VAT to stay at 20% despite calls to reduce it

During his Autumn Statement on Thursday 17 November, Hunt said the threshold UK businesses are allowed to earn before paying VAT is more than double those of its counterparts in parts of Europe but made no mention of cutting the rate of VAT – the 20% rate was reintroduced in April 2022 after a limited period of businesses paying 12.5% during Covid.

Hunt, who also stated National Insurances Contributions will be frozen, said in his speech: “While I've decided to freeze the employers NICs threshold until April 2028, we will retain the employment allowance at its new higher level of £5,000. This means 40% of all businesses will pay no NICs at all.

“The VAT threshold is already more than twice as high as the EU and OECD averages. I will maintain it at that level until March 2026.”

No help

Wentworth Pubs & Dining operations director Ian Mitty said via Twitter: “No help for hospitality with VAT. That’s going to cause thousands of pubs to close.”

“It's an awful budget for tenants. VAT fairness was the last hope. Utility costs will kill pubs without it. Paying for the rise in NLW will cost thousands we don’t have. Add that to greedy pubco and brewer increases (Heineken for one) and pubs are dead in the water.”

Sarah Travell, founder and CEO of tech-led accountancy and advisory firm, Virgate said: “Movement on VAT for the sector would have been a progressive step, encouraging consumer spend and offering a lifeline for businesses struggling in the current economic headwinds.”

Financial headroom to survive

Editor of The Morning Advertiser​ Ed Bedington added: “No change to VAT, the chancellor says, despite acknowledging it is twice as high as European neighbours.”

The industry has been calling for a cut in VAT for many months. Michael Kill of the Night-Time Industries Association said last month: “We need the Chancellor to cut VAT across the board and extend business rates relief, to give us the financial headroom to survive.”

Bath Pub Company managing director Joe Cussens said last week: “Unless something changes, we could see thousands of pubs shutting for good. I’ve seen an outpouring of frustration by operators on social media and I’ve been struck by how we all seem to agree on what’s required – a reduction in the VAT rate and business rates holiday.”