Your UK holiday could now be significantly cheaper thanks to 15% VAT reduction

Jul 8, 2020

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On Wednesday, the U.K. government announced a six-month reduction in VAT payable by patrons of pubs, restaurants, cafes, hotels and B&Bs — and it’s especially great news if you’re considering a domestic holiday this year. City A.M. reports the current tax rate of 20% on food, accommodation and attractions will reduce to 5% from 15 July to 12 January 2021, saving you 15%.

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Chancellor Rishi Sunak said the initiative is designed to help the struggling hospitality and tourism providers recover from the COVID-19 lockdown, which has seen many businesses close completely for more than three months. Consumers can expect to pay slightly less for a pint of beer from next Wednesday following the VAT decrease, however, you will really notice big savings on hotel accommodation where taxes are charged separately.

For example, on a sample search for a London hotel in November, a 20% VAT still shows as payable — £141.12 for a four-night stay:

(Image courtesy of Hotels.com)

However, under the new scheme, the Taxes and Fees line item should drop from £141.12 down to £35.27 — a saving of £105.85. For existing bookings that have not yet been paid for, such as those where you agree to pay at the property when checking in or out, the VAT reduction should be applied. For existing fully prepaid bookings, the existing 20% rate will apply.

Related: Summer staycation gets a boost: England tourism to reopen from 4 July

From 15 July 2o20, prices should drop for new hotel bookings where the tax is listed separately. Some properties, such as booking with Hilton, direct do not list the VAT separately and instead list a single rate “inclusive of fees and taxes”. While these rates will also hopefully reduce, these struggling businesses could instead retain the same single rate by choosing to increase the base rate of the room.

(Image courtesy of Hilton Hotels)

It’s worth asking whether your U.K. accommodation provider is passing the VAT reduction onto you when you check-in.

Related: 8 of the best hotels in the Lake District

If you’re taking a midweek trip in the U.K., there’s more good news as part of the Chancellor’s announcement on Wednesday included that the government will subsidise a 50% discount on your meals eaten in the U.K. at participating businesses on Mondays, Tuesdays and Wednesdays during August. Titled the “Eat Out to Help Out” scheme, each diner can receive up to a £10 discount on their meals, including children.

“This has never been tried in the UK before, said the Chancellor. “This moment is unique. We need to be creative”.

Featured image by Southern Lightscapes-Australia/Getty Images

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