eligible businesses will be able to claim up to £110,000 back at the end of the tax year. This will help businesses that have been hardest hit by the pandemic.

The business rates relief is worth almost £1.7bn and will be available to over 90% of all businesses in the retail, hospitality, and leisure sectors.

The Chancellor also used the Spring Statement to announce that the National Insurance threshold will be raised by £3,000.

Sunak says that 70% of workers will get an effective tax cut due to the changes, with the threshold for paying National Insurance being raised from £9,500 to £12,570.

The  statement also announces a review of the Apprenticeship Levy in the new Treasury tax plan, which will be finalised in the autumn. In the main spring statement document, it states: “The government recognises that employers have frustrations with the way that these apprenticeship levy funds can be spent within the apprenticeships system and is delivering a suite of improvements to address these.

Hospitality trade bodies have been left disappointed, however, by the 20% VAT rate return for the hospitality and tourism industry.

UKHospitality warns that a return to 20% VAT will be met with disappointment by thousands of hospitality businesses, as it will “jeopardise jobs and restrict the sector's efforts to stifle price rises for consumers, and its ability to lead the UK's post-pandemic economic recovery.”

UKHospitality Chief Executive Kate Nicholls said: "This is a real setback for thousands of UK hospitality businesses still suffering the devastating effects of Covid and facing a tidal wave of rising costs. For many businesses, the removal of the lifeline of a lower rate of VAT might prove fatal. For a heavily, disproportionately taxed sector, a return to 20% dashes the hopes that many businesses could begin to recoup some of the losses of the last two years.

"Locking in VAT at 12.5% would have given hospitality businesses a major boost, and helped the sector in its ambition to lead the UK back to post-Covid prosperity. As it is, thousands of jobs could be lost, the UK will remain uncompetitive versus international rivals, and already hard-pressed consumers in the midst of a cost-of-living crisis will see price rises in their favourite pubs, bars and restaurants, further fuelling inflation.

Nicholls did concede, however, that the business rates relief, along with the reform of the Apprenticeship Levy, would be welcomed by the hospitality sector.