A significant VAT rate change is coming in Ireland on 1 July 2026. If you run a restaurant, cafe, takeaway, hotel, or hair salon, this change affects how you charge VAT and how much you keep. Here is everything you need to know, including what the saving looks like in practice and what steps to take before July.
What is the VAT rate change in Ireland for 2026?
The Irish VAT rate for food and catering services and hairdressing is reducing from 13.5% to 9% with effect from 1 July 2026. This was confirmed as part of Budget 2026 and is intended to support businesses in these sectors and protect employment.
Which businesses does the 9% VAT rate apply to?
The reduced 9% VAT rate applies to:
- Restaurants, cafes, and pubs serving food
- Takeaways and food caterers
- Deli food and prepared food sales
- Hair salons and barbers
It does not apply to:
- Hotel accommodation (room bookings remain at 13.5%)
- General beauty treatments
- Alcohol, bottled water, soft drinks, and vegetable juices
What is the VAT saving for food and catering businesses?
A lower output VAT rate means less VAT collected on each sale. Depending on how your pricing is structured, this can improve margins, allow you to offer more competitive pricing, or both.
To put a number on it: if your food sales are 100,000 per month, the difference between 13.5% and 9% VAT is approximately 3,750 per month in reduced VAT liability. Over a full year, that is around 45,000. For any small or medium-sized food or hospitality business in Ireland, that is a saving worth capturing correctly from day one.
What does the VAT change mean for hotels in Ireland?
Hotels face a more complex position than most. The 9% rate applies to food and catering revenue, including restaurant services, bar food, and room service, but accommodation stays at 13.5%.
This means Irish hotels need to apply two different VAT rates across their revenue centres from 1 July 2026. If your accounting or point-of-sale system is not already set up to handle this split correctly, it needs to be reviewed before the changeover date.
What do businesses need to do before 1 July 2026?
The actions are straightforward, but they need to happen before the new rate takes effect:
- Update your point-of-sale systems to apply the correct VAT rate on applicable sales.
- Update invoicing and billing templates where VAT is shown separately.
- Review your accounting setup to make sure the new rate is correctly applied and reported.
- Check any contracts or pricing agreements that reference specific VAT rates.
- If you use cloud accounting software like Xero, update your tax codes and test before the changeover date.
The sooner this is done, the less pressure there is as July approaches.
What happens if you apply the wrong VAT rate?
Applying the wrong rate from 1 July means your VAT returns will be incorrect. Overcharging customers creates a liability. Undercharging creates a different compliance issue. Both require time and money to fix after the fact. A straightforward review and system update now avoids all of that.
Frequently asked questions
Does the 9% VAT rate apply to deli food? Yes. Deli food and prepared food sales are included in the reduced 9% VAT rate from 1 July 2026.
Does the VAT change apply to hotel accommodation in Ireland? No. Hotel accommodation remains at 13.5%. The 9% rate applies only to food and catering services within hotels, such as restaurant meals, bar food, and room service.
When does the new 9% VAT rate start in Ireland? The reduced VAT rate takes effect on 1 July 2026.
Do hairdressers and barbers qualify for the reduced VAT rate? Yes. Hairdressing services, including barbers and hair salons, are included in the 9% rate. General beauty treatments are excluded.
Need help getting your VAT setup right before July?
If you are unsure how this change applies to your business, or you need support updating your systems and processes before the changeover, the team at OTHS Consulting can help. We work with businesses across hospitality, food service, and professional services in Ireland and can make sure your VAT setup is correct ahead of 1 July 2026.
Get in touch at www.oths.ie
