If you thought you only had to worry about VAT if you were self-employed with your own business and earning over the annual threshold to pay it, think again. Everyone pays VAT – we just pay it in different ways.
Most people are aware that numerous products and services are subject to VAT. For example, that new TV you’ve just bought will have VAT included in the price. So will the new double glazing you’ve got your eye on. Whenever you put your car in for a service or repairs, you will pay VAT there as well.
Indeed, the latest figures released by Labour in the run-up to the General Election in May seem to indicate the average person has paid far more in VAT in the last four years. Before the rate was increased on 4th January 2011, it stood at 17.5%. It went up to 20% where it still stands today.
According to the figures released by Labour, a family with children now pays on average £450 a year more with the increased rate in place. This amounts to £1,800 over the four-year period. The figure varies depending on the status of each individual. For example a sole pensioner would have paid out £600 more over the four-year period, amounting to £150 a year.
Of course there is a much bigger picture here. The coalition has responded by saying the hike in VAT was necessary to help free up funds to bring down the deficit. This deficit was left by the last Labour government – a fact not mentioned by Labour when issuing the figures.
This is clearly a time when each party aims to outdo the others in the hope of getting additional votes – votes that could see them win the right to form a government after the election. Of course, the increase of 2.5% in the rate of VAT has affected us all. However is this one of the best ways to free up more cash to help bring down the huge deficit this country still has?
VAT does have a role to play here. If the rate was reduced, funds would have to be found elsewhere instead. That could mean a cut to services – another thing that could affect us all. It would be great to have the best of all worlds but as we all know this is far from possible no matter how much we might want it.
As the New Year dawns many people will be wondering who will govern the country once the election is over. Even if we had a change of government there is no guarantee the rate of VAT applicable to various goods and services would change. It’s merely a case of waiting to see what will happen, and getting on with life in the meantime. One thing is certain though – VAT is here to stay in one form or another.