Ireland’s New 9% VAT Rate for Hospitality & Hairdressing (From 1 July 2026)

From 1 July 2026, Ireland is introducing a reduced VAT rate of 9% for a range of hospitality and personal services — a major change for many businesses and consumers alike.

Why is the VAT Rate Changing?

The Government has decided to cut the VAT (Value-Added Tax) rate on certain services from the current 13.5% down to 9%. This move is part of the Budget 2026 package and reflects a commitment made in the Government’s Program for Government to support key service industries.

The reduction is designed to:

• Support businesses in sectors with tight margins and high costs.
• Help sustain and create employment in these industries.
• Potentially boost consumer demand by lowering the tax burden on everyday services.

Starting 1 July 2026, the 9% VAT rate will apply to:

• Restaurant and café meals (food supplied in restaurants, cafés and similar establishments)
• Catering services (including many take-away and hot food services)
• Hairdressing services (cuts, styling and related treatments) Some items do not qualify for the reduced rate — for example, alcoholic drinks and soft drinks remain at the standard VAT rate of 23%.

What This Means for Businesses

• Lower tax bills: Eligible hospitality and hairdressing businesses will pay less VAT on qualifying sales.
• Pricing decisions remain with businesses: While VAT is lower, it’s up to each business whether to pass on the savings to customers or use the relief to help absorb costs (e.g., wages, rents, energy).
• Planning & systems updates: Businesses need to update accounting and point- of-sale systems to apply the correct rate from 1 July 2026 onwards.

How It Might Affect Consumers

Consumers could see slightly lower prices for dining out or haircuts if businesses choose to reflect the VAT cut in their pricing. However, whether and how much prices change will vary by business.

What It Doesn’t Change

This VAT cut:

• It is not temporary, there’s no planned expiry date specified in the legislation, so the 9% rate is intended to be permanent until changed by future governments.
• Doesn’t apply to accommodation: VAT on hotels, B&B stays and similar remains at standard rates.

Wrapping Up

The 9% VAT rate for hospitality and hairdressing reflects a significant tax shift aimed at bolstering sectors central to everyday life and employment in Ireland. Whether this translates into cheaper meals or cheaper haircuts depends on individual business decisions, but from 1 July 2026, the tax landscape for these services will be noticeably different.