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Rishi Sunak’s VAT cut – everything that will stay lower in price until March 2021

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Chancellor Rishi Sunak has extended the current VAT cut for tourism and hospitality businesses.

Announcing a new “winter jobs plan” in the House of Commons, he said VAT will remain at 5% until March 31.

The 20% rate was granted a six month reduction in July, however with new, potentially six month restrictions coming into force on Thursday, the Treasury has extended the discount.

“This will give businesses in the sector – which has been severely impacted by the pandemic – the confidence to maintain staff as they adapt to a new trading environment,” Sunak told MPs.

He said the “economy is now having to adapt to a new normal,” as he announced measures to “protect as many jobs and businesses as possible”.

The VAT cut applies on food, drink and even staycations – meaning you should pay a reduced price if the firm chooses to pass the savings on.

You’ll see the discount applied at the checkout – where value added tax will be down from 20% to 5%.

The cut applies on food and non-alcoholic drinks as well as accommodation and admission to attractions across the UK, such as zoos and cinemas.

However the discount is discretionary, which means businesses won’t be forced to pass it on.

Tom Selby, senior analyst at AJ Bell, said: “Sunak has announced beefed up business loan schemes and tax cuts designed to ease the cashflow pressure on firms struggling during the pandemic. In particular, the tourism and hospitality sectors will now benefit from a reduced 5% VAT rate until 31 March.

“Taken together, these measures should help ease the pressure currently being felt by businesses and workers up and down the country. However, whether it is enough to prevent a surge in unemployment as we head into winter remains to be seen.”

Value added tax, or VAT, is the tax you have to pay when you buy goods or services. It’s typically 20%, though a reduced rate of 5% applies to some things like children’s car seats and home energy.

VAT does not apply on supermarket food, newspapers and magazines. Where it does apply, the tax will be included on the price tag.

The Chancellor previously said the cut includes eat-in or hot takeaway food from restaurants, cafés and pubs, accommodation in hotels, B&Bs, campsites and caravan sites, as well as cinemas, theme parks and zoos.

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The VAT cut applies on UK staycations, breaks as well as eating and drinking out.

Alcohol is excluded, however it does include food and non-alcoholic drinks from restaurants, pubs, bars, cafés, including takeaways.

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