2026 Autumn Budget: £18,000 Rates Threshold Lift, 3.9% Wage Rise

The Small Business Rates Relief threshold will rise from £12,000 to £18,000, Chancellor of the Exchequer John Healey announced in the House of Lords on 28 October, moving an estimated 2,000 further beauty businesses out of paying business rates entirely. The British Beauty Council welcomed the move but called the wider 2026 Autumn Budget surprisingly short on support for employers and youth employment.

Healey framed the Budget as delivering "breathing space" to embattled businesses and households. The rates threshold increase applies to brands and retailers on the high street, and a real-terms freeze on rates for businesses above the threshold will also ease pressure on the 191,200 establishments across the beauty industry, British Beauty Council CEO Millie Kendall told Cosmetics Business.

"With around half of approximately 50,000 salons already benefitting from Small Business Rates Relief, we welcome the Government's measures to increase the threshold from £12,000 to £18,000 which will move an estimated 2,000 further businesses out of paying business rates," Kendall said.

The package will be paid for by tackling non-compliance on online marketplaces and increasing gambling tax on higher-risk machine games. Stricter VAT compliance rules for online marketplaces will also help prevent offshore sellers from undercutting UK beauty retailers, product creators and salon retail shelves.

What does the wage increase cost employers?

On 1 April 2027, the National Living Wage will increase by 3.9% to £13.21 per hour. The uplift represents £910 in additional gross annual earnings for a full-time worker on the NLW.

Kendall said the Budget's support for start-ups, including a tax offer for founders and their companies plus funding commitments for female entrepreneurs, is welcome. A majority of the beauty industry's innovators are female founders (86%), and 95% of the sector are SMEs.

"The council has been proud to connect these vital voices with the Government and Treasury officials to secure new investment to help businesses to start, scale and stay in Britain, with a particular focus on improving access to finance for smaller firms," she said.

"However, for existing businesses already well-established, who employ and keep the economy running, there was very little to relieve the pressures many are feeling right now."

Kendall was blunt on the gap: "Overall, the Chancellor's Budget reflects the stability we need, but was surprisingly void of any mention of measures to support youth employment or businesses who employ more generally."

"With minimum and living wage increases coming again from April, we need more from the Government to support employers, not just an expectation for [the] industry to keep bearing the brunt of every fiscal shortfall Whitehall needs to cover," she said.

The official Budget 2026 document pledges strategic public procurement and promotion to back British firms, develop a skilled domestic workforce, and ensure talent can move to where it is needed most.

How are business groups reacting?

Zain Hanif, tax lawyer at law firm Freeths, called the rates relief threshold rise "a boost for smaller retail, hospitality and leisure businesses" that "should offer meaningful breathing space." He noted the increase broadly reflects inflation and had been anticipated, and said greater devolution could give local leaders more power to shape business rates around their economies.

Tina McKenzie, National Chair of the Federation of Small Businesses, was harsher. "This budget should have been the moment to help small businesses with the soaring costs holding them back, and the taxes restricting job creation," she said.

"Instead, they got nothing to ease sky-high energy bills and nothing to make hiring someone more affordable, while the increase in business rates relief excludes too many."

FSB's latest research shows nearly half of small businesses (47%) expect revenues to shrink in the coming months, while only around a fifth (22%) expect growth. They are three times more likely to plan reducing headcount than increasing it — 18% versus 6%.

"There was nothing today anywhere near big enough to change that gloomy outlook," McKenzie said.

Stephen Springham, Partner, Retail Research at Knight Frank, put the wage rise in long-run context. Since 2012, the minimum wage has increased 113%, over four times the growth rate for retail sales volumes (25%) over the same period. He noted the 3.9% rise sits above headline inflation (+3.5%) but below the running yearly average increase (+5.2%), and called it likely inflationary.

Limited movement on business rates did not coincide with a ratings revaluation, with multipliers and bandings already set in stone, leaving the Chancellor limited levers to pull, Springham said. Raising the threshold from £12,000 to £18,000 "may benefit some small traders and sole operators, but will not address underlying high street pressures." He flagged pubs, nightclubs and music venues as likely disappointed by the absence of additional rate relief.

With wage costs landing in April 2027 and rates relief capped at the smallest premises, the beauty sector's 191,200 establishments now wait to see whether devolved rates powers and the founders' tax offer translate into material relief.