With a reduced rate of VAT of 5% then 12.5% from 1st October 2021, the hospitality, tourism and food industries were given a bit of a lifeline to help them recover from the closure of many businesses through the pandemic.
But the reduced rate comes to an end on 31st March 2022 meaning businesses will have to return to charging 20% VAT on sales of food and accommodation. Many businesses may not have reduced their prices during this time as it was an opportunity to recoup a little of their lost earnings. Food and accommodation businesses who continued to trade throughout the pandemic will also have benefited from the reduced rate.
With the rate of VAT returning to 20% from 1 April 2022 we will no doubt see an increase in prices as businesses try to manage the new rate and maintain a profit. With food prices increasing it won't just be the increase in VAT which will force an increase in retail and hospitality pricing.
If you are a business in any of these industries have you prepared for this change? Have you planned any increased charges you need to make to enable you to cover your costs?
With the increase in the national minimum wage and the additional 1.25% of National Insurance contributions also starting from 1 April, its going to be a tough time for these businesses.