VAT rate rises from 17.5% to 20%
- Published on Tuesday, 04 January 2011 09:58
- Posted by Scott Buckler
The top rate of VAT has risen from 17.5% to 20% as the government looks to boost tax revenues to cut the UK's debt levels
Business groups have warned that retailers will be hit by the increase, while opponents of the rise have said the poorest will be hit hardest.
The government says the rise is necessary to help bring down the UK's high budget deficit.
Food, children's clothing, newspapers and magazines are not subject to VAT.
Concentrated burst Research by the Centre for Retail Research and online shopping group Kelkoo has suggested that retail sales will fall by about £2.2bn in the first three months of the year as a result of the rise in VAT.
The British Retail Consortium (BRC) has also warned that the rise, announced in the June budget, may have squeezed the traditional January sales period into a concentrated burst around the New Year.
More than seven out of 10 retailers polled by the BRC thought that their customers would bring forward purchases to beat the VAT increase.
Source: ©BBC News