The Chancellor, has unveiled a series of temporary tax measures aimed at supporting households and businesses during the summer months, alongside wider changes affecting the oil and gas sector.

The announcements, made as part of the government’s “Great British Summer Saving Scheme”, include:

• A temporary 5% VAT rate for children’s meals and attractions
• An increase in the approved tax-free mileage allowance
• Fuel duty support measures
• Changes to foreign branch corporation tax exemptions for oil and gas companies

Below, we outline the key measures and what they could mean for businesses.

Temporary 5% VAT Rate for Children’s Meals and Attractions

From 25 June 2026 until 1 September 2026, a reduced VAT rate of 5% will apply to:

• Children’s meals sold in restaurants, cafés, hotels and similar hospitality venues
• Children’s admission tickets to attractions such as cinemas, zoos, theme parks, fairs and soft play centres

The temporary reduction is intended to support families during the school holidays while encouraging spending across the hospitality and leisure sectors.

Important Conditions

HMRC has confirmed that the reduced VAT rate for children’s meals will only apply where:

• The meal is specifically marketed as a children’s meal
• The food is supplied as part of catering services for consumption on the premises

Businesses operating within hospitality and leisure will need to act quickly to ensure:

• Till systems and accounting software are updated correctly
• Children’s menu items are clearly identified
• VAT reporting processes reflect the temporary reduced rate

Where businesses have already charged VAT at the standard rate for advance bookings or prepayments, HMRC expects customers to receive refunds for any overpaid VAT.

Approved Mileage Allowance Increased

In a significant move for employees and business owners, the approved mileage allowance for cars and vans will increase from 45p to 55p per mile for the first 10,000 business miles.

The lower rate for mileage over 10,000 miles will remain at 25p per mile.

The increase is backdated to 6 April 2026 and represents the first rise in the approved mileage rate for more than 15 years.

This measure is designed to help offset rising fuel costs affecting workers who use their personal vehicles for business travel, including care workers, tradespeople and mobile employees.

What Businesses Should Consider

Employers should review:

• Staff mileage reimbursement policies
• Payroll processes
• Expense claim systems
• Budget forecasts for travel costs

Businesses paying below the new approved rates may wish to consider whether changes are appropriate.

Additional Fuel Support Measures

The government also confirmed several additional support measures linked to rising fuel costs:

• The existing 5p fuel duty freeze will continue
• HGV operators will benefit from a 12‑month road tax holiday
• Red diesel duty will be reduced for farmers and the rail freight industry until the end of 2026

These measures are intended to support sectors particularly exposed to higher energy and transport costs.

Oil and Gas Tax Changes

Alongside the support measures, the Chancellor announced reforms targeting multinational oil and gas groups.

Under the new rules, UK‑resident companies involved in overseas oil and gas extraction through foreign permanent establishments will no longer qualify for corporation tax exemptions from 1 September 2026.

The government stated that the reforms are designed to prevent certain structures that currently reduce UK corporation tax liabilities on energy trading profits.

The changes are expected to affect accounting periods beginning on or after 1 January 2027.

Our View

The temporary VAT reductions will provide welcome support for hospitality and leisure businesses during the busy summer season, although the short implementation window may create practical and administrative challenges.

The increase in mileage rates is also likely to be welcomed by businesses and employees alike, particularly given rising fuel prices and the fact the allowance has remained unchanged since 2011.

Businesses should review their systems and processes promptly to ensure they are prepared for the upcoming changes.

How we can help?

At Ward Goodman we are helping businesses assess the impact of these changes and ensure compliance with the latest HMRC requirements.

If you would like advice on:

• VAT implementation and compliance
• Payroll and mileage allowance changes
• Business tax planning
• Sector-specific tax implications

For more information, please contact Ward Goodman today on 01202 875 900 or Contact | Ward Goodman