Chancellor Rachel Reeves has unveiled a package of measures dubbed “Great British Summer Savings” — including a temporary VAT cut on leisure and hospitality activities and free bus travel for children — as the government steps up its efforts to ease the strain on household budgets amid persistent inflationary pressure linked to the Iran conflict.
The scheme, estimated to cost around £300 million, is designed to help families afford days out, meals and travel during the summer months. It comes as inflation, which eased to 2.8% in April 2026, is expected to climb again due to rising oil prices and disruptions to global supply chains caused by the war in Iran and the continued closure of the Strait of Hormuz. The Treasury has also extended the fuel duty freeze until the end of 2026 and introduced other transport-related savings.
Summer VAT cut: how it will work and what it means for families
From 25 June to 1 September 2026, the rate of VAT on a range of leisure and hospitality services will be reduced from 20% to 5% across England, Wales, Scotland and Northern Ireland. The cut applies to children’s meals served in restaurants (defined as meals marketed and priced for children and consumed on the premises), as well as children’s and family tickets for cinemas, theatres, exhibitions, shows and concerts. Admission tickets for both children and adults to attractions such as amusement parks, fairs, circuses, museums, zoos, adventure parks, soft play centres and observation attractions are also included.
The Treasury confirmed that adults without children can still benefit from the reduced rate on attraction tickets. The intention is that people will spend money in the economy at a cheaper rate — provided businesses pass on the VAT savings to customers. If a business chooses to pass on the full reduction, a family of two adults and two children could save roughly £9 on circus tickets, £17 on a wildlife park visit and £20 on a theme park outing, according to Treasury calculations. A child’s cinema ticket could be reduced by £1.50.
However, there is no legal requirement for businesses to pass on the savings. The government has expressed an expectation that they will, and the Federation of Small Businesses (FSB) has described the cut as a welcome boost, though it noted that ongoing support is needed to help businesses manage rising operational costs. Season tickets or repeat-entry tickets valid outside the relief period will not qualify unless priced the same as a standard single-entry ticket; repeat-entry tickets valid only within the relief period will qualify.
The VAT cut is partly funded by closing a tax loophole for oil companies, changing how they are taxed on their “foreign branches” to capture more UK trading profit. This reform is expected to raise hundreds of millions of pounds annually.
Charlotte Kennedy, a chartered financial planner at Rathbones, said that while targeted support is welcome, the impact of rising prices will not be felt evenly. “Lower-income families and those already spending a larger share of their income on essentials may continue to face significant pressure on household budgets,” she warned, adding that everyone experiences inflation differently depending on their spending habits. She advised households to review regular outgoings, prioritise high-interest debt repayment and build a rainy-day fund equivalent to three to six months’ living expenses.
Free bus travel for children throughout August
In a separate measure covering England only, all children aged five to 15 will be able to travel for free on any participating local bus service throughout August 2026. The Treasury said the scheme requires no registration and allows unlimited journeys, helping families reach summer activities while reducing household costs. The government estimates that a family with two children making a weekly return trip at a £1.50 child fare could save around £27 over the month.
The scheme, which follows a successful pilot in the West of England, is funded by more than £100 million allocated by the government, which also includes support for bus services. Children in London already qualify for free travel on the Underground using a five to 15-year-old zip card, but the new measure extends free bus travel to all children aged five to 15 across England.
Food tariffs suspended on more than 100 products
To help make grocery shopping cheaper, the government is suspending tariffs on more than 100 different food products, including biscuits, chocolate, dried fruit, nuts and baked beans. A full list of affected items is expected to be published next week. The Treasury estimates the consumer benefit will be more than £150 million a year, with the measure costing the public purse around £40 million. Chancellor Reeves said she expects supermarkets to pass on the savings in full.
The suspension follows earlier tariff cuts on products such as pasta, juices, tuna, oranges and peaches, which were expected to save consumers between £100 million and £400 million annually. The government has excluded significant UK primary agricultural production from the cuts. However, the Food and Drink Federation (FDF) has expressed scepticism, arguing that removing tariffs on finished products undermines domestic manufacturers and suggesting the focus should instead be on tariffs for ingredients.
Alongside these measures, the government has extended the fuel duty freeze until the end of 2026 — originally due to be phased out from September — saving the average driver around £120 by the end of the year. A 12-month vehicle excise duty holiday for heavy goods vehicles (HGVs) will save a typical operator around £600 per truck, and duty on red diesel used by farmers and rail freight has been reduced by more than a third until the end of 2026. Tax-free mileage rates for workers have also been increased by 10p per mile for the 2026-27 tax year, backdated to April, expected to save workers around £120 on average. The freight and logistics sector has welcomed these measures but called for longer-term certainty and a fuel duty stabilisation mechanism.
The Institute for Fiscal Studies (IFS) director Helen Miller has estimated the combined cost of the VAT cuts and free bus travel equates to an average saving of around £10 per UK household, noting that the savings are “pretty small.” The Resolution Foundation has pointed out that high-income households benefit most from the fuel duty freeze. The government has previously implemented a £78 billion package to support households and businesses through the cost-of-living crisis, including cost of living payments to vulnerable households — more than 80% of recipients reported the payments helped with energy and utility bills, and over 60% with food and groceries, though the impact was generally short-term. The Household Support Fund and discretionary local authority funding have also been provided.
Prime Minister Keir Starmer has said the government is focused on practical steps to ease pressure on household budgets and support parents during school holidays. Liberal Democrats’ Treasury spokesman Daisy Cooper noted that the party had been advocating for similar measures, including an emergency temporary VAT cut for hospitality. The government’s economic plan is framed as a direct response to the cost of living crisis and the impact of the Iran war.
