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Are you confused about VAT rates?

Sign saying 'Confused? This way'

Do you understand how much VAT is charged on the items you buy? Many of us are panic-buying to avoid January’s VAT hike without properly understanding the real rates we’re paying says a new survey.

If, like me, you’re under the assumption that everything you buy is subject to 17.5% VAT, it seems we’re both wrong.

Yes, I was aware that some items are VAT exempt (who hasn’t heard of the famous Jaffa Cake vs Jaffa biscuit debate?), but when it comes to everything else, I wrongly lumped everything into the same 17.5% basket.

Luckily, I can admit this without too much embarrassment, because a survey out last week revealed how much national confusion there is around this issue.

According to uSwitch’s findings, 45% of us are unsure whether our energy bills are subject to VAT and 36% wrongly believe we pay 17.5% when the actual rate is 5%. Nearly three in ten think food is subject to the standard rate, when almost all basic food is actually exempt for VAT.

Well, that’s a result for me, because my food bills won’t be going up as much as I thought in January, but still, this level of misconception is pretty shocking.

Are you buying to avoid the hike?

A few weeks ago, we asked if you are buying now to avoid the VAT hike and we had a variety of responses. Some of you admitted that, on bigger items, you are doing just that. ‘My husband and I moved house four months ago and he wanted to take time to do the house up but I have insisted that the work be done before the VAT hike as it will save an awful lot of money,’ said Sylvia F.

This tallies with a third of uSwitch’s respondents who said they are purchasing electronic gadgets, white goods and holidays now to avoid spending more come January. But with most travel (including flights, boats and trains) exempt from VAT, rushing to book next year’s holiday may not be such a savvy move.

And with seven in ten saying they believe flights are subject to VAT, it may just pay to brush up on the VAT basics.


Well, it doesn’t look like people are upping their spend, despite the VAT hike. New car sales in November fell by 11.5% compared to 2009.