Say Goodbye To The Low VAT Rate

6 January 2010, 16:56

As you may be aware, the lower 15% rate of VAT that was brought in at the end of 2008 has now reverted to the original rate of 17.5%. But what does this mean for you?

A lot will depend on whether you have a business or not. If you do and you have been charging the lower rate of 15% for the last year or so, you should now go back to charging 17.5% again. However some larger businesses are not handing the increase on to their customers. They will still need to pay this when it is due of course, but they are not adding the extra 2.5% on to the sales prices of their goods.

There is a clear reason for this. Many businesses are still trying to get back on their feet as we approach the end of the recession. Times are still hard for many people and the more we can do to encourage spending and sales at the beginning of the New Year, the better it will be for everyone.

The VAT change could affect you if you are a customer as well. You will find that prices in the shops may have gone back up. Having said that though, some places put the rate back up a while ago – you may not even have noticed. Because the change in VAT was not compulsory and it was announced at very short notice, some shops elected not to make the changes at all. This was more likely in the case of small concerns that didn’t have the time or manpower to change all the pricing.

It is still worth looking out for bargains though if you are shopping in the New Year sales. The shops that have decided not to pass on the increase to their customers are making a big deal over it because it amounts to positive publicity for them. And if you are thinking about making a large purchase such as a new TV, a kitchen or a three piece suite, you could save a lot of money if you go somewhere that will only charge 15% VAT instead of 17.5%.

So just because the rate has gone back up, don’t assume you will automatically be paying more. Some smart shopping could reveal the discounts are still out there to take advantage of. Make sure you do.