UK Budget takes property income tax to 24% and lifts the rates relief threshold for hospitality to £18,000

Chancellor John Healey delivered his first Budget on 28 October, and for anyone letting property or running a small hospitality business in the UK it pulls in two directions at once. Tax on rental income goes up. Business rates for smaller premises come down.

Most of it lands in April 2027, which gives operators a full season to plan rather than a scramble.

Rental income

Rates on savings and property income rise by four percentage points from 6 April 2027. That takes the basic rate on property income to 24%, the higher rate to 44% and the additional rate to 49%, according to analysis by law firm Brodies.

Short-term let and holiday let income taxed as property income sits inside this. Since the abolition of the furnished holiday lettings regime, most UK holiday let owners are taxed on property income rather than as a trade, so this is the rate that applies to them.

Property income tax is devolved to the Scottish Parliament, which sets its own rate. Whether Scotland matches the rise will not be known until the Scottish Budget on 3 December.

Business rates

In England, the valuation limit for Small Business Rate Relief on retail, hospitality and leisure properties rises from £12,000 to £18,000 of rateable value from 1 April 2027. The Chancellor says half of those properties will pay no business rates as a result.

Rates on other retail, hospitality and leisure properties are frozen for two years, though a freeze in real terms still allows bills to rise with inflation. Relief for pubs, music venues and social clubs goes from 15% to 35% on the same date.

Scotland already applies 15% relief to retail, hospitality and leisure properties and 40% to eligible licensed hospitality and music venues. Any change there comes on 3 December.

For a small guest house or a single holiday let paying rates rather than council tax, an £18,000 threshold is the measure most likely to change the arithmetic. Check your rateable value rather than assuming, because the threshold is on valuation, not turnover.

Wages

The National Living Wage rises 3.9% from £12.71 to £13.21 an hour from 1 April 2027, with the 18 to 20 rate going from £10.85 to £11.27.

UKHospitality chief executive Allen Simpson, responding to the wage announcement before the Budget, called the increase "a considerable additional burden for a labour-intensive industry like hospitality" and said businesses already facing substantial cost increases would feel it most.

That sits on top of employer National Insurance contributions, which have been at 15% since April 2025 with the threshold at £5,000 per employee. For an operation staffed with part-time housekeeping and front desk hours, the threshold change matters more than the headline rate.

What hospitality asked for and did not get

VAT on hospitality stays at 20%. UKHospitality and other trade bodies, with chef Tom Kerridge, have been campaigning for a cut to 10% under the VATsTheProblem banner, and that was the sector's main ask. It was not granted, and nor was employer National Insurance relief.

The levy to watch

The Budget set out a proposed implementation timeline for an England Overnight Visitor Levy, and the industry response was about pace rather than principle.

"The industry needs a minimum 18-month implementation period once the details have been finalised," said Joss Croft, chief executive of UKinbound. "Scotland's experience has shown just how complex visitor levy implementation can be, and England cannot afford to rush it."

He is right that the complexity is operational. A levy has to be collected at the property, shown correctly to the guest, excluded from commissionable rates where applicable, and remitted to a local authority on that authority's schedule. That is PMS and channel manager work, and the lead time Croft is asking for is roughly the lead time a vendor needs to build it.

If you operate in England, the practical move now is to ask your PMS provider what their plan is. The ones who built for Scotland and Wales already have the pattern. The ones who have not will be asking you for your rateable value and your council's rules in a year's time.