The 2025 Budget, presented by Chancellor Rachel Reeves on Wednesday, November 26, 2025, includes a number of directives that impact hospitality and the visitor economy.
Background
The UK enters a low-growth, high-tax decade. Real household incomes barely rise; inflation likely to stay elevated until 2027; productivity is downgraded. The tax burden is likely to increase to more than 5% of GDP between 2019/20 and 2030/31, largely driven by prolonged freezes to personal tax thresholds and higher NICs.
For tourism, this potentially means weak domestic spending power, rising operating costs, and new local taxation in the form of visitor levies.
Key Measures Relevant to Tourism
England Visitor Levy
- The government is giving Mayoral Strategic Authorities in England the power to create local overnight levies.
- A 12 week consultation has been launched seeking views on its design including how any revenues collected should be used, the types of accommodation that will be included, and how levy rates should be calculated.
Impact: Additional cost on visitors and weaker competitiveness; complexity for operators; costs to business, risk of levy becoming widespread.
High-Tax Environment
- Personal tax, inheritance tax and NICs thresholds frozen to 2031.
- Higher taxes on property, dividends and savings.
- International Student Levy (£925 per student per year) from 2028–29.
Impact: Less domestic disposable income; wage pressures remain high; potential hit to student-related tourism.
Business Rates Changes
- Budget changes to multipliers and transitional relief cut business rates bills for retail, hospitality and leisure for several years, but support largely unwinds by the end of the decade.
- 100% business rates retention (Cornwall, Liverpool City Region, West of England) extended to 2028–29, plus enhanced GLA arrangements.
Impact: Short-term help for smaller operators; long-term burden unchanged; mayors have stronger incentives to introduce visitor levies.
Labour Market
- From April 2026, the following minimum wages will increase
- National living wage increases from £12.21 to £12.71
- 18-20 year-old rate increases from £10 to £10.85
- 16-17 year old rate increase from £7.55 to £8
- Apprentice rate increases from £7.55 to £8
Impact: Businesses face higher employment costs via minimum wages.
Transport, APD & Energy Costs
- APD uprated by RPI from 2027; higher rate extended to private jets.
- Fuel duty frozen to September 2026, but it will then rise with inflation.
- New EV per-mile charge from 2028 – payable alongside vehicle excise duty, at 3p a mile for electric cars and 1.5p for plug-in hybrids.
- Sizewell C (building of a new nuclear power plant) levy increases energy bills from 2026–27.
Impact: Travel becomes more expensive; weaker UK competitiveness.
Macro Backdrop
- GDP at ~1.5% a year, productivity downgraded.
- Real household income growth falls to ~0.25% a year (near zero).
- Inflation: ~3.5% in 2025, ~2.5% in 2026, back to target in 2027.
- Labour market softens but remains stable.
Impact: Tourism demand grows slowly; consumers trade down, shorten stays or delay trips.
