People are set to face another price hike on April 1 seeing the cost of a pint in a pub soar by 40p. The government's cut in VAT for the hospitality industry comes to an end today.
It means customers will have to find more cash for a host of leisure activities. These include enjoying a drink in a pub, having a meal out or even a holiday, reports Birmingham Live.
Speaking on Good Morning Britain TV consumer expert Harry Wallop said the move would affect any business which has a turnover higher than £85,000. This means it will hit all major chains and most small firms.
Brewer Marsons has said the move will put up the cost of their brands. This could be up to 40p, said Mr Wallop.
The expert said: "The VAT was cut from 20 per cent down to 12 and a half per cent for hospitality industries. Any business that has a turnover of more than £85,000 has to pay VAT and that’s pretty much any hospitality business from a huge pub chain down to a small holiday let.
“Their costs are going up. You as a customer don’t notice the VAT price rise as it’s all wrapped up into one price for the meal you buy or the weekend away in a B&B.
“But the person who is providing that service has just seen their costs shoot up overnight on top of all the other stuff that they’re having to face like all consumers are like increased energy, everything that’s going up, inflation, the cost of living, the cost of food. So basically it’s just making life so much worse for the hospitality industry.
“If we take a pint of beer that is going up by a huge amount. One of the biggest brewers, Marstons, is saying they’re going to have to put the price of a pint of beer up from between 25 pence and 40 pence.”
The cost of living crisis will deepen for many households from April 1 as energy bills are set to skyrocket due to an increase in the price cap. However, higher energy prices are not the only way households and businesses are set to feel the pinch.
From the start of the month, a raft of tax rises and reductions in state pandemic support will increase costs for businesses and, ultimately, higher prices for their customers.
VAT increases
The cost of buying a pub meal, soft drink or hotel stay could become more expensive from April as VAT levels across the hospitality sector lift back to 20 per cent. The industry saw VAT dropped to five per cent to support its recovery during the pandemic.
It rebounded back to 12.5 per cent in October last year as restrictions eased, but it is now due to rise again to 20 per cent on Friday. Despite the initial fall in tax, few pub groups, restaurants and leisure businesses were able to pass on the benefits of the tax break - which covered soft drinks, food, events tickets, accommodation and other areas - to customers due the financial impact of the pandemic.
Bosses said that lengthy Covid disruption, significant debts and soaring cost inflation in recent months mean the reduced tax level has been used to help absorb costs. However, industry chiefs, including Wetherspoon founder Tim Martin and Young’s boss Patrick Dardis, said prices would now have to increase significantly for customers as a result of reduced VAT support.
Leaders warned the Government that the VAT increase would contribute to a “cliff edge” on Friday as wages and business rates changes also come into force. Emma McClarkin, chief executive of the British Beer and Pub Association (BBPA), said the VAT rate increase alone is expected to cost UK pubs more than £500 million over the next year.
UKHospitality boss Kate Nicholls said “might prove fatal” for business owners.
Business rates
Retail, hospitality and leisure businesses were supported during the pandemic with financial help including a break to the business rates property tax. The tax break in England has been steadily unwound with businesses receiving a 66% reduction of their rates up to £2 million per firm over the past nine months.
However, this will reduce to a 50 per cent reduction with a cap of £110,000 per business on April 1. The reduction, and even sharper declines from previously more generous schemes elsewhere in the devolved regions, means business across the UK will face a £7.1 billion increase in rates for the year.
This could lead to firms increasing prices to help cover higher property costs. Robert Hayton, UK president of real estate adviser Altus Group, said: “The government and devolved administrations are acting as if there hadn’t been a pandemic and seem oblivious to the cost of doing business crisis.
“The tapering off of business rates relief takes away vital breathing space for high street businesses.” Business leaders across the retail and hospitality sectors are continuing calls for widespread reform of the business rates system, which is still linked to property valuations from 2015.
National Insurance
On April 6, the Government’s proposed National Insurance tax rise will come into force. Ministers have said the plan is to use the extra revenues to fund the NHS, health and social care.
It will see employees, employers and the self-employed all pay 1.25p more in the pound for NI. For employees they would previously pay 12 per cent on earnings up to £50,270 and two per cent on anything above that. From April 6, the rate goes up to 13.25 per cent and 3.25 per cent respectively.
For the self-employed, rates will go up from nine per cent and two per cent to 10.25 per cent and 3.25 per cent. Payments will only be collected on wages above £9,880, although this rises to £12,570 in July - a threshold rise announced by Chancellor Rishi Sunak at the recent Spring Statement.
