Published: 06:00, 23 September 2021
Your Friday night trip to the pub could be more expensive this week as VAT is set to rise by 5%.
A temporary reduction in the value added tax on goods and services due to the pandemic will come to an end on October 1.
Here, we explain what that means for you...
When did the government reduce the tax?
When we all hoped lockdown was behind us and normality was returning, the government introduced a temporary 15% reduction in VAT for the hospitality industry, dropping it from 20% to 5%.
It was in a bid to help the sector, forced to close during the lockdowns, get back on its feet.
The rule came in July, 2020, 11 days after super Saturday when pubs and restaurants could reopen after the first lockdown which forced them to close for three months.
In September of that year, the reduced rate was extended to March 31, 2021 and again to September 30 in the budget.
As of October 1, VAT will go up to 12.5% until March 31, 2022 when it is likely to return to the full 20%.
What goods and services will this affect?
The following list includes the goods and services that benefited from the 5% reduction throughout the scheme.
Why was the reduction introduced?
It was part of the plan to help boost the economy after the first lockdown.
With prices slightly down, it was hoped people would return to pre-pandemic habits of eating out in restaurants to help hospitality recover.
This would support the local businesses and protect 2.4 million jobs within the sector.
What does it mean to me?
The price of going out for food, ordering a takeaway or a trip away will go up.
And with the current issues over supply shortages and the gas prices it's going to be another blow to the average person's finances.
However, many in the hospitality industry are calling for the reduction to stay in place. They point to the fact supermarkets pay zero VAT on food so are able to sell alcohol at discounted prices.
So the weekly trip to the pub might have to become a bottle of wine and a meal deal instead.
What is Wetherspoons up to?
Wetherspoon’s chairman, Tim Martin, has always been against the unfair tax on pubs and plans to highlight the inequality today.
All food and drinks at pubs across the country will be slashed by 7.5% - for one day only - to highlight the benefit of a permanent VAT reduction in the industry.
He said: “Taxes should be fair and equitable.
“However, it is unfair that supermarkets pay zero VAT on food, but pubs and restaurants, in normal circumstances, pay 20%.
“Pubs have been under fantastic pressure for decades, owing to the tax disadvantages which they have with supermarkets.
“Customers in our pubs on Tax Equality Day will find that the price of their food and drinks will be lower than normal.
“However, as a result of the VAT increase to 12.5% we will have to increase food prices by around 50p per meal.
“We urge the Chancellor to create tax equality between pubs and supermarkets by making permanent the current VAT régime for pubs.
“He should note that the main impact of tax inequality is on high streets and town and city centres, which depend heavily on a diversity of prosperous hospitality businesses for economic, social and employment success.”