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

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?

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26 Responses on "VAT forecast to rise 2.5% to 20% in emergency budget"

  1. 1
    nortumbrian says:

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

  2. 2
    whirly says:

    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%.

    • 2.1
      nortumbrian says:

      astounded non of them have thought of an online sales tax
      they must be losing a fortune in council tax etc from bedroom traders

    • 2.2
      Chris Dawson says:

      Upping them by 2.5%? Even though in reality a 2.5% increase in the rate of VAT equates to a 1.77% increase in gross prices?

      I like your thinking :-D

  3. 3
    Gary says:

    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. 4
    Hereford United Fan says:

    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. 5
    daver raver says:

    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. 6
    Bigpoppa says:

    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. 7
    Alan says:

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

  8. 8
    Wake man says:

    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. 9
    Sharon says:

    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!!

    • 9.1
      nortumbrian says:

      erm, we are meant to elect a candidate as a member of parliment, who may or may not be a member of a party,
      whos main purpose is to represent the interests and concerns of his local constituency

    • 9.2
      Bigpoppa says:

      Pedantic springs to mind…By electing a party, you know who the immediate PM will be. In this election no-one was elected as a “winner” due to the flawed system.

      The system is wrong and has been for years, I think many people have forgotten how great this country was with a parliament at all.

  10. 10
    nortumbrian says:

    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. 11
    John Pemberton says:

    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. 12

    The government has to make and save money somehow and this is one of the better methods of doing it. Like it or not it’s an idea that makes sense.

  13. 13
    MediaTrader says:

    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? Play.com 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.

  14. 14
    MediaTrader says:

    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.