The Government has confirmed a significant VAT change for the hospitality sector as part of Budget 2026. From 1 July 2026, the VAT rate on many food related hospitality services will drop from 13.5% to 9%.
If you run a restaurant, café, bar with food, takeaway, or hairdressing business, this change could directly affect your margins, your pricing, and how you manage your accounts.
From 1 July 2026:
The VAT rate on restaurant and catering services will reduce from 13.5% to 9%.
In other words, the lower 9% rate is being targeted at food led hospitality and hairdressing, not at accommodation or alcohol.
This change was flagged in media reports well in advance, including coverage by RTÉ, which highlighted that the hospitality industry would benefit from a VAT cut as part of Budget 2026, while hotels would be excluded.
The main winners are:
Hotels and guesthouses will not see a VAT reduction on the accommodation element of their services, although their food operations (restaurants, banqueting, etc.) can still benefit from the 9% rate.
For mixed businesses, such as hotels with restaurants, or venues offering “dinner plus accommodation” packages, the change adds complexity: the package will now need to be split for VAT purposes between a 13.5% accommodation element and a 9% food element on a fair and reasonable basis.
Although VAT is a tax on the customer, in reality VAT changes often show up in your bottom line.
If you keep prices the same, the cut from 13.5% to 9% effectively increases your margin on qualifying food and catering sales. That extra margin may help offset wage increases, energy costs, and food price inflation.
If you reduce prices, you can pass some or all of the saving on to your customers, which may help with competitiveness and demand in a market where many households are still price sensitive.
Many industry bodies, such as the Restaurants Association of Ireland, have welcomed the return of the 9% rate as an important support for jobs and viability in the sector. At the same time, professional commentary notes that the VAT cut is not a “silver bullet” for hospitality; it helps, but does not solve underlying cost and profitability challenges.
The key date is 1 July 2026. Up to and including 30 June 2026, you must continue to apply the 13.5% reduced rate to relevant restaurant, catering, and hot takeaway food services.
From 1 July 2026 onwards:
This gives businesses some time to plan, but also means there is a hard cut over date where systems and processes need to be ready.
To make the most of the change and avoid compliance headaches, hospitality and hairdressing businesses should start preparing now.
Here are the practical steps we recommend:
Make sure every menu item or service is clearly mapped to the correct VAT rate (23%, 13.5%, 9%, or 0%) in your accounting and POS systems.
Configure or check your till, booking, and invoicing software so that the 9% rate applies only to qualifying food, catering, and hairdressing services from 1 July 2026, and not before.
Decide whether to keep prices unchanged to improve margins or to pass some of the VAT saving on to customers. Build this into your budgets and forecasts for financial year 2026/27.
If you offer packages combining accommodation and food (for example “dinner, bed and breakfast”), work with your accountant to split the consideration between elements at different VAT rates and document the basis for apportionment.
Ensure your finance, front of house, and management teams understand which items are at 9%, which remain at 13.5%, and which stay at 23%, to avoid mis charging VAT and customer confusion.
The hospitality VAT cut sits within a wider €9.4 billion Budget 2026 package, which aims to support investment and economic resilience rather than introduce broad personal tax cuts.
Key points in the wider VAT picture include:
For hospitality and hairdressing businesses, the main actionable change is the reduction to 9% from 1 July 2026, but these other measures may also affect your cost base (especially energy bills) and investment decisions.
At M. A. Whately & Co, we work with many hospitality, retail, and service businesses, and we understand how complex VAT rules can become in practice.
We can help you:
If you operate in the hospitality or hairdressing sector and are unsure how these changes will affect you, please contact us and we will be happy to talk through your specific situation.
