BUDGET SUMMARY 26.11.25

27 November 2025 (Last updated: 27 Nov 2025 12:59)

Headlines 

1. Low-growth, high-tax decade locked in. Real GDP per head and real household income barely grow across the forecast, while the tax take rises sharply as a share of GDP, driven mainly by personal tax threshold freezes and previous NIC increases to April 2031. Taxing property, dividends and savings to close the “tax on wealth vs tax on work” gap. 
2. Visitor levy power confirmed for mayors in England Government will legislate for a levy on overnight stays in hotels, B&Bs, holiday lets and guesthouses in mayoral areas with the option to extend to other strategic authorities, with a 12-week consultation running to February. (GOV.UK) 
3. Business rates support for hospitality, but only time-limited 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 pilots for Cornwall, West of England and Liverpool City Region, plus enhanced GLA arrangements, are extended to 2028-29. Leeds City Fund created as a 25-year business-rates retention zone in the city centre. 

4. Minimum wage uplift: pay boost for lowest paid, cost shock for tourism employers. National Living Wage and youth minimum wages rise strongly from April 2026, improving incomes for low-paid workers but pushing up wage bills sharply in labour-intensive, low-margin sectors such as hospitality, attractions and events. 

5. Households squeezed: income growth slows, taxes up Real household disposable income per person grows at around 0.25% a year on average, well below the last decade, with the Budget’s tax rises a key reason. 

6. Labour supply still migration-dependent, but growth slows Net migration remains the dominant driver of population growth but falls from recent peaks, while participation drifts down with ageing and sickness. 

7. APD and asset taxes rising within a broader high-tax strategy – APD rates uprated by RPI from April 2027, higher APD rate extended to all large private jets, and higher taxes on property, dividends and savings. 

8. Minimum wage increases adding additional costs to businesses. 

Short summary 

The OBR says the UK is heading into a structurally low-growth, high-tax environment, with weak real income growth and a tax take rising by over five percentage points of GDP relative to 2019–20. Budget measures lean heavily on personal tax threshold freezes and other tax increases to close the fiscal gap, while offering targeted relief on business rates and some support for energy and fuel. 

At the same time, a further increase in the National Living Wage and youth minimum wages from April 2026 will raise incomes for low-paid workers but significantly increase labour costs in tourism, hospitality and events, particularly for employers relying on younger and seasonal staff. 

At least £13bn integrated settlements for seven mayors (2026-27 to 2029-30), plus extra local growth funds. 

• APD rate uplift from 2027. 
• Extension and expansion of business-rates retention pilots/zones (GLA, Cornwall, West of England, Liverpool City Region, Leeds). 
• Near-term reduction in energy bills through ECO/RO changes, rather than an immediate “Sizewell levy shock”. 
• New International Student Levy as a risk to inbound student flows and English-language / HE-linked tourism. 

For tourism this means very little disposable income growth in core domestic markets, continued pressure on labour costs, and a new tier of local taxation in the form of mayoral visitor levies on overnight stays. The visitor economy is being asked to shoulder more of the tax burden while being sold the promise of hypothecated spend on local infrastructure and “visitor experience”. 

1: Macro backdrop – demand and confidence 

Summary: Modest GDP growth, weak productivity and very slow real income growth. Budget leans heavily on an improved near-term picture, citing faster GDP and real wage growth in 2024–25, but the OBR still marks down medium-term productivity and confirms a structurally high tax-to-GDP path. The demand environment is fragile rather than booming. 

• Real GDP growth is around 1.5% a year through the decade, lower than the OBR’s March forecast from 2026 onwards as productivity assumptions are marked down. 
• Real GDP per person grows at roughly 1.1% a year on average, 0.3 percentage points lower than in March. 
• CPI inflation is higher for longer: around 3.5% in 2025 and 2.5% in 2026, returning to 2% only in 2027. Services inflation is sticky. 
• Real household disposable income per head slows from 3% growth in 2024–25 to around 0.25% a year (basically zero) for the rest of the forecast, well below the pre-pandemic norm. 
• Consumption growth averages about 1% in the near term, rising towards 1.75% by 2029, but from a lower starting level after recent revisions. 
• Unemployment sits around 5% until 2027, then drifts back towards 4%; the labour market is no longer ultra-tight but not slack either. 

Tourism implications: 

• Possible subdued but positive demand growth for both domestic and inbound tourism, with consumers trading down, shortening stays, or deferring big-ticket trips. 
• Price rises on accommodation, tickets and travel will bite quickly into volumes given the weak income story. 

• Any further cost shocks (visitor levies, APD, local charges) risk nudging marginal visitors either abroad or out of the market altogether. 

2: Tax environment – high tax, rising over time 

Summary: The Budget locks in a historically high tax take relative to GDP; the visitor economy is operating in what is effectively a permanently higher-tax regime. 

• The tax-to-GDP ratio increases by 5.4 percentage points between 2019–20 and 2030–31. 
• Of this, current government decisions (Autumn Budget 2024 and this Budget) add 2.1 percentage points, mainly via extended freezes to personal tax thresholds and prior employer NICs increases. 
• Threshold freezes are extended to April 2031, pulling more workers and pay rises into higher tax bands over time. 
• Rising tax on labour vs relatively weaker growth in corporate profits shifts the burden towards employees, whose incomes directly drive tourism spend. 
• Personal tax thresholds, the NICs secondary threshold and inheritance-tax bands are now frozen to April 2031. 
• The Budget explicitly raises taxes on property, dividends and savings as a deliberate policy choice. 
• From academic year 2028-29, a £925 per year International Student Levy applies per overseas student, with an allowance for the first 220 students per provider. This is intended to fund HE and skills but will increase the cost of UK study for international students. 

Tourism implications: 

• Domestic customers have less headroom for discretionary spend; tourism competes more aggressively with other taxed consumption. 
• Staff wage demands will continue to reflect higher personal tax and living costs, putting further pressure on operators’ margins. 
• Owners of tourism assets (hotels, parks, property portfolios, resorts) face a heavier capital-tax environment, influencing investment decisions and exit strategies. 

• Student levy may depress inbound student numbers, with knock-on effects for English-language schools, university-city visitor economies, long-stay youth and VFR travel. 

3: Visitor levy / tourism tax – new local power 

Summary: Government confirms a new power for mayors in England to introduce a levy on overnight stays and explicitly signals that this power may be extended to other strategic authorities, subject to consultation. This is framed as aligning England with other international cities, not as a revenue grab, but the OBR material does not yet provide a detailed central forecast for it. 

Key features from the GOV.UK announcement: (GOV.UK) 

• Would apply to overnight trips in accommodation including hotels, holiday lets, B&Bs and guesthouses. 
• Power would sit with mayors and local leaders; they choose whether to introduce a levy and at what level, subject to the framework that emerges from consultation. 
• Revenue is promoted as being used for transport, infrastructure, “visitor experience” and major events, with examples cited in London, Liverpool, West of England, North East, York & North Yorkshire, West Yorkshire and Greater Manchester. But not confirmed that this will be legislated for. 
• A 12-week consultation runs to 18 February on design, reliefs, exemptions and support mechanisms. Emergency/homeless accommodation and certain residential settings are explicitly exempt; mayors can add local exemptions. 
• Budget embeds this in the wider fiscal-devolution package, presenting visitor levies as part of mayors’ toolkit alongside business-rates retention and growth funds. 

Tourism implications: 

• This is effectively a new tax headroom for local government on the visitor economy, sitting on top of 20% VAT on accommodation and existing local charges. 
• It hits domestic and inbound visitors alike and cuts across multiple TA segments: hotels, self-catering, serviced apartments, holiday parks, coastal stays, cities, events and business tourism. 
• There is now a clear pathway for this levy to spread beyond combined-authority mayors to other strategic authorities, which broadens the long-term risk footprint for coastal, rural and non-metropolitan destinations. 
• The OBR does not yet quantify its yield in detail, but the political direction is clear: expect mayors to use it, particularly where budgets are tight and visitor numbers are strong. 
• This will sit alongside an already rising APD yield (forecast to grow from £4.1bn to £6.5bn by 2030–31) and other consumption taxes that affect travel.

Tourism tax/visitor levies is now a live issue for the TA. We will be engaged in the consultation but also campaigning and engaging with politicians, officials and partners to seek the best solution(s). More to follow in the coming week… 

4: Business rates and local government finance 

Summary: Business rates changes is a positive but the 5p discount is only a quarter of the maximum 20p discount the Government proposed last year. 

Local government pressures are acute and used as part of the justification for devolved revenue levers like the visitor levy. 

Government will extend the Greater London Authority enhanced BRR arrangements and the 100% pilots in Cornwall, the West of England and Liverpool City Region to 2028-29 and will create a 25-year business-rates retention zone in Leeds city centre (Leeds City Fund). A wider BRR reform package standardises the offer to mayors, giving them stronger incentives to grow their local non-domestic tax base. 

• Business rates multipliers are changed to permanently reduce rates for retail, hospitality and leisure under £500k RV and increase them for high-value properties; a transitional relief package caps post-2026 revaluation increases. £4.3bn support over three years via Transitional Relief and Supporting Small Business. 
• OBR estimates combined business rates measures cut receipts by about £1.2bn a year on average between 2026–27 and 2028–29 but are broadly neutral by 2030–31 as reliefs expire. 
• £13bn of flexible, devolved funding for seven mayors to invest in skills, business support and infrastructure in their areas. 
• Integrated settlements and expanded BRR powers mean mayors now control more of the marginal pound of growth in business-rates revenue. 
• The Budget decision to centralise SEND funding reduces local spending from 2028–29 onwards, but the Economic and Fiscal Outlook flags continued local-government risk. 

Tourism implications: 

• Business rates relief is real for hospitality, attractions, high-street tourism businesses and some leisure operators which is a partial offset to other headwinds. 
• For Cornwall, Liverpool City Region and West of England, extended 100% retention to 2028-29 and increases the incentive to lean on tourism-related growth and potentially to look favourably on visitor levies as a revenue stream. 
• Over the decade, there is no net reduction in the overall business-rates take; this is a rebalancing and smoothing exercise, not a structural cut. 
• Local government remains fiscally stretched; the overnight levy is being framed to plug gaps and fund visitor-facing services. The risk is that visitor levies become a de facto backstop for local budgets. 

5A: Labour market and migration – workforce and skills 

Summary: Labour supply growth slows but remains heavily supported by net migration. Budget 2025 does not introduce major new labour-market measures; the OBR’s view that the UK remains reliant on net migration for labour supply still holds. Potential output growth slows in 2026 partly due to a further fall in net migration, before recovering modestly as productivity improves. 

• Net migration is estimated at 431,000 in 2024, falling towards 262,000 by mid-2026, then rising back to around 340,000 by the end of the forecast period. 
• Labour supply growth slows from 1% this year to around 0.5% a year, reflecting lower net migration growth, ageing and sickness-related inactivity. 
• Personal tax measures are judged to slightly reduce labour supply, though not enough for the OBR to model explicitly in its potential output forecast. 

Tourism implications: 

• The structural reliance on migrant labour in tourism, hospitality, events and transport is unchanged, but flows are slower and policy risk remains elevated. 
• Combined with higher employer NICs (from previous Budgets) and weak productivity, this translates into persistent wage and margin pressure. 
• Without improved productivity and retention, higher taxes on labour bite harder. 

5B: Wage policy – National Living Wage and Minimum Wage uplift 

Summary: From April 2026, the National Living Wage and youth minimum wages rise materially. This delivers an above-inflation pay rise for the lowest paid, especially 18–20-year-olds, but creates an immediate cost shock for labour-intensive, low-margin parts of the visitor economy. 

• Key Budget measures 
• National Living Wage (21+): up around 4.1% to approximately £12.70+/hour from April 2026. 
• National Minimum Wage 18–20: up around 8.5% to just under £11/hour. 
• 16–17-year-olds and apprentices: up around 6% to about £8/hour. 
• Around 2.5 million workers benefit, a disproportionate share of them in hospitality, retail, leisure and other service sectors. 
• This sits on top of very rapid minimum-wage growth over the last five years and against a backdrop of rising youth unemployment and NEET rates flagged by the OBR. 

Tourism implications 

Demand:

• Low-paid workers gain disposable income, some of which will support local spend on day trips, eating out and lower-cost attractions. 
• However, this is partly offset by higher tax, housing and other cost 

Labour costs and margins: 

• For accommodation, hospitality, attractions and events, wage bills increase by 4–9% when wages costs are a high proportion of overall costs. 
• Many front-line and entry-level roles are already aligned to the National Living Wage, so this uplift is largely unavoidable. 
• Could end up with a mix of higher prices, tighter rota and hours management, and service rationalisation (shorter opening hours, reduced F&B offer, fewer staffed touchpoints). 

Youth and seasonal employment:

• The largest percentage increases fall on 18–20s and 16–17s, which are cohorts that underpin seasonal and entry-level roles across tourism. 
• Risk that employers cap headcount or hours for younger workers, reinforcing the OBR’s concern about rising youth unemployment and NEET rates. 

6: Transport, energy and environmental charges 

Summary: The Budget extends the complex bundle of transport and energy charges. There’s a new mileage-based charge on EVs, a fuel duty freeze (again), and a Sizewell C levy on energy bills. 

Key points: 

• From April 2028, a new Electric Vehicle Excise Duty (eVED) applies to electric and plug-in hybrid cars, charged per mile alongside VED. EVs pay about half the fuel-duty-equivalent rate; plug-in hybrids pay half of that EV rate. Vans, buses, coaches, HGVs and motorcycles are out of scope at launch. 
• The 5p fuel-duty cut is extended to end-August 2026, then reversed in three steps (Sep 26, Dec 26, Mar 27), with standard RPI indexation resuming from April 2027. 
• Sizewell C RAB levy puts an additional charge onto energy bills from 2026–27, rising through the forecast; this is offset partially by payments to investors but still a material line in the receipts forecast. 
• All APD rates will be uprated by RPI from 1 April 2027, and the higher APD rate is extended to all private jets above 5.7 tonnes. This is a clear policy rise, not just a volume effect. 

Tourism implications: 

• Car-based tourism faces a mixed picture: short-term support from fuel duty freeze, longer-term upward pressure as the 5p cut is unwound and EV charges bed in. 
• Coach tour operators and domestic transport providers benefit from the near-term fuel duty stance but operate under ongoing uncertainty about future uprating. 
• Marginal near-term relief on energy bills for energy-intensive venues and accommodation, though the structural cost base for energy remains high 

• Explicit APD rate uplifts from 2027 risk UK competitiveness and consumer spending with impacts across tourism. 

Impacts and outcomes for TA members 

For accommodation providers (hotels, B&Bs, self-catering, serviced apartments) 

• Top line: Weak real income growth + higher overall tax burden + new visitor levy power. 
• Price resistance from domestic guests and a sharper focus on value-for-money in city-break and short-break markets? 
• Margins are squeezed between wage/tax costs and limits on passing through price increases. 
• Visitor levies risk becoming embedded in pricing structures, with OTAs and platforms needing to adjust their systems; complexity is also bad for SMEs. 
• Visitor levies plus APD uprating raise the all-in tax burden on overnight stays and trips into the UK. 
• Business rates changes give some relief over the next few years, especially for smaller city and high-street properties. But no long-term commitment. 
• In pilots and BRR zones (Cornwall, Liverpool City Region, West of England, GLA, Leeds), local authorities now keep more of the upside from rateable-value growth, which strengthens their fiscal interest in tourism but also in higher RVs. 

For attractions, museums, heritage, entertainment and events 

• Dependent on discretionary spend that grows more slowly than in the 2010s. 
• Business rates support helps large city-centre attractions and leisure venues, but this is time-limited. 

• Visitor levies that fund public-realm improvements, festivals and destination marketing could be a net positive if hypothecation is genuine and transparent. 

• However, if levies rise without visible reinvestment, there will be political blowback from visitors and operators. 

• The proposed cap on secondary ticket resale at face value will change economics for some intermediaries. 

For coastal, rural and seaside destinations 

Less directly affected initially if visitor levies are concentrated in mayoral city regions, but:

• As visitor-levy powers and BRR incentives bed in for mayors, there is a clear policy path for similar tools to be offered to (or demanded by) other strategic and unitary authorities, including coastal and rural areas. 
• Energy and transport costs matter disproportionately for rural/coastal businesses and visitors. 

• Business rates and local-government pressures will continue to shape parking charges, local fees and service levels (e.g. public realm, maintenance). 

For transport and travel operators (inbound and domestic) 

• Airlines/airports: APD uprating from 2027, reinforcing the narrative that UK arrivals are already heavily taxed before any local tourism levy is added. 
• Coach and bus operators: benefit from fuel duty freeze in the near term; no eVED at launch, near-term benefit from fuel-duty freeze, but RPI indexation resumes from 2027. 
• Rail: Budget mentions rail fares freeze as part of the inflation profile, but OBR notes overall cost pressures; long-term affordability remains a concern. 
• Car tourism: EV drivers will face a new per-mile charge from 2028. 

• Overall: higher transport costs plus visitor levies push up total trip cost, further challenging the competitiveness of UK destinations versus European comparators. 

 

View other News