New figures from UKHospitality and the British Retail Consortium say hospitality pays 82p in tax for every £1 of pre-tax profit, and retail 72p, against an average of 50p across 11 sectors. The headline sounds like a complaint about high taxes. I read it differently: the problem is taxes that ignore profit. If the Budget wants to help small operators, business rates relief matters far more than any headline rate.
Corporation Tax and Income Tax rise and fall with what you earn. Business rates and employer National Insurance don’t. A café on thin margins pays the same rates bill in a bad year as a good one, and the same employer NI on every hour its staff work. That’s why the effective rate looks so brutal in sectors with lots of staff, big premises and small margins.
The lens is the same whatever your structure. A sole trader running a café pays Income Tax only on profit, but the rates bill lands either way. A limited company running two pubs is in the same position, just at a larger scale. Small business rate relief helps the very smallest. The trade bodies want a bigger retail, hospitality and leisure discount and help for firms hit by the 2026 revaluation. Those are the measures to watch on 28 October.
Every sector lobbies before a Budget, and banking at 40.5p is hardly suffering. But the gap is structural. It doesn’t come from one bad year.
If you run a café, shop or pub, which tax actually keeps you up at night: the one on your profit, or the ones you pay before you’ve made any?
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[…] sectors genuinely are taxed before they make a penny, as we covered in Where the Tax Bites, and that’s a fair fight to pick. But it’s still an argument for knowing your margin, […]