Summer VAT cut sparks pricing chaos for retailers

The UK government announced today that the reduced 5%rate of VAT will apply from 25 June to 1 September 2026 on children’s meals, children’s and family tickets for cinema, theatre and shows and admission tickets for everyone to attractions such as amusement parks, theme parks, fairs, zoos, wildlife parks and museums. The cut will apply across the whole UK.

Sue Rathmell, VAT Partner at MHA said: “The government has made it clear that it expects businesses to pass the VAT saving on to customers by way of reduced prices. This is in contrast to the reduced rate of VAT that applied during covid when businesses tended to keep their prices the same and pocket the VAT difference.

“While at first sight this seems to be a win-win for both holiday makers and business in terms of greater footfall it is not without significant challenges for companies. It will be time consuming and costly for businesses to recalculate their prices and amend their menus, displays and websites. Where a retailer has already received payment for tickets supplied for the period 25 June – 1 September 2026, the government expects retailers to refund the additional VAT to their customer.

“This will potentially be a lengthy exercise for retail businesses who will have to work quickly to get their systems set up for the change. Undoubtedly businesses will be relying on the VAT reduction bringing in a whole lot more customers to offset their extra costs.”

Among its UK locations, accountancy and business advisory firm MHA has offices in Edinburgh and Aberdeen. For further information, visit www.mha.co.uk