VAT was cut from 17.5% to 15% in December last year, and it will revert to its standard VAT rate of 17.5% in the new year, commencing from 1st January 09.

The VAT cut was made last year to encourage consumer spending, and to help the UK economy through the recession.

It has been reported that on hearing the news, disappointed shoppers want the VAT cut extended.

A retail expert has said that the rise of the VAT will drive shoppers to start early on their Christmas shopping this year, while online will see price cuts on Christmas day.

Research has found that the VAT cut has impacted on consumer shopping habits in the past year, especially those in lower income jobs.

According to a poll, 23% of shoppers only spent money on items that they would not have otherwise bought just to take advantage of the VAT cut. With the return of the 17.5% VAT rate in January, 32% of shoppers polled will decrease their shopping habits, according to research. 27% intended to bring their shopping forward before January to take advantage of the 15% VAT rate.

According to reports, Treasury Minister Stephen Timms has said that the cut was to help give people extra money, and their would be “no plans” of extending the 15% VAT rate and no future changes.

Research has revealed that October sales had risen by 3.4% from last year, mainly driven by clothing and footwear.

A rise in sales over the last year has also been driven by promotional activities. Another poll revealed that 72% of shoppers would do their Christmas shopping on the internet, while 38% plan to do the majority of their shopping online.

Monday 7 December is expected to be the busiest day for online Christmas shopping.

SOURCE: HMRC, BBC