Tax rises could push food prices higher, warn supermarkets
Food prices could rise even higher if higher taxes are levied on the sector, according to the owners of Britain's largest supermarkets. Tesco, Asda, Sainsbury's, and Morrisons all wrote a letter to Chancellor Rachel Reeves ahead of her Budget next month, as well as Lidl, Aldi, Iceland, Waitrose According to them, households would inevitably feel the consequences
of any potential tax hikes on the industry, such as higher supermarket shop rates. The Treasury said combating food price inflation was a priority
and that it was lowering business rates for "butchers, bakers, and other stores.
Supermarket bosses said in a letter to the Chancellor that if the industry were to face higher taxes,
Given the costs currently falling on the industry, including from the last Budget, high food inflation is likely to persist into 2026,our ability to serve our customers will become much more difficult, and it will be households that will live with the consequences.
they forecast.This is not something we would like to see extended by any measure in the Budget,
the spokesperson said.Within the context of the chancellor's Autumn Budget next month, rumors about her tax and budget policies are increasing. Following gloomy economic forecasts and a string of U-turns on cuts to social care, which have made it more difficult for her to comply with her self-imposed borrowing requirements, she is likely to raise taxes. Reeves said she was
not coming backfor more tax hikes after announcing tax hike in November that included a rise in the number of employers are required to pay in National Insurance Contributions. However, economists from the influential Institute for Fiscal Studies (IFS) have estimated a shortfall of £22 billion in the public budget and forecast that Reeves will
almost certainlyhave to raise taxes. The think tank cited rising borrowing costs for the government, lower growth forecasts, and spending commitments made since the spring as reasons for the current tight situation.
Many businesses in the run-up to the Budget often lobby their views and positions to the government, but rising food prices are placing more pressure on people's budgets. According to the Office for National Statistics, the cost of several staples has increased relative to butter prices, up by 19% and milk over 12%, with chocolate and coffee rising 15%. Although higher taxes and minimum wage bills have wreaked havoc on supermarkets, food inflation has risen in part due to poor harvests around the world, with illnesses and droughts affecting yields. Escalating trade tensions also have an impact. Retailers were
Helen Dickinson, chief executive of the British Retail Consortium, which represents the UK's major supermarkets, said.doing everything possible to keep food prices affordable,
But it's an uphill battle,she said,
citing higher taxes. Ken Murphy, Tesco's boss, has previously stated thatwith over £7 billion in additional expenses in 2025 alone,
enough is sufficienton company taxes. The higher National Insurance rate had cost the UK's biggest supermarket this year, according to Tesco, but the year's earnings outlook has been improved, with forecasts of full-year revenues of between £2. 9bn and £3. 1bn. Lidl's revenues soared threefold this week, according to the company. Sales jumped by 7. 9% as pre-tax profits hit £156. In the year, there were 8 million to 28 February, up from £43. 6m a year earlier. The chancellor has previously stated that she is planning
targeted action to combat rising living costsin her budget, but on Friday she declined to rule out raising income tax, despite rumors that she might have broken a key Labour election pledge.
Business rates
Supermarket bosses argued that part of the government's business rates reforms presented a challenge for the sector, particularly the so-called corporate rates surtax, levied on all major commercial premises. Non-domestic businesses, such as shops, pubs, and offices, pay a levy on business rates. The government revealed in last year's Budget that it intends to include two lower figures used to calculate such rates for retail, hospitality, and leisure properties with rateable values below £500,000. However, businesses with rateable values above £500,000 will pay a higher price, which the government claims would include the majority of large distribution warehouses, such as those used by internet retail giants Amazon. According to reports, the chancellor would announce that the rates businesses will have to pay at next month's Budget, as well as further details, which will go into operation in April 2026. However, large supermarket stores in the United Kingdom had argued that they were a tiny percentage of all shops
and that a third of retail's total revenue figures was accounted for a fifth of the total retail They urged the chancellor to
The chancellor has rightfully made combating inflation her highest priority, and with food inflation still high, ensuring that retailer's rates don't rise any more is one of the simplest ways to assist,ensure that the proposed revisions to business rates result in a significant reduction to the industry's rates burden.
Ms Dickinson said.The Treasury said that company rates would be updated to reflect changes in the overall value of the tax base,
the Treasury said,so that the system continues to raise the same amount of revenue in real terms.
the department said.If the total value of rateable properties rises, the tax rate will generally decrease,
Ultimately, what businesses pay after a revaluation depends on both the new RVs and the adjusted tax rate.This means that even if the RV of a specific property goes up, the bill could still decrease if tax cut is significant enough to offset the increase in value.
