That ÂŁ12bn has to come from somewhere.
HMRC’s ready reckoner estimates that 1p on the basic rate of Income Tax raises about £6.9bn in 2026/27.
So if a hospitality VAT cut costs around ÂŁ12bn, replacing that money through the basic rate alone would mean roughly 1.7p on Income Tax.
In plain English, that is the basic rate moving from 20% to about 22%.
That is the question too many people avoid.
If VAT is cut and prices do not fall, the consumer does not get the saving.
The operator retains more of the gross bill.
That may be margin support.
But the Treasury still loses the revenue.
So who pays?
Other taxpayers?
Other businesses?
Public services?
Borrowing?
Or a higher tax somewhere else?
There is no free ÂŁ12bn.
If the sector wants support, make that case honestly.
But do not pretend the cost disappears.
The hospitality industry wants their VAT cut to 10%. It will cost ÂŁ12bn
Who benefits?
❌ The smallest most vulnerable businesses? Nope. 45% get nothing.
❌ Consumers? Nope - prices won't fall.
âś… Nearly half the cash goes straight to large chains. McDonald's gets ÂŁ400m.
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