The Budget 2025 saw the UK Government announce that Scotland would receive an extra £820m over the next three years and revealed plans to introduce permanent lower tax rates for more than 750,000 retail, hospitality and leisure properties in England.
The new business rates multiplier for England will be set 5p lower than the small business and regular multipliers. But this fails to offset the removal of the remaining 40% relief on business rates that was first introduced to stores in England during the pandemic.
In addition, there will be a freeze on tax thresholds for personal tax and employer National Insurance contributions until 2031. However as expected, there will be no increase to income tax (the Scottish Government also has powers to change income tax levels in Scotland).
The Government also introduced 100% business rates relief for EV charging points and EV only forecourts for the next 10 years. It also announced a new mileage charge on electric and plug-in hybrid cars from April 2028.
The Chancellor said fuel duty would be frozen until September 2026, followed by staged increases.
There will be a reduction in the writing down allowance main rate in Corporation Tax. The government will double the penalty for taxpayers submitting a Corporation Tax return late from 1 April 2026. This will be legislated for in Finance Bill 2025-26.
Alcohol duty will rise by RPI on 1 February 2026 to maintain its current real-terms value.
Duty rates on all tobacco products will increase by RPI inflation +2 ppts. These changes will take effect from 6pm on 26 November 2025. The one-off increase of £2.20 per 100 cigarettes or 50g of other tobacco products and annual uprating of tobacco duty by RPI +2 ppts next year will take effect from 1 October 2026 and will be included in Finance Bill 2025-26.
The government will legislate for the new Vaping Products Duty to be introduced from 1 October 2026 at a flat rate of £2.20 per 10ml applied to all vaping liquid, alongside the Vaping Duty Stamps scheme as part of its plans to crackdown on the illicit vape market, as revealed on Monday.
The Government also confirmed its intention to extend the soft drinks sugar tax and its acceptance of the Low Pay Commission’s recommendations on the future rate of the National Living Wage (NLW), as announced earlier in the week. Hourly rates for National Minimum Wage and National Living Wage will change from 1st April 2026 as follows:
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- Over 21s will rise by 50p (4.1%) to £12.71.
- 18-20 will rise by 85p (8.5%) to £10.85.
- Under-18s and apprentices will rise by 45p (6%) to £8.
What’s more, the government will simplify administration of the DRS by removing the requirement for individual producers to account for VAT on unreturned deposits. Instead, this will be done by the Deposit Management Organisation.
David Lonsdale, Director of the Scottish Retail Consortium, said:
“After last year’s Budget battering Scottish retailers will be relieved the 2025 iteration appears to have little which will immediately make trading harder. Nonetheless, there was little to be excited about.
“The most significant announcement from a retail perspective was of a permanently lower business rate for most English shops; with stores seeing reductions of up to ten or twenty per cent in their business rate. When allied to the recent Welsh Government announcement to reduce retailers’ business rates there is now a real risk Scotland will become a substantially less attractive investment option from next April. The onus is on the Finance Secretary to seize the moment to reduce rates for all retailers in Scotland in her January Budget. If she flubs the chance then Scotland’s retailers’ and high streets are likely to face the unwelcome consequences.”
ACS chief executive James Lowman claimed that the business rates changes did not deliver for small stores in England. He said:
“Changes to the business rates system provide nowhere near enough support and are a major disappointment. Small shops will see their rates bills increase in April, and many will see further increases as a result of the revaluation.”
However, Lowman welcomed the announcement of new powers to tackle the illicit trade in vapes, which include fines of up to £10,000 and new digital duty stamps to make it easier to spot fakes.
He said: “We welcome targeted action to disrupt the illicit trade that undermines responsible retailers across the country, but new powers and penalties will only be effective if Trading Standards officers have the additional resources they need to enforce locally.”
The Scotch Whisky Association also vented its frustrations over Budget changes, following the Chancellor’s decision to further increase duty on Scotch Whisky.
Mark Kent, Chief Executive of the SWA said:
“The Scotch Whisky industry is disappointed that the domestic tax burden has once again increased in the Autumn Budget, putting huge additional pressure on a sector suffering job losses, stalled investment and business closures.
“Put simply, the government cannot expect the Scotch Whisky sector to just keep delivering growth, both at home and on the world stage, if the conditions which support growth are not nurtured.
“The previous 3.65% increase to spirits duty has reduced spirits revenue by 7% – a loss to the Treasury of £150m. Hiking duty today, for the third time in two years, not only limits our sector’s ability to contribute to much needed economic growth and productivity, but will once again fail to deliver for the public purse and needlessly cost jobs.
“Increasing global and domestic pressures led our industry to ask for duty in our home market to remain unchanged. Not a tax cut, not a handout, simply breathing room for a critical Scottish industry. Government has chosen to ignore those warnings, to the detriment of distillers, of bars and restaurants, our farmers and suppliers, and ultimately of growth.”
Why the new multiplier does not deliver for c-stores in England – ACS explains:
A convenience store has a rateable value of £30,000. Under the current system, they use the small business multiplier (0.499) to get an initial rates bill of £14,970, which is then reduced by 40% through the Retail, Hospitality and Leisure relief, resulting in a bill of £8,982.
Under the new system, the convenience store with a rateable value of £30,000 would use the Retail, Hospitality and Leisure multiplier (0.382) to get a rates bill of £11,460.
