Did you know or can you remember that the VAT rate which was reduced in December 2008 to 15% was only a temporary reduction.
The reduction from 17.
5% to 15% took place from 1 December 2008 and was granted for a time period until 31 December 2009.
From 1 January 2010, the VAT rate will increase.
In the Pre Budget Report, it was decided that the decreased VAT rate would not go on hold and will return to its previous rate of 17.
5% as from 1 January 2010 as the Government tries to seek extra revenue to support its rise in costs? But how will this affect us? It will affect us all.
The cost of living for everyone will increase as the VAT rate increases.
VAT is applied to the majority of our expenses for example, food, petrol and clothes, toys and appliances.
The effect upon the fuel costs can also affect the cost of our food before it even gets to the shelves in the stores where we are going to purchase it from.
This is because the haulage companies and all the other third party companies involved from the production of the food, storing and transporting it to the shops will also be affected by the increase in VAT.
This means that all the companies behind the scenes will have raised prices and then supermarkets and shops will then need to cover this increased cost as well as then adding the increase of the VAT which we will be obliged to pay.
So are we ready for this? No, probably not.
We will probably not notice the individual increases on the food items, but you will probably find that our shopping bills are increasing and whereby you would normally have a budget for your food shopping, this will have to increase.
The increase of VAT is also going to affect the cost of our fuel, which has already increased earlier this year and at present seems to keep increasing.
So our fuel costs for pleasure, going to work etc will also increase and again you will see your budget being stretched or find that you are not doing as many miles in the car as you used to.
Unfortunately there is nothing we can do about the increase in VAT, other than being aware of it, and adjust any of your budgets accordingly so you are still in control of your expenditure.