VAT increase on 1st January - how high will prices rise?

28 December 2009

If you've watched any television over the past few days, you can't help but notice there's a SALE ON NOW. That's not a surprise, obviously, with many stores dangling an extra carrot in front of consumers; the VAT increase arrives on 1st January, meaning an extra 2.5 per cent will be piled on top of most price tags in just four day's time, so bag your bargains now, now, NOW!

Bitterwallet - sale on at Currys

If you'd like to play a fun consumer-related game with us, then have a crack at the following:

  • Choose a shop that is currently predicting some sort of financial Armageddon if you don't buy from them before the VAT increase on 1st January - your television is currently stuffed with commercials for them. We've chosen Currys who are desperate for you to enjoy the bargains while they last.
  • Come 2010, compare the prices in January to those offered now

We're curious to see what stores do, because sticking the additional VAT on prices will cause all manner of ugly numbers - an iPod Touch at Currys costing £149 will become £152.73 £152.25, and so on. So will stores:

  • round up their prices up to something which won't necessitate lots of change in the till and mean the prices look less ambiguous - i.e. £153 in the case of the iPod Touch - but which means charging more than the VAT increase dictates?
  • round their prices down for the same reasons as above, but absorb part of the increase themselves?
  • make a merry old song and dance about not increasing their prices at all and take the hit, and hence another reason to grab a bargain while you can!

The sales will no doubt continue into January, so let's see if any dastardly outlets take the opportunity to introduce price rises above 2.5 per cent in the hope nobody spots them. Let us know in the comments or by emailing [email protected]

31 comments

  • Mark M.
    VAT Calculation 101 £149 inc 15% VAT = £129.57 Ex VAT so therefore, with 17.5% VAT = £152.25 I see what you've done, you've just added 2.5% on top of the current price, which is too much
  • Amanda H.
    Apple, Apple, Apple.
  • william
    Some retailers never passed on the Vat cut in the first place. http://www.diyweek.net/news/news.asp?id=12010
  • william
    Can you imagine all the retail stores having to take on extra staff on the 1st of January to change ALL their prices on the shelf?
  • The B.
    Seeing as none of them actually put prices down when VAT went down (well, they did for about 2 weeks and then rounded them back up again) then what do you reckon will happen?
  • dank
    It's not as simple as adding 2.5% on top of the current prices. To find the increase multiply the price by 0.022, that's just over 2p per pound.
  • NellieIrrelevant
    It was the Treasury's idea to bring the old VAT rate back on 1st of January. It makes the paperwork easier but ignores the fact that shop staff will be on holiday. William's right, they're not going to bring in extra staff to put .022% onto the prices. Retailers will just take the hit themselves - they'll have already factored the VAT increase into their operating costs.
  • Paul S.
    Mark M / dank - thanks for that - I didn't think it was right when I did it, now I know why :)
  • Paul S.
    NellieIrrelevant - I'd agreed, except what happens in the instances where stores have promoted the fact the prices will increase in 1sr January? You can't cajole people into buying now because you will increase prices, and then not increase them.
  • Gunn
    This is a good idea, I bet they don't change at all. 2.5% ain't much, I get more on most cashback sales.
  • RT
    Prices in our place were still displayed at the 17.5% value, but scanned through on the tills at the 15% value, so all someone has to do is change a line of code somewhere and hey ho back to normal.
  • Big A.
    Most retailers have just used the VAT decrease to improve profit and pretend to consumers that we are getting a better deal. It's been a gimmick by the government all along, do the bare minimum to pretend to the electorate that they are helping us out. Your illustration of how insignificant an amount proves what a scam the whole thing is and the fact that the desperate out there are (DSG & Co) will slump to any low to try and get people through the door. A quick search on the internet can usually beat prices by more than the amount than the VAT differences.
  • Big A.
    RT - it's not as simple as that unfortunately. Buying the goods in at 15% then selling them on at 17.5% has also to be factored in. I work in this industry and believe me when I say it's a bloody nightmare. It's more money for the bean counters keeping everyone right, again!!!
  • cheapskate
    PC World are flogging laptops at the beat the VAT price of £399.99 - er £408.69 please. Mmmm, catchy price...
  • Tom P.
    Posted by Big Al | December 28th, 2009 at 2:00 pm "it’s not as simple as that unfortunately. Buying the goods in at 15% then selling them on at 17.5% has also to be factored in" Why? Buying in is input tax, selling is output tax. HMRC is will only be interested in the output tax (at the correct 17.5%) you've collected after the 1st.
  • Paul
    What Tom said /\ A VAT increase (or decrease) doesn't affect the cost what has already been bought in, just the percentage off to HMRC when it's sold on.
  • becauseofboxingday
    I work for a high street retailer. We reduced our prices by the appropriate amount in line with the VAT cut, and we're putting them back up when the timeframe for the current rate of VAT expires. Changing a few price tickets is hardly a back breaking exercise, and took me barely half an hour this morning, along with putting up a notice stating that although the price tickets reflect the 17.5% rate, we'll be trading at the 15% rate until 01/01/2010. Hope this helps and doesn't damage too many conspiracy theories. Happy New Year xx
  • Drunkmonkey
    I work for a popular phone shop recently featured in that worst company in the universe or something like that! You will be pleased to hear in the middle of November all are prices rose by the 2.5%! However we are ohhh so pleased to announce that there will be no price rises in January! and we have very proud posters in store to announce this chilling news! Happy new year!!!
  • oliverreed
    Poundland will still be Poundland
  • VAT M.
    [...] read a funny article at BitterWallet.com about the VAT increase that becomes effective [...]
  • Justin M.
    To be fair on them, TK Maxx have been deducting the 2.5% at the till from the ticket price all along. As mentioned, it's just an adjustment to the central computer that runs the tills.
  • andy y.
    Retailers love it,three great profit opportunities (i) buy quick before 31st dec to avoid increases (ii) buy in Jan why we hold prices to pre increase levels (which they pre inflated) (iii) quietly widen the margin while RPI move nicely in 3% maybe 4% and nobody is noticing Stagflation is great,higher prices,no growth,rising unemployment,static wages. Remember it's everyone's fault except that fucking so called prudent financial gimp flash gordon.
  • simple s.
    just read some comments out to the missus re:currys rounding the ipod touch up to £153 or down to £152, she reckons currys will just put the price up at £160 and stiff the consumer
  • Help W.
    [...] blog Bitterwallet reckon retailers could use the VAT increase as an excuse to add another few quid onto the price of their goods, and want us to be on the lookout for the sneaky so-and-sos. We’re [...]
  • william
    becauseofboxingday , your store is breaching trading standards regulations by having incorrect prices on the shelves then.
  • dunfyboy
    Don't think so. That's why if you see a mis-price on the shelf and it rings up at the correct price they don't have to sell it for the cheaper price. Some retailers will let you have it, but they don't have to. Invitation to buy, or tender, or something. As for the VAT increase, the small stores who label everything and take the 2.5% off will be spending days sorting everything out, the big stores will either add it then round it up to a nicer looking figure or put their pre-VAT prices back down a few quid to what they were before the cut came into effect.
  • PCWORLD C.
    I have read on our Intranet that we will not be doing the increase straight away, We will be changing the prices on a weekly basis, so by the end of January the full 17.5% will be shown, so in the mean time the prices will be 15%.
  • Paul
    @william I don't think they are (but I can't be 100% sure) - however, even if they are, who is going to complain that their purchase came to 73p less than they were expecting?!
  • Russ
    2.5% on to the tag price is not the correct calculation... you would need to return to the pre tax price then add the full 17.5%... simply adding the 2.5% ontop adds 2.5% of the post tax price! This is also something tils cannot do... you cannot advertise a price on shelf then have it increase at the checkout.
  • DD
    I praised the retailers who deducted the VAT difference at point of sale as apposed to on the tag itself - it was obvious to the consumer that the deduction had been made as they often ended up paying an odd amount instead of the nice rounded tag price (M&S did this I think). Today is 1st Jan and it now sickens me to see retailers charging odd amounts on the price tag for items that so obviously weren't reduced in the first place (online is where it's probably easier to do this). This should not be tolerated, it just gives many retailers the right to fleece the consumer by and extra 2.2%. I.e if the price of something has now gone 'back to normal', should it really cost £37.80? or should it be £36.99? - which do you think seems the more likely 'original price'? Is there a way to report retailers suspected of taking advantage??
  • Customers B.
    [...] of 2009, we suggested you keep an eye on high street retailers and note how they reacted to the 1st January VAT increase. We suspected many retailers would absorb the increase themselves and crow about the fact to drum [...]

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