The UK government has announced a series of new tax and fiscal measures as part of its economic response to rising energy prices and the ongoing conflict in Iran.
In a statement delivered to Parliament on 21 May 2026, Chancellor Rachel Reeves confirmed several indirect tax, customs, and corporate tax changes aimed at supporting households and businesses affected by inflationary pressures and higher fuel costs.
Temporary VAT Reduction on Summer Activities
One of the headline measures is a temporary reduction in VAT from 20% to 5% on selected leisure and hospitality activities during the summer period.
The reduced VAT rate will apply from 25 June 2026 until 1 September 2026 and covers:
- Theme parks and attractions
- Cinemas and theatres
- Zoos and museums
- Concerts and soft play centres
- Children’s meals in restaurants and cafés
The measure applies across the UK.
Fuel Duty Freeze Extended
The government also confirmed that fuel duty will not increase this year, maintaining the existing 5p reduction previously introduced.
The announcement comes amid continued volatility in global oil and gas markets following developments in the Middle East.
Tariff Suspension on Food Imports
To address food inflation, the UK will suspend tariffs on more than 100 food products sold in supermarkets.
The government stated that it expects retailers to pass the savings on to consumers.
Red Diesel Duty Reduced
A temporary reduction in red diesel duty of more than one-third will apply to:
- Farmers
- Rail freight operators
The reduced rate will remain in place until the end of 2026.
New Corporate Tax Rules for Oil & Gas Groups
The Chancellor also announced reforms to the taxation of foreign branch profits targeting multinational oil and gas groups.
According to the Treasury, some groups operating through overseas branch structures have reduced UK corporation tax liabilities linked to energy trading profits.
The new rules are intended to prevent these arrangements and are expected to raise “hundreds of millions of pounds annually.”
Additional Industry Support Measures
Alongside the tax announcements, the government confirmed:
- A £350 million Critical Chemicals Resilience Fund
- A £120 million support package for the UK ceramics sector
- A 12-month HGV road tax holiday for hauliers
The measures form part of the government’s broader economic response package linked to energy price increases and supply chain pressures.