It’s not often we get to open this column with genuinely good news from the taxman, so let’s make the most of it. This month, two developments worth knowing about: a temporary VAT cut that could make the school holidays a little cheaper for families (and busier for local attractions), and a proposal from HMRC that could change how every employer and VAT-registered business in the country pays its tax.
The Great British Summer Savings: VAT down to 5%
In May, the Chancellor announced a temporary cut in VAT from 20% to 5% on a range of family-focused activities, running from 25 June to 1 September 2026 – neatly covering the school summer holidays. The government has badged it the “Great British Summer Savings” scheme, and it covers three main areas.
First, children’s meals. Where a meal is sold specifically as a children’s meal – think the kids’ menu at your local café or restaurant – it now attracts VAT at 5% rather than 20%. The key word is “specifically”: a small portion that happens to appeal to children doesn’t count. It has to be marketed, priced and presented as a children’s meal.
Second, children’s and family tickets for cinemas, theatres, shows and exhibitions. Adult-only tickets stay at 20%, but here’s a generous quirk: a family ticket that includes at least one child qualifies in full, adults included.
Third – and this is the broad one – admission to family attractions. Theme parks, zoos, farm parks, soft play centres, museums, aquariums, heritage sites and observation attractions all qualify, and at these venues the 5% rate applies to every visitor’s ticket, whatever their age. Sport is excluded, as are pay-per-ride charges within an amusement park (the gate price qualifies; the individual rides don’t).
For families, the benefit depends on businesses passing the saving on and many will, because it’s a great marketing hook for a competitive summer.
For business owners in the hospitality and leisure trade, though, this is a compliance job with a very short fuse. Tills and accounting software need the new rate set up correctly, staff need to know which sales qualify, and everything has to flip back to 20% on 2 September. There are also wrinkles around advance bookings: if you took payment at 20% for a visit falling within the relief window, you can adjust the VAT and the government’s expectation is that customers are refunded the difference. Annual passes and season tickets priced above a single-entry ticket don’t qualify at all. If any of this applies to your business and you’re not sure you’ve got it right, please do get in touch – a temporary rate change is exactly the sort of thing that trips up an otherwise spotless VAT record.
Paying HMRC: soon to be direct debit only?
The second development is quieter but potentially further-reaching. On 23 June, HMRC opened a consultation proposing that VAT and PAYE liabilities should be paid by direct debit – not as an option, but as a requirement.
At present, most businesses pay by bank transfer, choosing when to press the button. HMRC’s logic is that many late payments aren’t down to unwillingness to pay, but to missed deadlines and payments allocated against the wrong reference. A direct debit collected automatically after the VAT return or payroll submission would, in theory, solve both.
In practice, plenty of business owners will feel uneasy about handing HMRC the keys to the bank account. Cash flow timing matters enormously to small businesses, and there are legitimate questions about what happens when a payroll correction is needed, a VAT figure is disputed, or an amount is simply wrong before the money leaves the account. Under the proposals, paying by another method – even in full and on time – could itself attract a penalty. HMRC estimates around 2.4 million businesses and employers would be affected.
To be clear, nothing has changed yet. This is a consultation, open until 16 August 2026, and the details – exemptions, safeguards, timing – are all still up for grabs. That’s precisely why it’s worth engaging now. If you have strong views on how this would affect your business, respond to the consultation or let us know and we’ll feed your concerns into our own response.
WatkinsonBlack have considerable experience in all areas of taxation and business services. This includes providing a very cost-effective payroll bureau service, as well as assisting to ensure compliance with the latest Making Tax Digital legislation. If you are employed or self-employed either as a sole trader, partnership or limited company and want to arrange a no-obligation initial meeting on any taxation or accounting matter then please contact us by telephone on 01925 413210 or by e-mail to info@watkinsonblack.com. Please note that these ideas are intended to inform rather than advise and you should always obtain professional advice before taking any action.
