We all pay it and we’ll all feel it. The increase in the rate of VAT to 20% from 4th January next year will bring in £13 billion of extra revenue over the lifetime of the current parliament.
In his first Budget as Chancellor, George Osborne said that the rise in VAT from its current rate of 17.5% was necessary. ‘The years of debt and spending make this unavoidable,’ he continued. ‘That is £13 billion we don’t have to find from extra spending cuts or income tax rises.’
VAT exemptions for food, children’s clothing, books and newspaper will be preserved for the course of this parliament.
The Chancellor has also increased VAT on general insurance premiums to 20% from 17.5% for the higher rate, which will mean more on travel insurance and product warranties for consumers. The standard rate of insurance premium tax will also increase to 6% from 5% which will impact on the price of car and home insurance.
Retailers may benefit from this impending rise come Christmas as shoppers may not put off purchases until the January sales. Others are sure to ‘cash in’ now too. Have a quote now for new windows – as long as the price is held for 12 months. You could benefit even if you don’t want to make the purchase in 2010.