After hard economic times the government made a bold decision to cut VAT to 15% – the lowest level in 20 years, in an attempt to stimulate economic growth.
However, now that times have improved and the UK is no longer in recession, the government has counteracted its move with plans to increase VAT to 20% as of January 4 in the new year.
As the increase is getting close, a popular topic of debate is how consumers can lessen the impact the rise will have.
Many auto companies are running high-profile campaigns as savvy minded consumers look to make car purchases early to save 2.5%. This is likely to put pressure on the market next year.
The latest car manufacturer to offer protection against the VAT hike is Land Rover.
However, there are ways for all consumers to avoid paying the extra 2.5% on certain purchases, including cars delivered up to six months after the hike.
For example, if you get your order through before 4 January, a tax point will be created which means that even if you have the car delivered 6 months later you will still only have to pay the 17.5% VAT charge. Unfortunately this does not apply to those that have taken out a finance deal, however you can take advantage if paying with a personal loan.
Unfortunately this loop-hole won’t apply everywhere, as some car dealers either don’t understand it or may refuse to process the deal in this way because a VAT invoice will be required and they may have to pay the tax due before full payment is received
Results from one survey showed that there is a great deal of confution amoung both consumers and car dealers. Thirty dealers were contacted and asked whether the VAT rise could be avoided. The results showed that dealers did not have knowledge of any measures that could be taken to do so, while several were unclear of dates and had voiced various opinions.
Many were under the impression that it could only be avoided if the full balance was paid before the beginning of the new year, or if the car was registered this year, and some said it could not be avoided at all.
However, it’s not just cars that consumers can save on, as many consumers turn to 0% credit cards allowing them to buy now at the lower VAT rate while making repayments in the new year.
Use your 0% purchases card to pay for your items and pay off at least the minimum monthly amount to avoid interest charges. Ensure you clear your balance within the 0% duration and you will avoid the 2.5% increase
The Tesco credit card offers 0% on all purchases for up to 13 months, and you can avoid having to pay any interest if you clear the balance within this period.
