Posts tagged vat
The New VAT Rate
Dec 1st
As of today, the 1st December 2008, the government has officially rolled out for a set time, a new VAT rate of 15% as opposed to the old 17.5%.
Immediate thoughts are that on the surface it all seems to be a win-win situation for the consumer, a 2.5% drop in the VAT has to be a positive thing given the current economic climate…right? It should encourage people to spend more…right?
Why drop the VAT rate?
The VAT rate has been reduced, not just to encourage people to buy more, but with the ultimate aim of boosting the falling economy and rescue a lot of businesses which would otherwise be quite likely to go under in the next 12 months.
First thing to note though, is that it is not a 2.5% reduction in the ticket price. It actually equates to an overall reduction of 2.13% if you do the maths.
Secondly, it means that a lot of high street retailers and smaller stores are spending an obsene amount of money changing all the POS, till systems and advertising media to reflect the new prices so as to draw in more customers and show that they have the best deal.
This has therefore resulted in a spate of obscure prices. For example, rather than having a simple £29.99 item, it is now £29.35 meaning stores need to have a lot more easily accessiblechange and it also means if we as consumers pay using cash, will more than likely end up carrying a lot more loose change around.
I don’t know about you, but I’d rather pay the £29.99 and have 1p change, putting the difference back into the economy, than walk with a limp, dragging my leg because its 3kg heavier for all the change.
And before I get people claiming that all the small change adds up…consider that if you say, spend £300 a month on items that incur VAT at the 15% rate…you’ll save less than a whopping £7…
The only time you’d see a significant saving is if you spend tens of thousands…and if you’re spending tens of thousands on items which incur VAT, the difference is probably insignificant to you!
All in my opinion, and generally speaking, of course.
(Oh, and fuel duty has gone up by 2p)
Why Work For A Living?
Feb 6th
The income tax brackets for financial year 2006/2007 are as follows:
Tax Free: £5,035
10% tax: between £0 – £2,150
22% tax: between £2,151 – £33,300
40% tax: over £33,300
So, for example if you earn £12,000 a year, the breakdown would be:
£12,000 – £5,035 = £6,965
10% of £2,150 = £215
22% of (£7,185 – £6,965) = £4815 = £1,059.30Total tax = £215 + £1,059.30 = £1,274.30
Earnings after tax = £5,035 + £1,935 + £3755.7 = £10,725.7
Well, thats not so bad right? Well, hold on, I’m not done yet – we have to take off National Insurance! That leaves us with a nice £9,960.54 to take home.
Ok, well take another example. Take another example of say £30,000 pa. The breakdown:
£30,000 – £5,035 = £24,965
£24,965 – £2,150 = £22,815
10% of £2,150 = £215
22% of £22,815 = £5,019.30Total tax = £215 + £5,019.30 = £5,234.30
Earnings after tax = £5,035 + £1,935 + £19,059.30 = £26,029.3
Again, take away National Insurance and you are left with £22,020.54 to take home. Thats almost £8k in deductions!
I’ll not do another example, but suffice to say, that when you break the 40% bracket, it starts coming off in large chunks. For the most part, its only either the low and high ends of the scale that benefit and those in the middle (the vast majority) are coming out of it with a bit of a bad deal…
Now, imagine you have your hard earned cash and you want to buy something. You go into the store and whats this?! You’re being taxed another 17.5% in VAT ON TOP of your already taxed earnings!
Then you want to buy some petrol for your car, oh wait, there’s a duty on that too. And you pay more ‘Road Tax’ or ‘Veichle Duty’. What about the extra tax slapped on cigarettes? Don’t even start with ‘Inheritance Tax’ …
How much of every pound we earn is actually ours? I’d probably say approximately 40p (maybe less!) of every pound we earn actually goes towards buying products and things we want/need. The rest is blatant tax, but where does the money go?
Is this just all part of ‘Rip-off Britain’ or is it really worth working for a living?