/ Money

How much will the VAT rise cost you?

Piles of money with letters VAT on top

With the VAT rise being the talk of the country, how will that extra 2.5% hit you over the course of this year – and how are retailers coaxing shoppers in with this increase in prices?

If, like me, shopping is a pleasure for you rather than a pain, then this week will be very significant. No, I’m not talking about the potential further reductions in the sales but three little letters that mean shops are falling over themselves to be as competitive as they can. That’s right – V.A.T.

So the rise of VAT to 20% has actually happened – what does this mean for us? Clearly quite a lot of things will cost more, but how will we as individuals be affected? I know I’ll have to look more closely at my pay cheque and maybe make a few wiser decisions on my spending.

How are shops dealing with the VAT hike?

Shops are responding to the hike in various ways, meaning that when we say ‘shop around’ we really do mean it. Some, like Comet, have increased their prices from today, but others are delaying the push.

John Lewis told Which? before Christmas that its ‘Never Knowingly Undersold’ policy – which checks and matches the online and shop prices of high street competitors – means that it will be the last of these big chains to increase its prices due to VAT.

And of course there’s the much publicised promise of Superdrug to swallow the rise on its own-brand products, while those of you wanting to cash in before the rise can do so at Tesco until 25 January.

To VAT or not to VAT?

While I’d never advocate the ‘just buy it now’ idea (unless it happens to be a killer pair of shoes at half price), it’s certainly worth considering if shops are giving you the chance to buy what you actually want without the price rise. But be aware before you hit the tills if you spot any pre-VAT rise ‘bargains’ – price tickets don’t have to be changed until 1 February, so what you see in print might not be what you pay.

And let’s not forget that there are plenty of January sales around for us to cash in on some bargains – take a look at the Which? January sales guide to get up-to-the-minute news of where you can find the latest deals.

What do you think of the VAT hike – are you worried about the effect on your hard earned pennies – or do you think that there’s much ado about nothing?


I suspect that the extra 2.5% on VAT should not affect most people’s shopping habits.
It is a reasonably fair and an easy way to raise more revenue , probably fairer than raising income tax as you do have some control on your spending.

Before VAT we had purchase tax – at 33% on luxury goods at one time.

I agree, 2.5% rise isn’t much (in practice it’s only a 2.13% rise), we had 15% a few years ago. Although I agree it’s a good way of raising additional income that will help chip slowly at the humongous debt left to us by the previous administration courtesy of a bunch of greedy City types I’m not entirely convinced that it’s the most efficient method. The cost to business of the third VAT change in as many years must be huge and the knock on effect of that is for businesses to either reduce margins or implement cuts (i.e job losses).

Personally, I’ll try my best to continue to offset any losses in whatever way I can whether it’s changing fuel supplier (done), switching to a ‘reward’ current account (done) or using cashback sites like Quidco for major purchases (also done). Saving money with hardly any effort has its kicks.

I did have to laugh at the man on last night’s news, however, shopping in Comet to beat the VAT rise. Even if he’d waited until the VAT rise and then shopped online he probably would’ve saved more money instead of spending it at Comet!

I think any form of increased taxation will be regressive.
I’d rather the bankers (especially the spivs who gamble with money they don’t have) and MP’s (of all parties) paid for getting us in this mess.

Brian Kidd says:
6 January 2011

There’s a myth which has been propagated by the last Government and that is that the banks are to blame for the trillions of debt this country now has.Yes of course the banks played a part in the crash but the truth is Britain was up to it’s eyes in debt long before the banks crashed. They just made it worse!!.Gordon Brown couldn’t believe his luck when the banks went down!
What has quietly been forgotten is P.P.F.I’s( Public Private Finance Initiative) This was a wheeze dreamt up by Brown and his friends to go on spending our money but it wouldn’t show in the “accounts”.That accounts for a £ trillion in round figures on it;s own!!

The European Court of Human Rights cost the UK£2.1 billion per year. The cost of the compensation related to judgments from this organisation has cost a further £7.1 billions.
Yes there’s more!! The E U is costing the UK £16.5 billion per year. It doesn’t take a lot of working out does it!!

I was surprised at the lack of mathematical skills nearly all the commentators have been showing in the media about the rise in VAT. The rate has increased by a little over 14.28%, and not 2.5% as most commentators claimed. Furthermore, an item which cost £100 before the increase should now cost a fraction over £102.12 (£102.1275) {as also pointed out by fat sam} and not £102.50 as was often stated. I personally think that the increase in VAT may be a good way of reducing the deficit, as few of us can avoid it – as with some other taxes, and essential items are VAT free anyway. And I too can remember the 33% Purchase Tax which was applied to what was sometimes unfairly labelled as “Luxury Items”

Most commentators have rounded up to make it easier to understand. It is totally unnecessary to be so accurate. Estimation is a mathematical skill – this was the concept used.

I taught Mathematics

New VAT rise is called as a vote against trust !……..This new VAT rise will slowdown businesses and economy all together.
From student fee rise to vat rise, We will see more misery in our daily life.
We will see more doom and gloom situation in future.
Our new Govt. is champion of rise in every sector !…..Food and fuel price rise,Rail fare rise,energy tariff rise,student fee rise.etc. What is now left ? jobs ?

As an OAP a hike by 2.5% of VAT is certainly significant – As I am below the bread line already – I couldn’t afford any luxuries BEFORE the hike (My pension income is now 40% LESS than when I retired). So a small amount of essentials will be dropped. Will I starve? Not really. But will I miss the odd piece of fruit I can no longer afford – Then Yes.

This Government is a disaster – I’d sooner see a rise in Income Tax – I don’t get enough to pay income tax.

And the cuts have not started yet. We will see more doom and gloom situation in future.as “Shire of Rose” stated.