Hospitality is still paying 20% VAT in 2026 — here's where multi-site operators can actually claw the margin back

The grievance is real, and it's not new

UK hospitality has sat at the standard 20% VAT rate throughout, with no general increase and, despite a vocal and well-organised campaign, no general cut either. Compare that to the rest of Europe: 10% in France and Spain, 7% in Germany. UKHospitality's #VATsTheProblem campaign — fronted by Tom Kerridge and backed by the British Beer & Pub Association and the British Institute of Innkeeping among others — has gathered well over 100,000 signatures calling for a permanent 10% rate, and a YouGov poll commissioned by UKHospitality found 79% public support for a reduced rate. That is not a fringe position. It is one of the better-evidenced tax campaigns in the sector right now.

None of that has translated into a rate change. The Treasury's repeated position is that a general reduced VAT rate for hospitality and tourism would cost too much against current fiscal constraints — a 5% rate across the board has been costed at roughly £17 billion. Whatever the merits of the campaign, that is the practical reality multi-site operators are trading under.

What actually changed in 2026 — and what didn't

The only VAT movement this year is a temporary 5% rate on children's meals and family attraction tickets, running from 25 June to 1 September 2026. It was announced as part of a broader economic response to the spring 2026 energy price rises, not as hospitality-specific relief. It is worth knowing about if a meaningful share of your covers are family diners or you run a visitor attraction alongside food and drink. For most multi-site operators trading on a standard food and drink menu, it will not move the headline numbers.

If you've seen headlines suggesting a wider VAT cut is coming, treat them as campaign coverage, not policy. As things stand, the 20% rate is where you are planning from for the rest of the year.

The rate isn't in your control. Your cost-to-serve is.

This is the part worth spending your energy on. VAT is set by government and, realistically, isn't moving on a timescale that helps this year's trading. Labour cost as a percentage of revenue is set by how you run the business, and it is the single biggest controllable line on a hospitality P&L.

The problem for most multi-site operators isn't that labour cost is too high in principle — it's that nobody sees the number until weeks after it's happened. Payroll runs, someone compiles a report, and by the time it lands on your desk the week that blew the budget is long gone and the next one is already in progress. We've written in detail about what a sensible labour cost percentage looks like for hospitality and how to get weekly visibility instead of monthly surprises — see what is a good labour cost percentage in hospitality.

The second lever is the admin overhead sitting underneath labour cost: onboarding, rota-to-payroll handling, and the manager time lost to HR admin that has nothing to do with running a good shift. Across a three-site operation that is routinely twenty to thirty hours of owner and manager time a week that isn't going into food, guests, or growth. Our guide on automating HR onboarding in a multi-site hospitality business covers what that admin actually costs and what a fixed version of it looks like.

Where this leaves you

Back the campaign if you believe in it — the case for a 10% rate is well evidenced and it costs you nothing to sign a petition. But don't plan this year's margin around a rate cut arriving. Plan it around the two things you actually control: knowing your labour cost percentage weekly instead of monthly, and removing the admin hours that are quietly costing you more than most people realise.

Related reading: Labour cost percentage in hospitality · Automating HR onboarding in hospitality · Best CRM systems for hospitality operators