As the nation prepares their bank account for Christmas and New Year festivities they would be wise to think ahead to January 2011 when the VAT will increase on all purchases. As it stands VAT is 17.5% but after the New Year it will rise to 20%. It doesn’t seem like a lot but for those that are waiting for the New Year sales may just benefit from buying all large and expensive items now instead of later.
As we know many people benefit from Christmas shopping for themselves as a chance to indulge and also save on the items that get reduced or are on ‘special offer’ but we don’t always save as sometimes to qualify the high street uses sneaky tactics as a free gift if you spend over X amount.
Some people who have been waiting all year to buy their new TV, kitchen or other expensive item will be keeping an eye on the New Year sales but they are just a ploy, they have such sales to get rid of old stock that will no longer be available in the future to make way for newer items.
How VAT increase will affect you?
Well a LG 50” TV that costs £800 now will cost you £820 after the VAT hike you will only benefit from sale prices if it is 20% cheaper. For those who are looking to spend more on a bigger purchase such as a new kitchen or car will see feel and notice the difference even more as these purchases will run into the thousands.
You cannot beat the VAT hike as it is automatically added to all purchases and makes up the total price, there are some places however that add it on at the end before you come to pay so be careful. There are also some places such as Chinese supermarkets that display the final cost with VAT in small print so you think that you are paying less than you are.
It is estimated by raising VAT by 2.5% it will generate more income for the economy by billions, this was the reason VAT was set to increase in the first place to try and cover some of the nations deficit. So if you have any expensive shopping to do it is worth noting that the VAT increase will come into effect January 4th 2011. Any purchases made after this time will result in the 2.5% increase.