VAT forecast to rise 2.5% to 20% in emergency budget

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According to a BBC survey of 28 independent economists (who assist the Treasury with their forecasts) it’s very likely that we’ll see a hike in VAT taking it from the current 17.5% up to a 20% VAT rate before the end of the year.

The new Tory/Lib Dem Coalition Government is likely to announce an emergency budget at some time in the next 50 days, and it’s looking increasingly likely that VAT increases will be one of the first measures to be introduced. The increase would raise around £11.5bn per year for the Government coffers.

So how would a VAT rise affect your business? For those that are not VAT registered it’ll represent a real increase in the cost of your stock and other business supplies. For those that are VAT registered you’ll be able to reclaim the increased VAT on purchases but will have to collect additional VAT on sales.

It’s worth remembering that most sellers reported that the reduction in VAT to 15% made little difference over the course of a year, so would an increase of the same amount make a significant difference to you?

26 Responses

  1. GOD Bless America and Ebay .com
    and Australia and Canada and everywhere else other than europe and the UK,

  2. When it dropped to 15% I left all the pricing the same, if it goes up to 20% I will be upping prices by 2.5%.

  3. This could ultimately hurt eBay and as a result fees could rise to compensate. At some point even Luxembourg I would suggest will be raising VAT.

    Not being VAT registered I was wondering if eBay charge final value fees on the VAT element of a sale?

    It surely would make eBay even less competitive if they charge fees on the tax element of a sale.

  4. If VAT goes to 20% it will hit my profits due to the VAT I have to charge on postage. It would be very bad news.

  5. Soon there will be a breathing tax. Poor people will be telling there children take deeper breathes kids and not too many.

    Perhaps a shouting or raising your voice tax ?

    Arguements in the street could be done in a whisper.

  6. 20% who do these people think they are…This is the second unelected prime minister….and we’re supposed to just roll over!

    …England is way overdue a revolution, I say dump the government and let the monarchy run things again.

  7. This will be a great encouragement to the cash economy. We will be like Italy before we know it.

  8. It won’t be going up to 20% in the Channel Islands because they don’t have to charge VAT on the smaller items. This anti-competitive situation is now getting ridiculous. Postage prices are supposed to be the same throughout the UK. Don’t forget us mainland sellers will be collecting 20% for the government in VAT on postage because we are not charged VAT by the Royal Mail when we buy our stamps or equivalent. On a £15 memory card a Channel Island seller can sell for £3 less. Absolutely crazy.

  9. Quote: 20% who do these people think they are…This is the second unelected prime minister….and we’re supposed to just roll over!

    No-one elects a Prime MInister, we elect a party!! For goodness sake, why are people in this country so negative? Do you want another 13 years of the Labour Loonies instead? Give it a chance!!

  10. well I think Ant & Dec should get a chance, they seem to be well intentioned they cant do that much worse than the last lot

  11. If Cameron does, he is a lying bastard. he clearly said on the Paxman interview that “it was not planned for the 4 yr deficit reduction program”.

  12. I think a VAT rise was inevitable whoever came in, but poster number 8 is correct, the fact that we have to compete against offshore firms charging 0% VAT is crazy. Can the government not address this issue as well? must be rubbing their hands in glee at this, as it will mean that more mainland UK sellers cannot compete. I wonder if Mr Cameron knows how much money goes offshore because of this ridiculous situation – money which could be kept circulating round the mainland AND be taxed.

  13. well i’m sure anyone who trades from the Channel Islands trades there on the back of this loophole so should be prepared for it to be closed and then pay tax like the rest of us have to.


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