Summer VAT cut: how small businesses can prepare

A new initiative is to reduce the rate of value added tax (VAT) from 20% to 5% for specific family-friendly goods and services this summer. This means big changes for restaurants, cafes, soft play centres, and other tourist attractions. 

The government has announced the Great British Summer Savings scheme in response to the rising cost of living in the UK and extensive lobbying from tourism and hospitality sectors. 

Starting next month, this temporary tax relief runs from 25 June 2026 to 1 September 2026. It aims to boost footfall in the hospitality and leisure sectors while helping to ease the pressure on household budgets during the school holidays.

While this is positive news for attracting customers, the complexities of the scheme and compliance burden on businesses might present challenges. There’s a tight implementation window (and then a job to reverse it all on 2 September), which means updating pricing, menus, point of sale systems, booking systems, and VAT systems. 

You’ll also need to make sure staff are trained on how the VAT reduction is applied before the change comes into effect.

We’ve broken down the details of the scheme below, helping you understand everything you need to know and how to prepare your small business. 

What is the temporary VAT relief for summer?

The Great British Summer Savings scheme is a temporary tax reduction designed to lower the cost of family activities. Between 25 June 2026 and 1 September 2026, the standard VAT rate of 20% drops to 5% on qualifying children’s meals and family tickets.

This applies across the UK and aims to encourage spending during the crucial summer holiday period. It offers a short-term opportunity for small businesses to attract cost-conscious households, and hopes to avoid days out feeling like a luxury.

What can businesses do to prepare?

Businesses are ultimately free to set their own prices, so it’s up to you if you want to reflect the VAT saving in the prices your customers pay. However, the government is urging businesses to pass this on to families as it’s designed to have mutual benefits. 

Here’s a few things you’ll need to do to prepare ahead of the changes:

• check staff understand the new rules so they can answer any customer questions on the discount 
• review your current pricing and update your systems to reflect the new 5% rate 
• adjust menus and booking platforms
• create a new price list / menu which just has goods and services that are eligible for the reduced VAT rate on (this can make it simpler when it’s time to revert back to the 20% rate) 
• check how your systems distinguish between children’s tickets, adult tickets, and family tickets
• review any bundled packages, such as a family ticket that includes merchandise or parking, as these need to be separated for tax purposes (only the qualifying admission part of the package benefits from the reduced rate) 

Who does the VAT cut apply to?

The temporary cut targets businesses operating in the hospitality, entertainment, and leisure sectors. This includes restaurants and cafés offering dedicated children’s menus, as well as cinemas, theatres, and venues selling family admission tickets.

Visitor attractions like theme parks, zoos, soft play centres, and museums also fall under the new rules. However, the relief depends entirely on how you market and price your products.

For example, a children’s meal that’s available for customers dining in your premises qualifies for the 5% rate. Takeaway meals or adult meals marketed in smaller portions don’t qualify and remain at the 20% rate.

HMRC has published guidance on how the temporary reduced rate of VAT is going to work. 

Pros and cons of passing VAT savings on to your customers

The main advantage is the potential for increased demand. Lowering prices makes your business more attractive to families, which can lead to higher footfall and improved sales during the summer months. This can also boost brand loyalty and drive new business. 

On the downside, implementing the changes requires immediate administrative work. Updating accounting software, till systems, and menus takes time and effort.

Applying the incorrect rate could also lead to a liability with HMRC. Failing to apply the discount means you might miss out on a key commercial opportunity to attract customers.

What does this mean for businesses now – and when the scheme ends?

Right now, businesses have a short window to make the most of the summer rush. It’s a good idea to use this time to run promotions that highlight your lower prices and attract local families, for example posting on social media or sending a newsletter to your mailing list.

When the scheme ends on 1 September 2026, the standard 20% rate will automatically apply again. It’s important that you remember to reverse your system changes to avoid undercharging customers and falling short on your tax returns.

Plan ahead so the transition back to standard pricing is as easy as possible. This means communicating with customers about the discount and how long it’s running for, and making it clear that it’s a temporary government scheme. 

Frequently asked questions about the summer VAT cut

Does the VAT cut apply to advance bookings?

Yes, the reduced rate applies to advance bookings as long as the admission date falls between 25 June 2026 and 1 September 2026. Tickets bought during this period for events happening after 1 September 2026 will be taxed at the standard 20% rate.

Can I apply the reduced rate to takeaway children’s meals?

No, takeaway meals don’t qualify for the temporary tax relief. The 5% rate only applies to children’s meals supplied as part of catering services for consumption on the premises.

Do group tickets qualify for the 5% rate?

Group tickets only qualify if they are specifically marketed and sold as family tickets that include at least one child admission. Standalone group tickets that don’t specify family admission remain at the standard rate.

What happens if I have already sold tickets at the 20% rate?

If customers have already prepaid for qualifying summer admissions at the 20% rate, you can adjust your tax accounts to reflect the 5% rate. The government expects you to refund the customer for the additional value added tax paid.

Do I have to change my prices to reflect the reduced scheme for summer?

No. Businesses are free to set their own prices, and as a small independent business you might be considering keeping any savings to help you manage cash flow. However, passing on the savings to customers can be a good tactic for building brand awareness and encouraging more sales.