Chancellor Rachel Reeves announced a temporary cut in VAT on 21st May 2026, with the intention of giving financially strapped families with kids, a cash boost during the summer holidays.
The reduced rate of VAT will be 5% was and applies to a list of activities for a six-week period from 25th June until the kids go back to school in early September 2026. The temporary measure covers children’s meals, children’s admission tickets and admissions to qualifying family attractions, such as Alton Towers.
The government is hoping that this temporary reduction in the costs of children’s meals in restaurants, children’s tickets for theatres and cinemas, and tickets for everyone for other attractions such as soft play, theme parks and adventure centres, will both help financially strapped families ass well as giving a boost, albeit temporary, to the economy.
In addition, children aged five to 15 in England will also be able to travel free on local bus services throughout August, with Chancellor Rachel Reeves committing more than £100m to fund the initiative.
What exactly is covered by the reductions?
The reduced rate of VAT, from 20% to 5%, will apply to three categories:
- Children’s meals, the relief is limited to meals that are clearly marketed and presented for children and consumed on the premises. However, as many kids’ meals are merely smaller portions of adult meals, this may well become a bone of contention.
- Admission tickets, the reduced rate applies to children’s tickets for cinemas, theatres, exhibitions, concerts and similar events. Adult tickets remain standard-rated unless they form part of a family ticket, in which case the reduced rate can apply to the package as a whole.
- Family attractions, such as theme parks, zoos, museums and soft play centres. In these cases, the reduced rate applies to all visitors, which will clearly have the greatest commercial impact. It will however require businesses to confirm to HMRC that their activities fall within the definition of a qualifying attraction and why.
As it is only 4 weeks to the start of the scheme, businesses have only been given a short window to prepare both their logistics and accounting systems. The other elephant in the room is the requirement to obtain clearance from HMRC that they qualify to apply the reduction. As HMRC’s track record in responding to such submissions in a timely manner is woeful, this is highly likely to prove contentious.
The reduced rate and who will pay!
The reduced VAT rate, which is a cut from 20% to 5% on eligible activities across the UK, will also include repeat-entry tickets. HMRC have stated this type of ticket whilst qualifying, is solely for use within the relief period. So good luck enforcing that HMRC!
The summer savings are planned to be funded by reforms to the foreign branches exemption. This is a tax loophole that currently allows companies to offset overseas losses and thereby reduce the tax they pay in the UK. Dear Rachel claims that closing this loophole, could potentially raise “many hundreds of millions a year”, but could not produce figures to back up her claim.
Potential complications
At first glance this government initiative sounds like it’s a great idea, even though it will only run for a short period. However, tax experts are already pointing out a number of flaws and issues.
Emma Rawson, of the Association of Taxation Technicians (ATT), has raised concerns that the proposals will “further complicate an already overcomplicated tax”. “VAT is ripe for reform, but a wider review is needed, not short-term narrow changes such as this one,”. “It’s also highly debatable as to whether the new measure will actually reduce costs for families. We’ve seen in the past that businesses don’t always pass on VAT cuts to consumers.”
Rawson pointed to the fact sheet accompanying the announcement, which prefaced the potential savings figures with the line “if the business chooses to pass through the full benefit”. Tax expert Jason Croke also raised complication concerns, recalling the “hassle and errors during the Eat Out [to Help Out] scheme”. and which ended up being a shambolic mess.
Accountant’s view
In my opinion any measure, albeit temporary, that reduces the costs of a family day out is to be welcomed, especially as it’s planned for rich multi-national companies to effectively pay for it. Unfortunately, in my long experience on temporary tax measures, there are bound to be unexpected consequence for such schemes brought in at short notice, with the potential impact not fully thought through.
