The Government has announced a temporary VAT reduction designed to support families during the 2026 summer holidays — and businesses in hospitality, entertainment and leisure need to prepare now. 

Alongside the recent increase to HMRC’s approved mileage allowance rate to 55p per mile, this is one of the more significant practical tax updates affecting day-to-day business operations this year. 

Temporary 5% VAT Rate – What’s Changing? 

From 25 June 2026 to 1 September 2026 inclusive, a temporary reduced VAT rate of 5% will apply to certain: 

  • Children’s meals 
  • Children’s cinema, theatre and exhibition tickets 
  • Admission tickets to qualifying family attractions 

This replaces the normal standard VAT rate of 20% during the relief period. 

The changes were announced by the Chancellor on 21 May 2026 and are intended to reduce costs for families during the school summer holidays. 

Businesses affected should now begin reviewing: 

  • VAT coding 
  • Till systems 
  • EPOS software 
  • Pricing structures 
  • Marketing materials 
  • Package deals and bundled offers 

Who Will Be Affected? 

The temporary relief applies across a wide range of consumer-facing businesses, including: 

  • Restaurants and cafés 
  • Cinemas and theatres 
  • Museums and exhibitions 
  • Theme parks and water parks 
  • Zoos and wildlife attractions 
  • Soft play centres 
  • Adventure parks 
  • Circuses and family entertainment venues 

Children’s Meals – What Qualifies? 

The 5% VAT rate only applies where a meal is clearly marketed and sold as a children’s meal. 

HMRC has confirmed this will depend on how the meal is: 

  • Presented 
  • Priced 
  • Marketed 

Examples of qualifying supplies include: 

  • Dedicated children’s menus 
  • Fixed-price children’s meal deals 
  • Kids’ meals including a soft drink and dessert 

However, the relief does not apply to: 

  • Smaller portions of adult meals 
  • Discounted adult meals 
  • Lower-calorie options 
  • Shared family meals 
  • Takeaway meals 

Importantly, meals including alcoholic drinks will not qualify. 

Practical Example 

A restaurant offering a “Kids Meal Deal” including: 

  • Main meal 
  • Soft drink 
  • Dessert 

for a single fixed price can apply the 5% VAT rate to the entire package. 

However, if a child upgrades with items selected from the standard adult menu, those additional items remain subject to 20% VAT. 

Cinema, Theatre & Exhibition Tickets 

The reduced rate applies to tickets specifically sold as: 

  • Children’s cinema tickets 
  • Children’s theatre admissions 
  • Children’s exhibition tickets 
  • Children’s concert admissions 

Family tickets can also qualify. 

For example: 

  • A “2 adults + 2 children” theatre package sold for one price qualifies entirely for 5% VAT. 
  • Standard adult-only tickets remain at 20%. 

The key test again is how tickets are marketed and presented. 

Attractions Included in the Relief 

One of the more generous aspects of the announcement is that certain attractions qualify for the reduced rate for all visitors, not just children. 

This includes admissions to: 

  • Theme parks 
  • Water parks 
  • Zoos 
  • Aquariums 
  • Museums 
  • Botanical gardens 
  • Soft play centres 
  • Indoor bounce parks 
  • Adventure parks 
  • Observation attractions 

If the attraction is normally standard-rated for VAT, admissions during the relief period can be reduced to 5%. 

Important Exclusions 

The relief does not apply to sport or physical recreation, including: 

  • Sporting events 
  • Gym use 
  • Sports participation 
  • Recreational sports activities 

Timing Rules Matter 

The reduced rate applies based on the date of admission, not necessarily the booking date. 

This means: 

  • Tickets purchased in advance for visits during the qualifying period can still benefit from 5% VAT. 
  • Tickets for admissions on or after 2 September 2026 remain subject to 20%. 

Businesses that have already charged VAT at 20% may choose to adjust invoices and refund customers accordingly. 

VAT Systems & Administration 

Affected businesses should ensure: 

  • Till systems are updated in time 
  • VAT codes are correctly configured 
  • Staff understand qualifying supplies 
  • Family packages are reviewed carefully 
  • Mixed supplies are apportioned correctly 

Incorrect VAT treatment during temporary rate changes is a common HMRC risk area. 

Mileage Allowance Increase – 55p Per Mile 

Separately, HMRC’s approved mileage allowance rate has now increased to 55p per mile the first 10,000 miles for business travel. 

 

This will impact: 

  • Employee mileage claims 
  • Director expense reimbursements 
  • Company travel policies 
  • Self-employed business cost calculations 

Businesses should ensure expense systems and payroll processes reflect the updated rate where applicable. 

Final Thoughts 

Although temporary, the summer VAT reduction creates genuine planning opportunities for hospitality and leisure businesses. 

However, the rules are detailed and heavily dependent on: 

  • Marketing 
  • Packaging 
  • Pricing structure 
  • Time of supply rules 

Businesses should review qualifying supplies carefully before applying the reduced rate. 

If you need help reviewing your VAT treatment, updating systems or understanding how the temporary rules apply to your business, our team is here to help.