The government has announced a temporary 5% VAT rate on selected family-focused activities from 25 June to 1 September 2026. While the aim is to help families enjoy more affordable days out during the summer holidays, it also means hospitality and leisure businesses have some important changes to make before the scheme begins.
If your business runs a restaurant, cinema, theatre, museum, zoo, heritage attraction or soft play centre, now is the time to prepare.
Which businesses are affected?
This temporary VAT reduction is not a blanket cut across the hospitality industry. Instead, it only applies to specific supplies made by eligible businesses.
The reduced 5% VAT rate applies to:
- Children’s meals served for consumption on the premises from a dedicated children’s menu
- Children’s tickets for cinemas, theatres, concerts, exhibitions and shows
- Family tickets for cinemas, theatres, concerts, exhibitions and shows
- Admission tickets for qualifying family attractions, including zoos, museums, heritage sites, theme parks, soft play centres and similar venues
It’s worth noting that not every product or service your business sells will qualify, so checking HMRC’s guidance carefully is essential.
What doesn't qualify?
This is where many businesses need to take extra care.
For example:
- Takeaway children’s meals are not included.
- Smaller adult meals or discounted adult menu items do not automatically qualify.
- Adult-only cinema or theatre tickets remain subject to the standard VAT rate.
- Season tickets generally do not qualify unless they meet specific HMRC conditions.
The VAT treatment depends on how products are marketed, priced and presented, not simply who buys them.
What should businesses do now?
Although the change is temporary, it still requires proper planning. Making the right adjustments before 25 June will help avoid pricing mistakes and VAT errors later.
Here are the key actions to take:
- Review which products and services qualify.
- Update your till and EPOS systems with the correct VAT rates.
- Check your accounting software VAT codes.
- Review menus, ticket types and pricing structures.
- Train staff so they understand which sales qualify.
- Update website pricing and promotional material if needed.
If you use Xero, it’s worth checking that your VAT rates and tracking categories are correctly configured before the new rate comes into force. If you connect your EPOS system to Xero, make sure the integration also applies the correct VAT treatment.
Should you reduce your prices?
One of the biggest questions businesses are asking is whether they should pass the VAT saving on to customers.
The government hopes businesses will use the relief to make family activities more affordable and encourage additional spending during the school holidays. However, there is no requirement to reduce prices, meaning businesses can choose how they use the temporary tax saving.
Many businesses may decide to:
- Reduce prices to attract more visitors.
- Keep prices the same and improve margins.
- Use the saving to fund special family promotions or bundled offers.
The right approach will depend on your costs, competition and overall pricing strategy.
Don't forget the end date
Because this VAT reduction only runs until 1 September 2026, businesses also need a plan for switching everything back afterwards.
That means remembering to:
- Change VAT rates back to 20%.
- Remove temporary pricing.
- Update EPOS systems.
- Check your VAT return covers both VAT rates correctly.
- Review any advance bookings that span the relief period.
Planning for both the start and the end of the scheme will make life much easier when your VAT return is due.
A good opportunity to review your systems
While no one enjoys changing VAT rates, this temporary measure offers a useful opportunity to review your finance processes.
Take a look at:
- Whether your sales are mapped to the correct VAT codes.
- Whether your Xero reports are giving accurate VAT information.
- Whether staff understand when reduced rates apply.
- Whether your pricing strategy could be improved for the busy summer season.
A little preparation now could save a lot of time later.
Ready for the Summer VAT Changes?
The Temporary 5% VAT Rate for Summer 2026 could be a great opportunity for hospitality and leisure businesses, but only if you’re prepared.
If your business sells children’s meals, tickets or attraction entry, now is the perfect time to review your pricing, update your VAT settings and make sure everything is ready before the changes come into effect.
If you’re unsure how the new rules apply to your business or you’d like help making sure your Xero account is set up correctly, we’re here to help.
Book a free discovery call today and we’ll talk you through what the changes mean for your business, answer your questions and help you stay compliant, so you can focus on looking after your customers this summer.
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