VAT is going to rise to 20%, so the points that I mentioned earlier today will come into effect, but from 4th January 2011 and not tomorrow morning.
Although VAT will now rise, at least the things that were previously exempt such as childrens’ clothes, food and books will remain outside VAT taxation, and will do so for the life of the government, Osborne promised.
But costs of all other items that we buy will go up by 2.5%. So the average household will be worse of by at least £1 per day. Petrol will rise by 2.5p per litre.
The thing is, this will happen from 4th January next year. I can see why a delay is required as millions of shops and suppliers of goods and services will now have to update their tills and accounting systems.
Can you imagine the forthcoming New Year sales though? “Beat the VAT rise, buy your ******* now!” (fill in the blanks with a high cost item of your choice). What about really expensive “vatable” costs such as building work, landscaped gardens etc?
I can see a huge spike in business over the next six months for a whole range of goods and services as people rush to save that extra 2.5%. In January it will become very quiet again though.
And then we’ll gradually forget that VAT was ever 17.5% and we’ll start to spend again. I hope we all get used to it, as I doubt that VAT will ever fall below 20% again.