Category: Resources

The government’s sudden U-turn on business rates policy is set to increase tax bills for large UK retailers from 2026. After earlier suggestions of relief for large‑format stores, the Treasury has now confirmed that properties with a rateable value over £500,000 will remain in the top tax band. Many operators are already seeking business rates advice for supermarkets to understand how this shift affects future liabilities.

This decision lands at a time when supermarkets are already battling rising operational costs, reduced margins, and inflation-driven pricing pressure. With business rates already accounting for around £7 billion annually from the retail sector, many large chains could now face further financial strain.

The move is expected to affect both profitability and pricing strategies across the industry, with concerns that higher costs may be passed on to consumers. For large retailers, the priority now is to assess rate exposure, protect margins, and plan ahead.

At Apex Accountants, we help supermarket operators and retail businesses prepare for regulatory shifts like this, offering business rates support for supermarkets and property-focused financial planning to reduce risk and support sustainable growth.

What has changed?

The government had previously hinted that larger stores with a rateable value above £500,000 would receive relief from the top business rates band. However, this relief has now been scrapped. The Treasury has confirmed that these properties will remain in the highest tax bracket.

This decision affects many of the UK’s largest supermarkets. Major chains expect their stores to face increased costs when the next revaluation period begins. The British Retail Consortium has criticised the move, warning it could have serious consequences for retailers.

Why does such an increase matter to supermarkets?

Supermarket operators in the UK already contribute a significant share of the total business rates collected, with the retail sector paying about £7 billion each year, accounting for roughly a third of retail business rates

With rising energy costs, wage increases and supply chain issues, this additional tax burden will make it harder for supermarkets to operate efficiently. Larger stores might find it challenging to sustain their current profit margins, potentially necessitating cost-cutting measures.

Will food prices go up?

Yes. Retailers have warned that without the expected tax relief, many supermarkets will have no choice but to increase prices. The extra costs will be passed on to consumers through higher prices on everyday essentials. These hikes could further impact households already dealing with inflation and reduced spending power.

Could this lead to store closures?

The BRC has estimated that up to 400 large retail stores could shut down if the current policy goes ahead. Stores in areas with lower turnover or limited customer footfall may be most at risk. This could reduce retail access for local communities, especially in rural and underserved areas.

What about smaller shops?

The government still plans to offer relief to small businesses and independent retailers. This includes those in the hospitality and leisure sectors with lower rateable values. However, the government has now excluded large-format stores, which dominate supermarket chains, from this support.

Will online retailers be affected?

The focus of the policy is on physical premises. Digital retailers lacking large warehouses or physical outlets might experience less impact. However, online businesses that operate large fulfilment centres with high rating values may still face increased tax costs.

What can supermarkets do now?

Our tax advisors for the retail sector urge all retail businesses to review their property valuations and forecast the cost impact. This is particularly important for supermarket groups, food retailers, and businesses with multiple large locations.

You should:

• Recheck your rateable values and update your financial models
  
• Budget for the likely increase in business rates for 2026 onwards
  
• Revisit your pricing strategy to assess what can be absorbed
  
• Identify underperforming sites that could become loss-making
  
• Speak to your accountant for tailored planning and business rates support for supermarkets

Strategic Business Rates Advice for Supermarkets from Apex Accountants

This Treasury U-turn adds yet another layer of financial pressure on large UK supermarkets. Without business rates relief, many retailers now face increased costs that could disrupt pricing, profitability, and long-term stability.

At Apex Accountants, we specialise in supporting retail businesses through complex regulatory shifts. Our team offers expert guidance on tax forecasting, business rates analysis, and strategic financial planning tailored to large-format retail operations.

With over 20 years of experience in retail accounting, our tax advisors for the retail sector understand the pressures faced by supermarkets. Whether you need property-level advice or full financial modelling, we’re here to support your growth and compliance.

Get in touch today to discuss how we can protect your retail business from rising costs.

The UK Government has confirmed a 4.1% rise in the National Living Wage (NLW) from 1 April 2026, lifting the hourly rate for workers aged 21 and over from £12.21 to £12.71. This change, recommended by the Low Pay Commission, is part of the government’s wider goal to align minimum pay with two-thirds of median earnings. The UK minimum wage update 2026 is expected to benefit over 2.4 million employees, offering full-time workers an annual gross boost of around £900. While this is a welcome step for workers grappling with high living costs, it presents real challenges for businesses already navigating wage inflation, frozen tax thresholds, and rising National Insurance liabilities.

At Apex Accountants, we help employers assess the impact of wage reforms on payroll, budgeting, and compliance. With the minimum wage changes for employers due in April, now is the time to review your workforce strategy. Here’s what the 2026 increase means for your business and how to prepare.

Are there bigger increases for younger workers?

Yes. The 2026 changes deliver larger percentage increases for younger age groups and apprentices:

• Workers aged 18–20 will see a rise of 8.5%, from £10.00 to £10.85
  
• Workers aged 16–17 and apprentices will receive a 6% boost, from £7.55 to £8.00
  

The government also plans to phase out youth wage bands entirely in future budgets, aiming to standardise pay for all adults. If you’re an employer hiring under-21s or apprentices, these changes will increase your overall wage bill considerably, especially when combined with other tax measures.

What’s the financial impact for businesses?

The increase in the National Living Wage for over 21s comes at a time when employers are already under pressure. Labour costs have risen consistently since 2019, and now many businesses must:

• Recalculate payroll budgets ahead of Q2.
• Update payroll software and employee contracts.
• Account for higher National Insurance (NI) costs, especially as the employer NI threshold was lowered to £5,000 per year.
• Prepare for more workers entering the 20% income tax band, as income tax thresholds remain frozen at £12,570.

The impact is not just about higher wages. It affects pension auto-enrolment contributions, employment taxes, and even benefit entitlements. Businesses need to model these costs now to avoid last-minute cash flow shocks in the next financial year.

Which sectors will feel it most?

Sectors with large hourly-paid workforces will feel the greatest strain. These include:

• Hospitality and leisure
• Retail and supermarkets
• Care and support services
• Manufacturing and logistics

Many employers in these industries are already operating on thin margins. A rise in wages, combined with higher employer NI contributions and rising supply costs, may lead to price increases, reduced hiring, or cutbacks in hours.

Trade groups like UKHospitality have warned that businesses can no longer absorb cost increases and may be forced to pass them on to customers—fostering inflation.

Will more low-paid workers now pay tax?

Yes, and this is a key point often missed. Although the wage increase is welcome, the freezing of personal tax thresholds means that more low earners will now pay income tax. Anyone earning over £12,570 will pay the basic 20% tax rate. A worker earning £12.71 per hour, 35 hours a week, will earn around £23,100 annually — far above the tax-free threshold. Taxation may claw back much of the wage increase.

For employers, these changes may mean answering more employee questions about net pay and explaining why wage rises may not feel like take-home increases.

What should employers do now?

At Apex Accountants, we recommend that all businesses take proactive steps to prepare for April 2026. These include:

• Payroll forecasting: model different wage scenarios, especially if you employ a mix of age groups or offer variable hours.
• NI and pension review: recalculate employer NI and auto-enrolment pension costs, particularly for employees crossing the earnings threshold.
• Budget impact assessment: review cash flow and budget allocations. Even small changes in hourly wages can add thousands to annual costs.
• Contract and software updates: update employment contracts and ensure your payroll systems are ready to apply the correct rates from April.
• Explore support options: some sectors may qualify for grants or funding schemes tied to apprenticeships, training, or local economic recovery. We can help assess your eligibility.

These minimum wage changes for employers also present an opportunity to review workforce structures and improve pay equity across age groups

Are there wider policy concerns?

Yes. The rise in the National Living Wage for over 21s, though popular with employees and unions, is happening alongside rising unemployment and slower hiring rates. The UK job vacancy rate is now at its lowest since 2021, and many firms say they are reluctant to hire inexperienced workers at higher costs.

Policymakers must now strike a balance between protecting low earners and supporting job creation. Compared to 2024, it will now cost businesses around £2,367 more per year to employ a full-time minimum-wage worker—due to wage increases and employer NI changes introduced over the last two budgets.

Businesses must now tread carefully — rewarding staff while safeguarding viability.

Apex Accountants’ View of the UK Minimum Wage Update 2026

The impending 4.1% increase in the minimum wage represents a significant shift for employers throughout the UK. With higher labour costs, frozen tax thresholds, and tighter margins, this change demands serious attention from finance and HR teams alike.

At Apex Accountants, we work with businesses to stay ahead of wage reforms, not just react to them. We help you:

• Forecast the full cost of wage increases, including tax and pension impacts
• Build flexible payroll models that support compliance and profitability
• Identify cost-saving opportunities through tax planning and reliefs
• Integrate updates into payroll systems and financial reporting with precision

This April, don’t leave wage planning to the last minute. Speak to our team today to prepare your payroll and budgeting strategy ahead of the 2026 increase.

Chancellor Rachel Reeves is preparing to hand new tax powers to English mayors — allowing them to apply a levy on overnight stays for the first time. This proposed Rachel Reeves tourist tax could be introduced in major cities such as London, Manchester, and Liverpool, with revenues used to support transport, public services, and local infrastructure.

The UK aims to modernise its visitor economy by following cities like Paris, New York, and Barcelona.

Each of these cities already applies an overnight levy to support local tourism services and infrastructure. The London tourist tax update reflects the UK’s push to devolve fiscal powers to local city authorities. This change will help local governments respond more effectively to tourism-related costs and pressures.

At Apex Accountants, we help hotels, B&Bs, Airbnb hosts, and short-let operators prepare for tax reforms like this—with clear guidance on systems, tax treatment, and financial planning.

What Is the Rachel Reeves Tourist Tax, and Who Will It Affect?

The proposed levy will apply to overnight stays in participating English cities. It includes hotels, guest houses, holiday lets, and short-term rentals booked through platforms like Airbnb.

Local leaders can decide how the charge is applied — either as a flat fee (around £2 per night) or a percentage-based model, similar to the approach used in some EU cities. That means luxury hotels may carry higher per-night levies than economy or budget stays.

The charge will appear on invoices and booking confirmations, clearly itemised for guests. This may affect all overnight visitors, including tourists, business travellers, and families visiting relatives. Although participation is voluntary, we anticipate a swift response in cities such as London and Manchester. According to a recent London tourist tax update, the Greater London Authority estimates the capital alone could raise up to £240 million per year if a 5% levy is introduced.

Why Is the Government Introducing This?

Until now, England was the only G7 country that did not allow city authorities to apply tourist levies. Cities like Paris, Milan, New York, and Edinburgh already raise millions each year through similar schemes.

By enabling these powers, the government hopes to reduce the burden on local council budgets and improve infrastructure in heavily visited areas. The proposed tourist tax consultation in the UK, open until February 2026, seeks to clarify how cities can apply the levy and how funds will be distributed between mayors and borough councils.

While hospitality groups have raised concerns—arguing the tax may discourage short breaks or family trips—research from Centre for Cities suggests the impact on tourism numbers is minimal when rates are modest.

When Will It Be Introduced?

The tourist tax consultation in the UK will remain open until early 2026. Once final rules are agreed, cities will be allowed to launch their schemes. The first local levies could begin in late 2026 or early 2027.

Cities will be able to choose between flat or percentage models and may also apply caps on high-value bookings or long stays. Accommodation providers must report this tax separately in their financial records, and guests cannot recover it like VAT.

How Will It Affect Accommodation Providers?

Hotels, B&Bs, serviced apartments, and short-let hosts will need to update their systems to:

• Add the tourist levy to booking engines and billing systems.
• Record the charge separately from accommodation income for accounting and tax purposes.
• Report and possibly remit the funds to local authorities.
• Inform guests clearly at the point of booking or check‑in.

The requirement applies to both direct bookings and third-party platforms like Airbnb, Booking.com, and Expedia. For larger chains and multiproperty operators, it may also require changes to centralised finance systems.

If your accommodation business uses cloud accounting tools, you’ll need to confirm whether your platform supports tourist levies and adjust tax codes accordingly. Failure to show the charge properly could create audit risks or misreporting under HMRC rules.

Will It Harm Tourism or Local Businesses?

The short answer is no — not if it’s implemented well.

The Centre for Cities reports that visitor numbers tend to stay stable, even when modest levies are introduced. In fact, many visitors are familiar with these charges when travelling abroad.

What matters most is how the revenue is spent. Cities that reinvest in clean streets, safer areas, and public transport often benefit from a stronger tourist economy — not a weaker one.

Still, communication will be key. Businesses must explain the charge clearly, avoid surprise costs, and adapt marketing strategies to reassure customers that they are getting value for money.

Why Choose Apex Accountants?

At Apex Accountants, we work closely with tourism, hospitality, and accommodation clients across the UK. Our team helps businesses stay compliant and profitable through fiscal changes like this.

Here’s how we support you:

• Tax Planning & Compliance
  We apply the correct VAT treatment and help you include the levy without misreporting income or overcharging guests. We ensure the levy is correctly classified for local and national accounting.
• Financial Forecasting
  We model how tourist levies will affect revenue, profitability, and booking patterns across weekdays, weekends, and seasonal peaks. This helps you stay one step ahead.
• Cloud Accounting & Booking Integration
  We help you integrate the new charge into your invoicing and property management software. You’ll have audit-ready records and compliant reporting from day one.
• Business Advice for Hotels & Short-Lets
  Whether you operate a single serviced flat or manage dozens of rooms, we offer tailored guidance to protect your margins and reduce disruption.

We’re already helping clients in London, Edinburgh, Cardiff and Manchester prepare for the proposed levy. Let us help you stay ahead.

Need help preparing your business for the tourist tax?

Get in touch with Apex Accountants for tailored tax advice, clear financial guidance, and full support to get your systems ready.