Extending VAT cut would save drinkers and diners £15.7 billion in tax

Embargoed: 00:01 Monday 3 May 2021


As Brits enjoy the Bank Holiday with a drink outside, the TaxPayers’ Alliance (TPA) is calling on the chancellor to extend the current five per cent reduced rate of VAT and include alcohol. Doing this until April 2023 could generate at least £15.7 billion of savings for consumers and the hospitality industry.

The TaxPayers’ Alliance has launched a petition calling for the change, which will be delivered to the chancellor before the current VAT cuts finish at the end of September. 

A new briefing note demonstrates how extending the current five per cent VAT rate until April 2023 would generate total savings of £13.5 billion for hospitality. It also explains that including alcohol not only creates one simple tax level for all VAT in the sector, making administration easier for businesses, but also saves drinkers an extra £2.2 billion.

This would also have a huge impact on staycations, giving Brits
cheaper holidays at home over the next two years. For example, the VAT cuts meant Adventure Island amusement park in Southend could reduce total prices by 21 per cent, including a 50 per cent reduction in the cost of an annual pass from £100 to £50. Extending these VAT cuts would widen these benefits further.

The campaign group is also calling on the chancellor to
abandon current plans to introduce a new reduced VAT rate of 12.5 per cent after the five per cent cut comes to an end in September 2021. The 12.5 per cent rate is an unnecessary added complication for businesses and only runs for six months, giving companies a short window to adapt to the new, higher rate. It also comes into force at a typically quiet time for the sector.

Pubs, clubs, restaurants and hotels have seen some of the highest rates of job losses due to the pandemic. The TPA’s proposed tax cuts would allow the hospitality sector to fully recover - saving businesses, jobs, and allowing the economy to bounce back more quickly.


Key Findings:

  • Extending the current reduced VAT rate of five per cent and including alcohol would generate at least £15.7 billion of tax savings for the hospitality industry and consumers.

  • Extending the current VAT reduction in 2021-22 would save the sector a total of £6.3 billion. If extended until April 2023 as proposed, this would generate total savings of £13.5 billion for the sector over the two years.

  • Reducing the VAT rate on alcohol to five per cent - currently not included in the government’s VAT cuts package - would save an additional £2.2 billion over the period. 




John O’Connell, chief executive of the TaxPayers' Alliance, said:

"These tax cuts would be a helping hand for hospitality on the way out of these difficult times.

“Not only would the savings protect jobs and businesses by cutting prices for drinkers and diners, they would also help Britain bounce back better from covid-19.

“We’re calling on the chancellor to offer a rescue to this struggling sector by extending and enhancing the VAT cut, and ultimately get the economy back on track.”

TPA spokesmen are available for live and pre-recorded broadcast interviews via 07795 084 113 (no texts)

Media contact: 

Danielle Boxall
Media Campaign Manager, TaxPayers' Alliance
[email protected]
24-hour media hotline: 07795 084 113 (no texts)

Notes to editors:

  1. Founded in 2004 by Matthew Elliott and Andrew Allum, the TaxPayers' Alliance (TPA) campaigns to reform taxes and public services, cut waste and speak up for British taxpayers. Find out more at www.taxpayersalliance.com.

  2. TaxPayers' Alliance's advisory council.

  3. The TaxPayers’ Alliance have launched a petition to extend the five per cent VAT cut and include alcohol until April 2023. The temporary five per cent reduced rate of VAT for hospitality, hotel and holiday accommodation, and admissions to certain attractions, is currently set to end on 30 September 2021, after which a new reduced rate of 12.5 per cent will be introduced, ending on 31 March 2022.

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