Budget watch · Last reviewed 24 September 2026
Autumn Budget 2026: What Could Change for VAT on 28 October
Preview written before the Budget.This is a preview. We will update this page on Wednesday 28 October as the Chancellor speaks, and add every VAT change to the log at the bottom.
Chancellor John Healey delivers his first Budget on Wednesday 28 October 2026. The main VAT rates will not rise, because the government has said it will keep Labour’s 2024 manifesto promise not to increase VAT. The real questions are about reliefs: a lower rate for hospitality, what happens when 0% VAT on electricity and on solar panels and heat pumps runs out on 31 March 2027, whether the £90,000 registration threshold moves, and the promised roadmap for mandatory electronic invoicing.
Key facts
- Date
- Wednesday 28 October 2026
- Time
- Budget speeches normally start straight after Prime Minister’s Questions, at about 12.30pm
- Chancellor
- John Healey, in post since July 2026
- Forecast
- The Office for Budget Responsibility publishes its forecast on the same day
- VAT rates now
- 20% standard, 5% reduced, 0% zero rate
- Thresholds now
- £90,000 to register, £88,000 to deregister, unchanged since 1 April 2024
- Ruled out
- A rise in the rates of VAT, income tax or employee National Insurance
The VAT watch list
These are the VAT questions most likely to be answered on the day. The final column is our reading of the signals so far, not a prediction of what the Chancellor will say.
| Area | Where it stands | What is being discussed | Signals |
|---|---|---|---|
| Hospitality VAT | 20% on restaurant meals, hot food, drinks and hotel stays | Industry campaign for 10%. BDO suggests a cut could exclude alcohol | Under pressure, costly |
| Solar panels, heat pumps, batteries | 0% until 31 March 2027, then 5% | Extension of the zero rate | No commitment yet |
| Household electricity | 0% in Great Britain from 1 October 2026 to 31 March 2027 | Extension, and a matching cut on gas | Possible |
| Registration threshold | £90,000 | A rise to £100,000 | Unlikely |
| Public EV charging | 20% (home charging 0% from 1 October) | A lower rate, possibly 5% or 10% | Possible |
| Electronic invoicing | Mandatory for B2B VAT invoices from April 2029 | Detailed implementation roadmap | Promised for this Budget |
| Main VAT rates | 20% and 5% | No change | Rise ruled out |
Hospitality: a cut to 10%?
Pubs, restaurants and hotels have been pushing hard for a lower VAT rate since the summer, arguing that closures are rising and costs keep climbing. More than 800 hospitality businesses wrote to the Prime Minister on 14 September asking him to deliver a cut (Morning Advertiser). The Treasury is wary. Financial Secretary James Murray said in August that a big VAT cut “costs a lot of money” and that anything announced would need to be fully funded (Restaurant Online).
The price tag is the sticking point. Tax Policy Associates puts the cost of a 10% rate at £12bn to £14bn a year once businesses start stretching the boundary of what counts as hospitality. It also points out that about 45% of hospitality businesses are below the VAT threshold and would get nothing directly, while large chains would take a big share of the benefit.
What a 10% rate would mean in practice.
Take a meal priced at £12.00 including 20% VAT. The business keeps £10.00 and pays £2.00 to HMRC.
| Scenario | Menu price | VAT | Business keeps |
|---|---|---|---|
| Today, at 20% | £12.00 | £2.00 | £10.00 |
| At 10%, price unchanged | £12.00 | £1.09 | £10.91 |
| At 10%, full cut passed on | £11.00 | £1.00 | £10.00 |
VAT rate change calculator
Enter a price that includes VAT, then pick today’s rate and a new one.
Today, at 20%
At 10%, price unchanged
At 10%, full cut passed on
Keep the price at £12.00 and the business keeps £0.91 more on each sale.
Pass the full cut on and the price falls to £11.00, so the customer pays £1.00 less.
History suggests most of the cut stays with the business. After France lowered its restaurant VAT rate in 2009, prices had fallen by only about 1.9% two and a half years later, according to the research Tax Policy Associates cites. When the UK cut hospitality VAT to 5% in July 2020, the change was announced on 8 July and applied from 15 July, so a Budget cut could arrive quickly if it comes.
If you use the Flat Rate Scheme, watch for new percentages too. In 2020 HMRC cut the flat rates for catering, accommodation and pubs alongside the main rate change.
Solar panels, heat pumps and batteries: the 31 March 2027 cliff edge
Installing energy saving materials in homes has been zero rated in Great Britain since April 2022. The relief is written into law until 31 March 2027, and from 1 April 2027 the rate goes back to 5%. The House of Commons Library says the government has not indicated any plan to extend it, even though the question has come up several times in Parliament. On a £10,000 installation the difference is £500. Our guide to 0% VAT on solar panels and heat pumps covers what qualifies.
Electricity and gas
The zero rate on household electricity starts on 1 October and is due to end on the same day as the solar relief, 31 March 2027. It costs about £850 million for the six months and was paid for by cancelling the digital ID programme. BDO has suggested a matching cut on domestic gas would be an eye catching Budget move. Nothing has been announced. Our guide to 0% VAT on electricity explains how the current cut works.
The £90,000 registration threshold
The threshold rose from £85,000 to £90,000 in April 2024 and has not moved since. There is talk of £100,000, and BDO lists it as a possibility. The signals from government point the other way. In a House of Lords debate on 5 March 2026, the then Treasury minister Lord Livermore said £90,000 is already high by international standards and that any change would only be made at a fiscal event (Hansard). With tight public finances, a higher threshold that costs revenue looks unlikely.
If it did rise, businesses just over £90,000 might be able to leave VAT, depending on where the deregistration limit is set. Our guides on registering and deregistering explain the current tests.
Public EV charging
Charging at home gets the domestic rate, which is 0% from 1 October. Charging at a public point costs 20%. In February 2026 the First tier Tribunal ruled in the Charge My Street case that some public charging can qualify for the lower rate where a customer uses no more than 1,000 kWh a month at a location. HMRC is seeking to appeal. Industry estimates put the extra VAT raised by charging 20% rather than 5% at about £85 million a year (vatcalc). There were reports in January that the Treasury had looked at a lower rate before pay per mile charging for electric cars starts in April 2028. BDO suggests 10% is possible.
Electronic invoicing roadmap
This is the one VAT item almost certain to feature. The government has already decided that all B2B and business to government VAT invoices must be structured electronic invoices from April 2029, sent through the Peppol network. A PDF attached to an email will not count. The consultation response promised an implementation roadmap at Budget 2026. Expect detail on timelines, standards and any phasing. Businesses that are not VAT registered will not be required to use it. Our guide to what a valid VAT invoice must include covers today’s rules.
The main rates
The Prime Minister has confirmed the government will stick to its promise not to raise VAT, income tax or employee National Insurance rates (Grant Thornton). A cut to the 20% standard rate is not expected either.
Why any VAT giveaway will be small
Money is tight. The Office for Budget Responsibility gave Rachel Reeves, then Chancellor, £22bn of headroom against her fiscal rules at the November 2025 Budget. Estimates now range from about £5bn to £11bn, after higher borrowing costs and weaker figures (Grant Thornton, House of Lords Library). Borrowing reached about £134bn in 2025/26. VAT raised £179.9bn in 2025/26, so even a narrow relief costs billions. Expect targeted, time limited measures rather than broad cuts.
Already decided before Budget day
Several changes are fixed whatever the Chancellor says on 28 October.
- April 2029Mandatory electronic invoicing for B2B VAT invoices
- 6 April 2027Making Tax Digital for Income Tax extends to income over £30,000
- 1 April 20270% VAT on energy saving materials and on household electricity ends, back to 5%
- April 2027Business rates cut by a fifth for pubs, social clubs and live music venues in England
- 1 January 2027Fuel duty goes up 3p a litre as the temporary 5p cut starts to unwind, with the last 2p added on 1 March 2027. VAT at 20% is charged on top of fuel duty, so pump prices move by more than the duty change
- 5 November 2026Next Bank of England rate decision. HMRC’s late payment interest, now 7.75%, moves with it. See our late payment calculator
- 1 October 2026Household electricity in Great Britain goes from 5% to 0% VAT
- Last reviewed 24 September 2026
- 1 September 2026Great British Summer Savings 5% rate on family days out ended
- 29 July 2026Capital goods scheme: computers removed, land and buildings threshold raised from £250,000 to £600,000
- 1 July 2026Motability advance payments on new leases became standard rated
- 1 April 2026No VAT due on qualifying goods businesses donate to charities to give away or use
- 2 January 2026Private hire operators taken out of the Tour Operators’ Margin Scheme
What to do before and on Budget day
- Do not reprice early. A VAT change applies from a set start date, which can be days or months after the speech. The summer savings cut was announced on 21 May and started on 25 June. The electricity cut was announced on 21 July and starts on 1 October.
- Check your deposits and advance payments. If a rate changes, the VAT due depends on the tax point. Money taken before the change, for work done after it, may need care.
- Be ready to update tills and invoicing software on the start date, and check any new Flat Rate Scheme percentages.
- Thinking about solar, a heat pump or a battery? Unless the relief is extended, the rate depends on when the installation is supplied. Talk to your installer about timing well before 31 March 2027.
- Close to £90,000? Keep tracking your rolling 12 month turnover. The threshold is the same until the government says otherwise.
- Issue B2B invoices? Ask your accounting software provider about its Peppol plans once the roadmap is out.
Budget day: what was announced
This section will be updated on Wednesday 28 October 2026 with every VAT announcement, the date it takes effect, and what it means for your business.
| Announcement | Takes effect | What it means for your business |
|---|---|---|
| Updates due on 28 October 2026 | ||
Frequently asked questions
When is the Autumn Budget 2026?
Wednesday 28 October 2026. It is John Healey’s first Budget as Chancellor.
Will VAT go up in the Budget?
The government has said it will not raise the rates of VAT, income tax or employee National Insurance, in line with Labour’s 2024 manifesto.
Will the VAT threshold change?
It stays at £90,000 unless the Chancellor announces otherwise. A rise to £100,000 has been floated, but ministers have described £90,000 as already high by international standards.
Will hospitality VAT be cut to 10%?
It is the most talked about VAT idea before the Budget, but the Treasury has stressed the cost. Nothing is confirmed until the speech.
Will 0% VAT on solar panels and heat pumps be extended?
No extension has been announced. As the law stands, the rate returns to 5% on 1 April 2027.
When would a VAT change from the Budget take effect?
On the date the government sets. That is usually stated in the Budget documents and can range from a week to several months later.
Where will the official Budget documents be?
On GOV.UK on the day, alongside the Office for Budget Responsibility’s forecast.
Need a quick sum at the new rates? Our VAT calculator handles any rate, and the current VAT rate guide lists every UK rate in force.
Open the VAT calculatorSources: HM Treasury, HMRC, the Office for Budget Responsibility, the Office for National Statistics, legislation.gov.uk, Hansard, and the House of Commons and House of Lords Libraries, plus the reports linked above. This is general information, not tax advice. Check GOV.UK or speak to an accountant about your own position.