5% VAT rate for holiday lets and serviced accommodation

simon

Simon Misiewicz

8th July 2020


Article relevant to the tax year 2020/21

VAT rate reduced from 20% to 5% for the hospitality industry

As part of Rishi Sunak’s mini-budget announcement from 8th July 2020, he announced a number of initiatives to promote the UK economy. One of the things that Rishi Sunak announced was the 0% Stamp Duty Land Tax holiday for properties under the value of £500,000.

In this article, we will very much focus on the other announcement that Rishi made about VAT. To stimulate the economy Rish Sunak said that VAT would be reduced from 20% to 5% for the hospitality industry. This would cover such things as:

– Hotel and accommodation

– Food and drinks (non-alcoholic drinks)

– Entertainment

You may be interested in our main article “buy to let tax for UK landlords”. This article discusses all the different types of tax that you need to be aware of as a UK landlord. I also wrote an article on the tax benefits of owning a Furnished Holiday let.

The VAT rate reduction for the hospitality industry starts Wednesday 15th July 2020 and runs for six months until 12th January 2021.

Download your buy to let tax guide here, written by our property accountants

Buy multiple properties form the same vendor to claim multiple dwellings relief to reduce Stamp Duty Land Tax

 

Download your buy to let tax guide here, written by our property accountants

Buy multiple properties form the same vendor to claim multiple dwellings relief to reduce Stamp Duty Land Tax

If you want to know more then please read our “buy to let tax tips for UK landlords” article

 

How do owners of holiday lets benefit from the VAT reduction from 20% to 5%

One of the key benefits of the reduction announced in the mini summer budget was VAT reduction from 20% to 5%. This will certainly increase demand. A previous night stay that cost £120 would not only cost the end-user £105. This £15 saving is significant especially when a family stays for a week or two in a furnished holiday let

John and his family wants to stay on the British Coastline. Before the mini-budget announcement, John was looking at a cost for two weeks in a holiday cottage as £2,400.

This was too much and decided not to book the accommodation. Thanks fully he waited until Rishi Sunak gacve his announcement to reduce VAT on hospitality (including holiday lets) from 20% to 5%.

Instead of paying £2,400 he now decides to book the same accommodation but only paid £2,100. This is a significant cost saving of £300

VAT on food and drinks

The economy will also be boosted by the save that restaurants and bars will also be able to charge less for the food and drinks. They too will have a reduction of VAT from 20% to 5%. Please do note that the reduction of VAT rate from 20% to 5% only applies to non-alcoholic drinks

50% vouchers “eat out to help out”

One of there best contributions, in my opinion, is the “eat out to help out” phrase by Rishi Sunak. Individuals can go to a bar and restaurant and get 50% off for a bill of £10 per head (this also includes children).

Not only is there a reduction on food and drinks from 20% to 5% but Rishi Sunak also gave 50%. John wants to take his family out for a pub lunch on the British Coast. In the old world, he might spend the following

£10 per head

4 members in a family

£40 for a meal

The £40 bill will now be slashed thanks to Rishi Sunak’s mini summer budget announcement.

£40 would now be slashed by half because the government will provide John with 50% “eat out to help out” vouchers

£20 cost would be also be reduced by £2.50 given the VAT reduction from 20% to 5% for the hospitality industry.

Thanks to Rishi Sunak John will now spend £17.50 instead of £40 by taking his family out to a pub meal on the fine British Coast.

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