The 9% VAT Cut Is Here: What It Actually Means for Your Salon, Café or Catering Business

If you run a hairdressing salon, café, restaurant or catering business in Ireland, your VAT rate just changed. As of 1 July 2026, the rate on these services dropped from 13.5% to 9%. It’s a meaningful shift for businesses that have spent the last few years absorbing rising costs — but it comes with details that are easy to get wrong if you’re updating prices, invoices or booking systems this week.

Here’s what’s actually changing, who it applies to, and what to do about it.

What changed

The second reduced VAT rate of 9% now applies to:

• Restaurant and catering services, including food sold in cafés, restaurants and hot takeaway
• Hairdressing services

This was confirmed in Budget 2026 last October and came into effect from 1 July 2026, with no expiry date currently attached — unlike previous temporary VAT reliefs, this one is intended to be permanent. Revenue has since published updated guidance confirming the change formally in its Tax and Duty Manuals.

For context, this rate dropped to 9% during the pandemic, rose back to 13.5% in September 2023, and has now returned to 9%. For many hospitality and hairdressing businesses, this effectively restores pricing conditions from a few years ago.

What’s not included

This is the part that trips people up, because “hospitality” doesn’t move as one block. A few things stay outside the 9% rate:

• Hotel and short-term accommodation stays at 13.5%. Only the food and catering side of a hospitality business benefits — not room rates.
• Alcohol, soft drinks, bottled water and sports drinks remain at the standard 23% rate, even when sold as part of a meal.
• General construction, cleaning and other non-food hospitality services are unaffected.
• Takeaway food is treated differently depending on the specific product — because takeaway sales are generally classed as a supply of goods rather than a service, so the applicable rate can vary by item.

If your business sells a mix of these — say, a café that also serves wine, or a hotel restaurant — you’ll need to apply different rates to different line items rather than one flat rate across the bill. Revenue’s guidance specifically addresses bundled offers, such as bed-and-breakfast packages, where the price has to be fairly split between the accommodation portion (13.5%) and the food portion (9%).

What this means practically

1. Update your systems before your next invoice run. Till software, accounting packages, and any booking or invoicing tool you use need the new rate applied from 1 July. If you’re still showing 13.5% on food or hairdressing line items, you’re either overcharging customers or under-declaring VAT — both create problems with Revenue down the line.

2. Decide whether you’re passing the saving on. There’s no requirement to drop your prices. Some businesses will choose to hold pricing and use the margin to absorb other rising costs (payroll, rent, energy); others will pass some or all of it on to stay competitive. Either is a legitimate business decision — just make it consciously rather than letting your system charge the old rate by accident.

3. Keep your VAT-rate documentation tidy. If you ever face a Revenue review, having a clear record of when and why you moved specific products or services to the 9% rate — and which ones you deliberately kept at 13.5% or 23% — will save you time and stress.

4. Watch for the accommodation/food split if you’re a hotel or B&B. This is the area Revenue has issued the most detailed guidance on. If you sell packages combining a room with meals, the price needs to be apportioned between the two rates based on what each part would reasonably cost if sold separately.

Why this matters beyond the VAT line

For sectors that are highly labour-intensive — hairdressing and food service both fall into this category — the relief is aimed squarely at protecting jobs and margins in businesses where payroll is the single biggest cost. Whether or not you choose to reduce prices, the change effectively reduces VAT due on qualifying sales by close to a third, which is real breathing room if you’ve spent the past couple of years watching costs rise faster than revenue.

It’s also a good moment to look at where else admin time and small percentages are quietly eating into your margin — booking systems with per-transaction commissions being one of the more common, and avoidable, examples.

A quick checklist

• [ ] Confirm which of your products/services qualify for 9% (food, catering, hairdressing) and which stay at 13.5% or 23%
• [ ] Update till, invoicing and booking software with the correct rates per item
• [ ] Decide on your pricing strategy — hold, partially pass on, or fully pass on the saving
• [ ] If you bundle accommodation and food, set up a fair apportionment method
• [ ] Brief any staff who issue invoices or quotes manually
• [ ] Document the date and reasoning behind any rate changes, in case of a future Revenue query

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This article is general information for Irish SME owners and isn’t a substitute for advice from your accountant or Revenue directly — particularly if your business has mixed-rate or bundled offerings. For full detail, see Revenue’s Tax and Duty Manuals on restaurant and catering services, and on guest and holiday accommodation.

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