Tax Changes: The government has recently announced two key tax changes that will affect both business owners and consumers. The first change is the increase in the approved mileage allowance rate for cars and vans from 45p to 55p per mile for the first 10,000 business miles. The second is a temporary reduction in VAT from 20% to 5% on certain children’s meals, tickets and family attractions during the summer holidays.
Tax Changes: Mileage Tax Relief Increased to 55p Per Mile
From the 2026/27 tax year, HMRC has increased the approved mileage allowance payment rate for cars and vans from 45p to 55p per mile for the first 10,000 business miles travelled each tax year. The rate for mileage above 10,000 miles remains at 25p per mile. This is the first increase to the mileage allowance in more than a decade and reflects the rising costs associated with fuel, vehicle maintenance, insurance and general motoring expenses. The updated rates apply to employees and directors using their own vehicles for business travel. They are also relevant for self-employed individuals.
Important Points to Remember
It is important to note that ordinary commuting between home and a permanent workplace does not qualify for mileage relief. The relief only applies to qualifying business journeys. You should continue to maintain accurate mileage logs, including journey dates, destinations and business purposes, as HMRC may request evidence to support claims.
Tax Changes: Temporary 5% VAT Rate for Children’s Meals and Family Attractions
Alongside the mileage changes, the government has introduced a temporary reduced VAT rate of 5% for certain family-focused activities and services. The reduced rate will apply between 25 June 2026 and 1 September 2026. The relief covers:
- Children’s meals sold in restaurants, cafés and similar establishments
- Children’s tickets to cinemas, theatres, exhibitions, concerts and shows
- Admission to qualifying family attractions, including theme parks, zoos, museums, soft play centres and similar venues
The measure is intended to support families during the summer holidays while encouraging consumer spending in the hospitality and leisure sectors.
Which Supplies Qualify?
The VAT reduction does not apply automatically to all food or admissions. HMRC has made clear that eligibility depends on how products are marketed and sold. For example, children’s meals must be specifically presented as children’s meals, usually through a dedicated children’s menu. Smaller portions of adult meals or discounted adult meals do not qualify. Similarly, only children’s admission tickets qualify for cinemas, theatres and shows unless a family ticket is sold as a single package, in which case the whole family ticket may benefit from the reduced rate. For attractions such as theme parks, zoos and museums, the reduced rate generally applies to all admission tickets where the venue is considered suitable for families with children. However, sports events and sporting activities are specifically excluded from the relief. The temporary nature of the relief means VAT rates are expected to revert to 20% after 1 September 2026.
Here to help
If you would like advice on how these changes affect you, please contact our team.