Besides committing to your New Year’s resolutions in 2010, this January the retail industry will have to commit to a VAT rise of 20% from 17,5% by the coalition Government. The VAT hike is delayed with half a year and gives consumers and
retailers some more time to adjust.
The new tax rate would raise £13bn per year and would cancel out other cuts or income tax rises, according to Chancellor George Osbourne. The rise would bring the UK more in line with the rest of Europe, as currently Britain has the fourth lowest VAT rate. Only Luxembourg (15%), Cyprus (15%) and Spain (16%) charge less tax and Denmark and Sweden have the highest VAT rate of 25%.
Due to the tax measures retail shares are currently increasing, as bargain hunters are looking for the best buys of the moment. It is quite likely the market will look up by the increasing retail shares and profit by the delayed VAT hike.
Children’s clothing, most food, newspapers and magazines will stay VAT free.
