Will VAT rise add to debt worries?

As most people are now aware the level of VAT in the UK is set to increase from 17.5 percent to 20 percent from the start of the New Year, as the coalition government continues to find ways to cut public spending and increase income so that the public deficit can be cut. Already concerns have been expressed about how the VAT increase will affect consumers when it comes into play, with consumers having 2.5 percent extra added on the cost of everything upon which VAT is charged.

However, there are also concerns that the VAT increase could affect debt levels by making consumers feel pressured into making purchases prior to the increase kicking in even though they may still only have been thinking about making these purchases. With many people still recovering from the cost of Christmas purchases and spending more money in the sales, the pressure of having to buy things like big ticket items before the VAT increase could prove too much.

Worryingly, however, a report has also shown that some people do not actually know what VAT is and will therefore have no idea about how it will affect their budget and how they should account for the increase that is set to come into play. Almost one fifth of the population has no idea what VAT is according to research that was carried out by the Citizen’s Advice Bureau.

A CAB official said that budgeting was vital, stating: “Christmas is a time of giving and it’s all too easy to overspend. There are enticing offers and pressures to buy and it can be tempting to ignore how much you are spending, but this may lead to problems in the New Year. Planning, budgeting and organisation is key to avoid getting into debt at Christmas and beyond.”

Tags: cost, debt, New, public deficit, year

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Personal debt worries continue for manyConsumers to cut back on Christmas spending to avoid debtConsumers warned to avoid additional debt in salesConsumers in UK cutting back on spending to try and get rid of card debtRising cost of living could increase debt levels

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