Tax updates you need to know this summer

Last week, Chancellor Rachel Reeves announced a package of tax measures, and some of them are genuinely welcome news for businesses and workers alike.

But as always, the headline isn’t always the full story.

Here is our breakdown of the key changes most likely to affect our clients, and some of the questions that we think are worth asking.

The mileage rate is going up!

If you use your own car for work, whether you’re a care worker, plumber, sales rep, or anyone else who clocks up the miles, this one’s for you!

For the first time in 15 years, the approved mileage allowance payment (AMAP) rate has increased. The rate had been frozen since April 2011, so this is a meaningful change.

From 6^th April 2026, the tax-free rates for cars and vans are:

• 55p per mile for the first 10,000 business miles in the tax year (up from 45p)
• 25p per mile for any mileage above 10,000 miles (up from 15p)

Note: The motorcycle rate hasn’t changed.

The increase has been backdated to the start of the current tax year (6^th April 2026), and HMRC has confirmed the new approved mileage rates apply from the 2026/27 tax year onwards.

So, if you’re an employee using your own vehicle for work, your employer can now reimburse you at the higher rate, but they don’t have to.

What does it actually mean for you?

This actually depends on whether you’re an employee or self-employed.

If you’re self-employed, good news! These rates will automatically apply as tax relief when you calculate your business mileage expenses.

If you’re an employee, your employer can now reimburse you at a higher rate, BUT they don’t have to. Every employer sets their own mileage policy, and plenty of businesses pay below the HMRC threshold.

So what happens if there is a difference?

Here’s the part not many people know: if your employer pays you less than the HMRC suggested rate, you can claim tax relief on the rest directly from HMRC.

Example:

If your employer pays you 25p per mile and the approved rate is now 55p, you can claim the remaining 30p per mile in tax relief.

You can do this via a P87 on the HMRC website.

If you drove 100 miles for work and your employer reimbursed you at 25p, you’d receive £25. But you can claim tax relief on the remaining £30, meaning there’s extra there for you to cover expenses of running your vehicle, wear and tear, etc.

If you’re an employer who reimburses mileage, now is a good time to review your expenses policy. The threshold has increased, which means there is an opportunity to reflect that in what you pay. But it’s not mandatory. It’s worth thinking about what would work for your business and your team.

Summer VAT cut for children’s meals and attractions

A temporary 5% VAT rate is being introduced over the summer, for:

• Children’s meals at restaurants, cafés, hotels, and similar hospitality venues.
• Children’s tickets to attractions including theme parks, cinemas, zoos, fairs, and soft play.

The reduced rate starts on 25^th June 2026 (when Scottish schools break up) and runs until 1^st September 2026.

For the reduced rate to apply to food, two conditions must be met.

1. The meal must be held out for sale only as a meal for children
2. It must be supplied as part of catering services for consumption on the premises

Here’s where it gets interesting

When VAT is reduced, the business collects less tax on behalf of HMRC. But the business isn’t obliged to pass that saving on to the customer. They could reduce their prices… or they could maintain their current prices and improve their margin.

A children’s meal that costs £5 today could still cost £5 in July. The family sees no difference at the till, but the restaurant actually gets to keep more of that £5.

In my personal opinion (Megan, the writer of this post) anything extra to help local businesses towards rising costs, hiring more staff at a busy time of year (think less wait times and the same great service), and potentially putting more aside to keep our beloved businesses open over the winter period, is something that I would love to support.

For small, independent hospitality businesses who’ve had a really tough few years, the idea of holding onto a little more margin is understandable. For big chains, you might feel differently.

The chancellor’s intent seems to be a mix of both: support for families who want to be able to do more over the holidays, and a boost for hospitality. But the reality is more layered than headline suggests.

So, what do you need to think about?

If you run a hospitality business or a visitor attraction, there are a few things to work through ahead of 25^th June:

• Your software will need updating: this ensures the correct VAT rate is being charged from 25^th Speak to your provider now so you’re not scrambling at the last minute.
• If you’ve already taken bookings and pre-payments

Remember: this change is temporary… it ends on 1^st September.

• Are you reducing your prices to potentially attract more customers over the summer?
• Or are you maintaining prices and using the breathing room to improve your margins?

There isn’t a one-size-fits-all here, but it’s worth thinking about your pricing strategy.

These headlines always feel fairly clean cut and self explanatory, but as Laura, our MD, puts it:

“On the face of it, it’s just a number, a formula change, and a software update, but actually there’s a lot more to it.”

Other updates worth noting

A few other announcements from last week that may be relevant depending on your sector:

Fuel duty and road tax

The 5p fuel duty freeze was confirmed. For hauliers, there’s a 12-month road tax holiday for HGVs. This will save a typical lorry up to £912. Duty on red diesel will also be cut by over a third until the end of the year.

Free bus travel for children in August

Subject to bus companies signing up, children aged 5 to 15 across England will be able to travel for free in August. This is already in place in London and Scotland.

How do you interpret these changes?

While putting together this blog post and talking with the team, a few questions came up that we keep coming back to: who gets the benefit? Is it the business, the customer, or both? Who would see more from this?

We’d love to know what you’re thinking about these changes, particularly the VAT cut. Are you planning to pass it on? Or does keeping that margin make more sense for your business right now?

Leave us a comment on our socials, under this post, to join in the conversation.

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As always, if you have any questions for us, we’re here to help.

You can give us a call on 01872 267 267, message us via WhatsApp on 0777 49 39 111, or email us at [email protected].

The information in this post is based on announcements made by the Chancellor in May 2026. Some details, including full impact assessments and detailed HMRC guidance, are still being published. We’ll keep you updated as more becomes clear.