Among other things, the UK does one thing travelers tend to really like – to give you a final price, with tax included, on pretty much everything. When you see a main course costing £10, or a hotel which costs £200, that’s the final tally, not some frustrating price before taxes and fees are added. In an effort to boost the hospitality sector, a big portion of that final price just got dropped, which should mean cheaper trips and cheaper meals…
Rishi Sunak, Chancellor of The Exchequer, which in normal people terms means “important person who controls lots of things with money in the UK” has announced a strong stimulus plan to boost flailing industries like travel and hospitality.
We’re reducing VAT to 5% for goods and services supplied by the tourism and hospitality sectors.
This is a £4bn catalyst benefiting over 150,000 businesses, and consumers everywhere – all helping to protect 2.4 million jobs. #PlanForJobs pic.twitter.com/B9LKptz4Qy
— Rishi Sunak (@RishiSunak) July 8, 2020
Basically, the government is reducing the taxes it collects on things like meals, attractions and hotel stays by 75%, from 20% down to 5% until January, 2021, and that means all of the above, with the exception of booze, should get cheaper.
This applies to visitors and locals, so inbound travelers and domestic “staycations” would benefit equally. Anyone with flexible rates already booked, where you check out at the front desk could easily inquire about the lower rate they should expect, thanks to the big drop in VAT.
A hotel which charged £200 per night before,would’ve been giving up circa £33 to the government via the 20% VAT tax, and pocketing £166, but will now see that number drop by huge margin, potentially allowing for lower rates.
The idea, if hotels, tours, attractions and restaurants go along with it, is that it will allow these businesses to drop prices to attract more customers back. Even if they bump up their rates by 5% to pocket a little extra, it would still represent a 10% savings for customers and potential visitors, and that could be fantastic new for all.
UK Travel Slowly Rebounding
The UK made the first crucial step in bringing back visitors last week, introducing 59 countries from which travelers can visit without the need for quarantine, or to which locals can jet off to, without needing to quarantine on return.
As the UK adds countries to the “quarantine free” list, while dropping taxes visitors would face left, right and center at restaurants, on tours and in hotels, excitement is once again in the air that hospitality and the many thousands of businesses which rely on it could see better times ahead.
Very good news for hotels, restaurants and attractions. The headline could be even better: the reduction is 75%.
In other words, a 75% drop in a 20% VAT results in a 5% VAT.
PLEASE sort out all the maths in this article!
As Patrick said, it’s a 75% reduction in VAT – or a 15 percentage point reduction, not the same thing.
£200 post 20% tax is £166.67 pre tax + £33.33 tax.
I was rather hoping for abolishment of the air passenger duty
Needs to happen, no question.
Doesn’t it all depend on whether the savings are passed on. I suspect a llot will just increase their profits instead.
Your excitement is premature: it won’t be passed on to the consumer.
I suspect the cost of rewriting menus, website content etc will mean prices stay the same, especially as venues now have less capacity and therefore reduced potential to make profits. This saving will help them to remain commercially viable, that’s all. I’m happy if my favourite pubs and restaurants manage to keep trading.