Jenny Moseley, a former head pastry chef with 15 years of experience, opened Wood Street Bakery in Walthamstow, east London, in August 2021 after losing her previous job during the pandemic. Despite a strong start, Moseley’s café has since faced mounting financial pressures due to rising taxes, wage costs, and overheads, which she describes as nearly unsustainable.

An analysis based on Wood Street Bakery’s pricing highlights the impact of these costs. In the 2025-26 tax year, a £3.30 croissant purchased in the café reflected substantial deductions before any profit was realized. Of this price, 55 pence went to the government in value-added tax (VAT), leaving £2.75 to cover business expenses. Staff wages accounted for approximately £1.47, excluding national insurance contributions, while ingredients cost 40 pence, rent 12 pence, electricity 10 pence, and business rates 2 pence. Any remaining profit was subject to corporation tax.

Payroll expenses have increased sharply, with the bakery spending £212,005 on wages and £9,618 on employer national insurance contributions in 2025-26—the latter up from 13.8% to 15% last year—amounting to about half of net sales. By comparison, the previous year’s wage bill was just under £182,000 with £8,700 in national insurance.

Business rates have also risen significantly. Although the property benefited from a reduced multiplier designed for smaller retail, hospitality, and leisure establishments, Moseley’s bill increased from £3,874 to £4,674 year-on-year, representing a 219% rise compared with the 2024-25 rate of £1,464.

Moseley cited recruitment challenges as another obstacle. She noted a shrinking pool of experienced hospitality workers, forcing businesses to offer higher wages to attract skilled staff. The tight financial margins have limited the sector’s ability to train inexperienced employees, a traditional pathway for many into the workforce. This dynamic, she warned, threatens the hospitality industry’s role in providing entry-level jobs and skills development.

VAT remains a significant burden despite many raw ingredients being zero-rated for tax. Moseley pointed out that the VAT charge applies to the added value created by transforming ingredients into finished products and serving customers, which results in substantial tax collections for the government. In the last financial year, Wood Street Bakery reported approximately £50,000 in profit but paid £23,500 in VAT and £14,400 in corporation tax.

Calls have been made to reduce VAT on hospitality from 20% to 10% as a measure to support the industry. Andy Burnham, a political figure positioning for prime minister, has expressed support for this proposal alongside some prominent restaurateurs. However, Burnham’s team has yet to commit to implementing the policy if elected.

Moseley emphasized the importance of the hospitality sector to the broader economy, citing its role in employment, support for local supply chains, tourism, and the vitality it brings to high streets and town centers. Nevertheless, she warned that the combination of rising operational costs and heavy taxation presents serious challenges to the survival and growth of independent hospitality businesses.