UK Restaurant Menu Pricing Guide (2026): CPIH Benchmarks + VAT Math

If you only review prices once a year, cost pressure sets your margin for you.

UK operators also have to manage one extra layer: guests pay VAT-inclusive prices, but your controllable margin sits in ex-VAT revenue. When those layers are mixed, sales can look stable while net contribution quietly slips.

This guide gives a practical monthly system for 2026: lock statutory assumptions first, run net pricing math, then publish clean VAT-inclusive prices across every channel.

Quick Summary

• National Living Wage (21+) is GBP 12.71 from 2026-04-01.
• Employer Class 1 NI is 15% above the secondary threshold (GBP 5,000/year) for 2026-04-06 to 2027-04-05.
• ONS CPIH (December 2025 release, published 2026-01-21) shows 3.6% all items and 3.8% restaurants and hotels.
• Run pricing in this order: net cost math -> margin check -> VAT-inclusive publish price.
• Use one effective date across dine-in, direct online ordering, and delivery platforms.

2026 Benchmarks to Lock Before Repricing

Before touching any menu, lock these inputs in your sheet:

1. Wage floor and role mix assumptions (2026-04-01 update).
2. Employer NI settings (15% above GBP 5,000/year from 2026-04-06).
3. Current CPIH context (useful as market context, not as your pricing formula).
4. VAT treatment by item/channel under current HMRC rules.

If your model still uses pre-April payroll assumptions, your pricing baseline is outdated even before a supplier increase hits.

Why Margin Slips Even When Covers Stay Flat

The most common UK pricing mistake is running cost percentages directly on VAT-inclusive sell prices. That mixes tax presentation with operating economics.

A cleaner structure is:

1. Build true variable cost per dish (ingredient + loaded labour minutes + packaging/channel fees).
2. Set target contribution in net terms.
3. Convert to VAT-inclusive customer prices at the end.

This approach keeps finance, ops, and FOH aligned around the same number.

Net-First Reprice Formula

For core items, use:

Required net price = Updated variable cost per dish / (1 - target contribution margin)

Where:

• Updated variable cost per dish includes ingredient, labour minutes at loaded hourly rate, and channel-specific costs.
• Target contribution margin is the margin you need before fixed costs.

Then convert net to guest-facing price:

VAT-inclusive price = net price × 1.20

Worked Example: One Core Item (2026 Assumptions)

Assume one high-volume lunch item:

• Current menu price: GBP 14.40 VAT-inclusive (GBP 12.00 net)
• Updated ingredient cost: GBP 4.35
• Labour per dish: 10 minutes at loaded GBP 14.61/hour -> GBP 2.44
• Packaging/card/channel variable cost: GBP 0.55
• Target contribution margin: 42%

Updated variable cost = 4.35 + 2.44 + 0.55 = GBP 7.34
Required net price = 7.34 / (1 - 0.42) = GBP 12.66
Required VAT-inclusive price = 12.66 × 1.20 = GBP 15.19

In practice, most teams would publish GBP 15.20 or GBP 15.25 depending on their rounding policy.

Local Scenario: Central London Lunch Site vs Leeds Neighbourhood Site

Using one uplift percentage across all sites usually creates avoidable trade-offs.

Local execution matters more than national averages. The same inflation print can justify different item-level moves by location.

Monthly UK Pricing Routine (15 Minutes)

1. Refresh wage/NI assumptions using current statutory dates.
2. Update top-spend ingredients and key packaging costs.
3. Recalculate top 10 items in net terms.
4. Flag items with contribution margin below target for 2+ weeks.
5. Convert approved changes to VAT-inclusive prices.
6. Publish on POS, own-order channel, and delivery apps on one effective date.

Related Guides

• UK Food Cost Calculator
• UK Menu Pricing Calculator
• UK Menu Price Review Checklist
• UK Menu Price Rounding Guide
• UK Restaurant VAT Pricing Guide
• UK Curry House Cost Guide
• UK Restaurant Labour Cost Calculator
• UK Restaurant Prime Cost Calculator
• Menu Engineering Guide
• Margin vs Markup Guide

Want This Done Automatically?

KitchenCost recalculates recipe costs, food cost %, and price targets as your ingredient prices change.

If you want a faster way to protect margin, try KitchenCost.

Sources (checked on 2026-02-12)

• ONS - Consumer price inflation, UK: December 2025 (CPIH Table 2)
• GOV.UK - Minimum wage rates for 2026
• GOV.UK - Rates and thresholds for employers 2026 to 2027
• GOV.UK - VAT rates
• GOV.UK - How VAT works (charging VAT)