Reduce VAT on hospitality to 10%: protect jobs, communities & UK competitiveness

Reduce VAT on hospitality to 10% to prevent closures & protect tax revenue. When venues close, HMRC loses 100% of its VAT, business rates, PAYE & corporation tax, reducing employment & supply chains. We believe a lower VAT rate would keep viable businesses trading, securing jobs & ongoing revenue.

Hospitality businesses operate on very tight margins and struggle to absorb 20% VAT alongside rising food, energy, wage and rent costs. We believe a permanent reduction to 10% VAT would save jobs, keep venues open, support apprenticeships and skills, and strengthen high streets – it would help businesses survive and continue contributing billions to the UK economy.

This would protect local jobs, keep pubs and restaurants open, and help high streets, tourism and communities survive.

The Government recognises the significant contribution made by hospitality businesses to economic growth and social life in the UK. Pubs, cafes and restaurants are at the heart of our communities.

From 25 June to 1 September the Government is introducing Great British Summer Savings, which is a temporary reduced rate of VAT on children's menu meals and eligible family attractions, cutting VAT on eligible activities from 20% to 5%.

This is a targeted and temporary scheme to reduce the costs of children’s meals in restaurants, children’s tickets for theatres and cinemas and tickets for everyone for attractions like soft play, adventure centres, and theme parks, helping families enjoy a day out for less.

VAT is a broad-based tax on consumption, and the 20 per cent standard rate applies to most goods and services. Exceptions to the standard rate have always been limited and balanced against affordability considerations. Reducing VAT for hospitality to 10 per cent would come at a significant fiscal cost.

HMRC estimates that reducing the standard rate of VAT to 10% on accommodation and food and beverage services would cost approximately £11 billion a year, meaning tax rises or spending cuts elsewhere, or increased borrowing. For context, £11 billion is roughly equivalent to the annual Child Benefit bill, the total expenditure on the Royal Navy or a 1 percentage point rise in the Standard Rate of VAT.

We keep all taxes under review and make decisions on changes at Budgets, where they can be considered in the context of the overall public finances.