The UK Hospitality VAT Problem Nobody Warned You About and What You Can Do While You Wait for Change

When 100,000 people sign a petition in less than 72 hours, they're not just protesting, they're signalling that an entire industry is under pressure.

By Saladin Nadir | Hospitality Business Advisor

In under three days, more than 100,000 people signed a petition to lower the hospitality VAT rate from 20% to 10%. Chef and restaurateur Tom Kerridge started the VATs The Problem campaign, which is supported by major trade groups such as UK Hospitality, the British Beer and Pub Association, the British Institute of Innkeeping, and CODE Hospitality.

This fast response shows how tough things are for the industry right now.

As a Hospitality Business Advisor, I’m here to help you understand what this means for your business and what you can do now, no matter what the government decides.

Why This Campaign Gained Momentum So Fast

This campaign spread quickly, not because of clever marketing, but because it brought attention to a cost that operators have quietly managed for years.

Currently, the UK has the second-highest hospitality VAT rate in Europe, just behind Denmark. France and Germany charge around 7%, Spain and Italy are at 10%, and Ireland will move to 9% in July 2026. In the UK, restaurants, pubs, and cafés pay 20% VAT on every qualifying sale, which is the same rate as luxury goods and professional services.

VAT may seem like only a government concern, but it has a direct impact on your profit margins.

Here’s why: VAT is charged on your revenue, not your profit. If your business has an annual turnover of £1 million, you collect and pay about £166,000 in VAT on standard-rated sales. Cutting the rate by 10% would keep around £83,000 in your business. For a £500,000 turnover, that’s £41,500. This is not a small difference; it can mean the ability to invest in your team, maintain standards, and plan for the future, instead of just trying to stay afloat.

That’s the number driving the petition, and it shows why 100,000 people signed it in only three days.

The Honest Picture: VAT Is One Problem, Not the Only One

I want to be direct with you, since that’s my job as an advisor.

VAT is a real and significant cost, but it’s not the only reason hospitality businesses are struggling to make a profit. If you wait for a government VAT cut to fix your margins, you’re depending on something outside your control.

Operators are dealing with several cost pressures at the moment. Wages are going up due to increases in the National Living Wage. Food and energy costs are still higher than before 2022. Business rates relief helps pubs but not restaurants. Financing costs are rising, and staffing challenges are making recruitment and training more expensive.

A 10% VAT rate would help in this situation. However, if you only improve your margins when external conditions improve, your business will always be at risk. The most resilient businesses focus on profitability as something they can control, not just as a result of government policy.

Three Actions You Can Take Right Now

These are practical steps you can take now to improve your profitability this quarter, no matter what the government does.

1. Run a Real Pricing Review, Not Just a Gut-Feel One

A lot of hospitality operators set their prices by following their gut or copying what others charge. This isn’t a real pricing strategy.

Look at your current prices and compare them to your actual costs. For each main menu item or service, figure out the real cost, including ingredients or materials, direct labour, and a fair share of overheads. Then see if your current price gives you a margin you can keep up. In many businesses, raising prices by 5 to 8% on some items adds more to yearly profit than cutting any single cost.

2. Identify and Promote Your Most Profitable Offer

I always ask operators I work with: What is your most profitable product or service? Not the most popular one, but the one that brings in the most profit. Most people need to check their numbers to answer this.

Once you know which item is most profitable, think about how well it’s promoted in your sales. In many businesses, the most profitable items aren’t pushed by staff, highlighted on menus, or featured in marketing. Making this change costs nothing and can bring results in just a few weeks.

3. Audit Your Fixed Costs Systematically, Not Emotionally

Rising overheads can quietly hurt hospitality businesses. They build up over time, like a new subscription, an expanded contract, or a staffing setup that made sense two years ago but no longer fits your current business.

Take two hours this week to review every fixed and semi-fixed cost from the past three months. For each one, ask if it brings measurable value that justifies its cost. Don’t just ask if it’s useful—focus on measurable value. Anything that doesn’t meet this standard should be considered for reduction or renegotiation. In most businesses I work with, this review finds 5% to 10% of overhead spending that can be cut or renegotiated.

What I’d Tell Any Operator Reading This

If you support the petition, sign it and share it with your team. The sector needs a united voice on VAT, and this campaign is picking up real momentum. The consumer launch is on 1 July, with a target of one million signatures.

If you'd like to support the petition, you can sign it here:

Official petition: https://www.vatstheproblem.co.uk/

But don’t let a policy campaign distract you from good financial management. The operators who will benefit most from a VAT cut are those who have already strengthened their businesses. Cutting VAT from 20% to 10% is a big win for a business with strong margins, but for a business with ongoing problems, it’s just a short-term fix.

Focus on what you can control and start improving your business today.