Chancellor Announces “Selective” Summer VAT Cut for Hospitality, Leisure and Family Dining

Chancellor Rachel Reeves has unveiled a temporary VAT reduction spanning large parts of the hospitality, leisure and licensed on-trade sectors, cutting the standard 20% rate to 5% for a ten-week window this summer — a move that will directly affect pricing in restaurants, cafés, theme parks, soft play venues, cinemas and theatres.

Delivering a statement to the House of Commons on Thursday, Ms Reeves confirmed the reduction forms part of a broader cost-of-living package tied to ongoing economic pressures stemming from the Iran war. The measure, branded by the Treasury as the “Great British Summer Savings” scheme, will run from 25 June to 1 September 2026.

For operators in the licensed on-trade and hospitality sector, the most immediately relevant element is the reduction on children’s meals served in restaurants and cafés, which will move from the full 20% rate to 5% for the duration of the scheme. The Chancellor confirmed ticket prices across a wide range of leisure attractions — including fairs, theme parks, zoos and museums — will benefit from the lower rate for both adults and children.

Children’s admission prices for cinemas, live concerts, soft play centres and theatrical performances are also included in the temporary relief. Operators across these categories will need to assess how — and whether — the VAT saving is passed on to consumers, and how point-of-sale and accounting systems will need to be adjusted for the transitional period.

Beyond the VAT cut, the Chancellor announced free bus travel for children in England throughout August, which could have secondary footfall benefits for town-centre hospitality businesses. Other elements of the package — including a 10p-per-mile increase to tax-free mileage rates backdated to April 2026, a £350 million chemicals resilience fund, a £120 million support package for the ceramics sector, and the removal of import tariffs on more than 100 food product categories — may offer some relief to supply chains serving the wider food and drink industry.

The temporary nature of the relief — spanning roughly ten weeks across the peak British summer trading period — means operators will need to prepare for two VAT rate changes in quick succession: the downward adjustment on 25 June, followed by a return to 20% from 1 September. Businesses affected are advised to contact their accountants or VAT advisers promptly to ensure compliance and to review menu pricing, ticketing structures and till configurations ahead of the June deadline.

UKHospitality, which has long campaigned for a cut to VAT for the entire hospitality sector, said the move was recognition from the Government that a lower rate of VAT delivers immediate benefits for consumers, businesses and the economy.

It said the VAT cut was a ‘positive step’ for families, and urged the Government to now take a bold step by cutting VAT for the entire hospitality sector.

Kate Nicholls, Chair of UKHospitality, said: “It’s good to see the Government recognise the importance of a lower rate of VAT for hospitality as the quickest and simplest way to lower prices and boost consumer confidence.

“A 5% rate of VAT for family admissions to visitor attractions, children’s meals and soft play is a positive step to help families enjoy a great British break this summer.

“If there is scope to further support families by including accommodation in this reduced rate, I would encourage the Chancellor to do so to help tackle one of the biggest costs of a family holiday.

“This should now be viewed by Government as a downpayment on a wider shift to a lower VAT rate for the entire hospitality sector, to bring us in line with Europe. Our biggest competitors benefit from VAT rates that average around 10%, and can be as low as 7%, and the UK is a clear outlier.

“As the Government has recognised today, VAT is the single biggest lever it can pull to lower prices, tackle inflation, drive demand, boost spending, generate growth and create new jobs. I would urge it to be bold and cut VAT for the entire hospitality sector.”