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Homepage / News & Articles / VAT rise will add £158 to family bills

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VAT rise will add £158 to family bills 22 December 2010
James Falla (about the author)

The looming VAT increase will add £158 a year to essential bills for the average household, according to consumer experts.

On January 4, VAT will rise from 17.5 per cent to 20 per cent, putting extra pressure on household budgets.

Ann Robinson, at comparison website uSwitch.com, said: “Hardest hit will be the 5.4 million consumers who are already spending more than they earn and the 57 per cent that have experienced a pay freeze this year. The impact is going to spread far more widely than just shoppers.”

James Falla of beatmydebt.com agrees. "Many people are currently living at the very edge of their financial resources. Just a small increase in the cost of living will be enough to push them into a position where they are unable to maintain their monthly bills and debt repayments" he said.

"If people find themselves in a situation where they are struggling to pay their bills they should get advice about the various debt management options such as debt management plans and IVAs. These can be especially useful with helping mortgage payers keep up with their payments" Falla added.

Beating the VAT rise

A uSwitch.com report says more than a third of consumers are rushing through big purchases this side of the hike, spending an average of £2,300 more than they would usually spend at this time of year.

White goods and electronic gadgets take the lion’s share of the spend but almost a third are rushing through a flight or holiday booking and 21 per cent are buying a new car.

However James Falla warned people not to spend beyond their means in the rush to beat the VAT hike.

"Trying to avoid the VAT increase by using credit now will simply store up problems for the future. 2011 looks as though it will be a tough one for many with the rising cost of living and falling incomes. It is best to try and keep your borrowing levels as low as you can so you are best placed to manage a financial problem if it comes along" Falla advised.