Budget 2021: cheaper holidays and meals out this summer as Rishi Sunak set to extend VAT cut

CHEAPER holidays and meals out could be on the cards this summer as Rishi Sunak considers extending a VAT cut for the hospitality industry.

The temporary tax break worth 15% will be extended until June, reports the Daily Mail and Financial Times.

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The Sun has been calling for the support to be continued in next month’s Budget to help save jobs in the struggling industries.

The Chancellor slashed VAT (value added tax) from 20% to 5% for food, drink and holiday businesses as part of his mini-Budget on July 8.

The tax cut was due to remain in place until January 12, 2021, but in September was extended until March 31.

Mr Sunak is expected to announce it to last by another three months.

Full list of businesses where VAT will be cut

THE VAT rate will be slashed for the hospitality and tourism industries in order to help them bounce back from the coronavirus crisis.

  • Restaurants, cafes and pubs
  • Hotels, inns, boarding houses and similar establishments
  • Holiday and caravan parks and other holiday accommodation businesses charging fees for tent pitches or camping facilities
  • Shows
  • Theatres
  • Circuses
  • Fairs
  • Amusement parks
  • Concerts
  • Museums
  • Zoos
  • Cinemas
  • Exhibitions
  • Similar cultural events and facilities

The extension will be a boost to the tourism and hospitality industries, which have been hit hardest by the coronavirus lockdowns.

Under plans to unlock England from the current national shutdown, UK staycations can go ahead and pub beer gardens will reopen from April 12.

VAT is a tax paid by businesses to HMRC on the items or services they sell, which is typically passed on to customers in the price they pay for goods and services.

If the savings are passed on in full, it means cuts of 12.5% on the end price people pay, or household savings of £160 a year, according to the Treasury.

In terms of holidays, the saving could cut £300 off a one-week family staycation.

In July 2020, Wetherspoons slashed prices by up to 28% following the tax break, with pints starting at £1.29.

But businesses don't have to pass on the tax break to shoppers.

Last summer, KFC chose not to cut menu prices by 12.5% across the board, instead it reduced the price of "fan favourites" for a limited time.

And McDonald's recommended its franchises cut prices but they didn't have to.

Kate Nicholls, chief executive at tradebody UKHospitality, told The Sun that extending it will be a "lifeline" for many businesses, but wants to see it extended for another year, until March 2022.

She said: "Many businesses haven’t felt the benefit of the lower rate due to lockdowns and extreme restrictions, so an extension of just a few months simply won’t help.

"The Chancellor must meet the magnitude of this moment with the right measures that will underpin hospitality and the wider economy’s recovery."

Brits will be able to book a self-contained staycation with their household from mid-April.

On the same day, pubs and restaurants are allowed to reopen for outside bookings.

From May 17, hotels are allowed to reopen and holiday homes can be let to groups of up to six people from different households or groups from two households with no cap on size.

Cafes, pubs and restaurants can also open for inside bookings, and from June 21, holiday homes can be let to groups of all sizes.

The Treasury declined to comment.

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