Autumn Budget 2025: Retail Sector Commentary

The government has announced a £4.3 billion support package to cap business rates reduction from April 2026 for almost 750,000 retail, hospitality and leisure properties. This will be achieved by increases in rates on commercial properties with a rateable value of more than £500,000. This will benefit smaller high street retailers, who were expected to be hit hardest by rate multiplier increases. However larger retailers operating larger stores or online retailers, operating “Big Box Sheds” will see an increase in the level of rates levied. This will impact online retailers who do not operate physical stores and rely on these large size buildings to fulfil orders, though will find it easier to pass on increased costs to customers. This will also impact retailers with larger footprint stores, who may potentially look at downsizing stores or closure of some larger premises.

It was announced pre-budget that the National Living Wage was set to increase in April 2026 by between 4.1% to 8.5% depending on the age of the employee. For those aged over 21 the increase including NIC is 57.5p per hour to employers. The outcome of this announcement could lead retailers to review their staffing levels and potentially use this as an opportunity to investigate automation or new technology in place of staff or operate on leaner staff levels. In any case retailers should be considering the impact on the bottom line and how this fits in with hiring of staff and current staff levels.

The Chancellor also announced that from April 2029 salary sacrifice for pensions in excess of £2k will be subject to employee and employer NIC. This will further tax employees, something the government said it would not do, as well as stretch already tight margins for retailers. However given the time before this is implemented means that there is an option to consider revisiting levels of salary matching, hiring policies and impacts on future pay.

From April 2026 the main writing down allowance on plant and machinery purchases will reduce from 18% to 14%, this is however sweetened with a new first year allowance of 40% relief on purchases of equipment and plant that qualifies. The Government in encouraging retailers to invest in their infrastructure of their business and incentivise future investment. In order to maximise any opportunities here, it may be beneficial to consider the timing of asset purchases to maximise the tax efficiency of the purchase.

To support fair competition between high street businesses and online retailers, the government will remove the customs duty relief for low value imports (goods valued at £135 or less. From March 2029 at the latest, low value goods will be charged customs duty as bulk imports currently are. This allows UK based and high street retailers to operate on a more level playing field with regards being able to complete on price with online retailers based outside of the UK, who have seen exponential growth in demand over the last few years due to their low pricing.

The government announced that action will be taken on retailers breaching tobacco and vape regulations and are using powers in the Tobacco and Vapes Bill to introduce a new licencing scheme for retailers to be able to stock these products. This may add an additional burden onto retailers, however in the long term will protect retailers who legitimately sell these products. It is hard to determine how this will impact the sector both from a cost and administration perspective at the current time.