Beat the VAT hike!
The return of VAT to 17.5% in January will see everything go up in price - and in some cases by hundreds of pounds. However, here are a few cunning ways to get around this extra tax sting.
Did you notice the difference when VAT was reduced from 17.5% to 15% last November?
In some instances you'd be forgiven for blinking and missing it. After-all for most every-day purchases it's a matter of pennies. It stands to reason, then, that most of us won't pay much attention to it rising again on 1 January.
However, if you blink and miss it again, you could miss out.
Will you notice?
Most of us aren't planning to pay a blind bit of notice to the change. Research from Auto Trader found that 12 million of people are unaware of the rise. Meanwhile, a different study from Nationwide found that fewer people than ever think this is a good time to be making a big purchase. Only a third of people think now is the time for shopping - which is the lowest level since April 2006.
But be aware that the VAT increase on more expensive items on 1 January will be impressive.
For example, if you buy a TV worth £300 the VAT hike will add an extra £6.52 to your bill. If you splash out on a holiday costing £1,150, you'll have to pay an extra £25. Or on a major purchase like a car you're likely to have to fork out hundreds of pounds more!
Avoid the hike!
If you are planning to make an expensive purchase, it is well worth considering doing so before 1 January.
Although now is not the best time to spend a fortune on things you don't really need, and wouldn't otherwise consider, if you are planning a big buy in the next few months think about bringing the purchase forward.
You can make the VAT savings on all sorts of things, from home improvements to white goods and electronics. It also applies to holidays. Booking now means you'll only pay VAT at the current rate, even if you're planning to take the break itself well into next year.
Likewise, you can get the saving on a car, even if you are spreading payments over a number of months. And, of course, if you buy the car before February you stand to benefit from the scrappage scheme too.
Shop in the salesIf you time your purchase to coincide with the good old December sales you could bag yourself an even lower price.
Most sales will start in the week before Christmas, but even if your chosen retailer doesn't launch the sale until after Christmas, you still have a few days before the New Year for your purchase - which may be an excellent excuse to escape the family for a few hours at the same time.
There is one caveat. If you cannot afford this new purchase, then there is no excuse for shopping before 1 January.
If you shop using an expensive credit card or loan, or pay on any kind of staggered basis which involves a hefty interest charge, then the interest you pay on the debt will quickly wipe out any VAT savings many times over - leaving you seriously out of pocket.
Cut your costs
If you do need to borrow money to make a purchase, make sure you do so as cheaply as possible. A 0% purchases credit card will allow you some breathing space by spreading the cost of an expensive purchase over an extended period, without charging you any interest.
However, if you buy in this way, it's vital you repay your debt by the end of the interest-free period or you will quickly eat into your saving.
What's more, if you can't afford to buy immediately, you still have other options.
Look for retailers who are promising to offer VAT at 15% for a bit longer. John Lewis, for example, has pledged to stick to 15% until the end of January.
Or take the additional VAT on the chin, and look for other ways to cut costs.
These days some of the best deals are often found online, so make sure you brush up on your internet know-how. Shopbots are nifty websites designed to help make online shopping easier by comparing deals and digging out the lowest prices for you.
Add in a voucher from a site like myvouchercodes.co.uk, vouchercodes.co.uk and discountvouchers.co.uk and you could shave a great deal more than the extra VAT off your purchase price.
Remember, now is the opportunity to make purchases you can afford while they are more affordable. But if you don't have the spare cash, it's certainly not a good excuse to blow the budget.
**This material is for information purposes only and should not be considered financial advice. We strongly encourage our readers not to rely solely on this content, but to seek independent advice when making financial decisions.**
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