It won’t be possible to completely avoid the 2.5 per cent VAT rise to 20 per cent from January but by planning ahead, shopping from particular retailers and being selective about what you buy, you can lessen the rise’s impact.
Consider buying your big-ticket items now. Paying the current 17.5 per cent level of VAT on a car, or expensive white goods like an upmarket fridge-freezer, could make a big saving. Some shoppers might be waiting to see if large purchases like these are going to be reduced in the Christmas or New Year sales. But they shouldn’t cut it too fine, particularly if it’s something they have to order. Just make sure an ordered item’s invoice is dated before January 4, 2011.
Choose where you shop. Similar foods at the supermarket, for example, will face larger prices differences depending on whether they face VAT or not, while cakes are zero-rated, and chocolate will be taxed at 20 per cent from January 2011. A chocolate chip biscuit won’t face VAT, but one covered in chocolate will.
And while so-called essentials foods, like raw meat, fruit and vegetables are exempt of VAT, luxury foods are not. In practice this means you’ll pay a lot more for ready meals and takeaways than for many fresh ingredients.
After the VAT rise comes in, individual shops and stalls might barter, although employees of big chains are unlikely to have the authority to change prices.
You can face a lower VAT bill by buying more second-hand goods. Most second-hand car dealers, for example, charge VAT only on the profit they make on the sale of the car - known as the second-hand margin scheme. Most of the goods sold at charity shops and fund raising events are VAT-free, so you save money and donate to a good cause at the same time.