The VAT rate is set to increase from 4th January 2011 from its current 17.5% to 20%, making many of our luxuries more expensive.
Items that are deemed ‘everyday’ will be exempt from the tax including children’s clothing, items of food and books. However items seen to be a luxury will see an increase.
To exemplify what this will mean on an everyday basis we have taken some ‘luxury’ items and calculated what the VAT increase will mean
Take a Bar of Chocolate costing £2.00 with the VAT increase to 20% in January 2011, it will cost £2.04. This may not seem like a lot but if you were to buy this chocolate bar every day for a year, it would cost you an extra £14.60 over the year. Perhaps not that much, but taken with all the other items which will see an increase, it all adds up!
The price increase for more expensive ‘luxury’ items will be more obvious. For example, a New TV costing £635 now (at a rate of 17.5% VAT) will cost £648.51 from January 2011. A £13.51 difference!
Feel free to leave your thoughts about the VAT increase and how it will affect you.
For help and advice on the VAT rise for small businesses, speak to one of our recommended accountants for a free consultation.
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