As of the start of January this year, the standard rate of VAT is 20%, compared with the previous rate of 17.5%. The following advice from Cash Genie aims to consider how this might affect the average consumer or small business over, and possible ways to mitigate the effects of this fairly significant increase in tax.
The increase is pretty much unavoidable, as VAT is the tax you have to pay when you buy goods or services. The majority of consumer items have, therefore, become more expensive since January. The exception to the rule is that items classed as ‘essential’ are VAT free. These include food, children’s clothing, and newspapers and magazines. Being aware that most goods will cost a bit more will help you manage the impact of this increase. Average spending might, therefore, increase, particularly in the month or two when everyone is getting used to the changes. It is important to think about how to ensure this does not have a negative effect on your budget. For those who are struggling with the change, it may also be worth remembering that companies like Cash Genie provide short term payday loans which could help you cope with a change to your outgoings, by providing you with a cash advance which you can then repay when you receive your next paycheck.
VAT-registered businesses will have to consider their pricing. Retailers or service providers can decide whether to pass the VAT increase onto customers or clients, or absorb it themselves. This decision will be dependent on whether customers and clients are likely to think of price as a major differentiator when choosing between your business and your competitors. Therefore if your business is unique, or you are happy that you have a strong enough USP or differentiator, then it may not be necessary for you to absorb the increase yourself. However, if you are the kind of business that tends to compete on the basis of price, you may need to give some careful thought about whether it will be damaging to allow your customers to face the price increase.
The VAT increase can also be difficult for staff, who have to deal with a swift change to prices they are used to. It is worth devoting some time talking to them to make sure they understand not only the changes but also the reasons behind them, so they can explain them to any customers who may be unhappy.
With a little forward planning and effort, you may not need a Cash Genie loan to help you through the VAT increase. But if you do need them, they’re always here.
Please visit http://www.cashgenie.co.uk/ for further information about this topic.
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