How does the VAT rise affect your shopping basket?

18 January 2011Blog


New VAT rate is 20%

As part of the 2010 government budget, Value Added Tax (VAT) will be raised to 20% (previously 17.5%) from January 4th 2011 onwards. So how will this new rate affect food prices?

VAT is charged on the majority of products and services however some items are VAT exempt, these include.

  • most food items
  • books, newspapers and magazines
  • children’s clothes
  • some goods provided in special circumstances – for example, equipment for disabled people

While most food items have a zero (0%) rate, there is still a large amount of items that are taxed at the standard (20%) rate.

Unfortunately without consulting the tax man’s website every time you shop, there is no obvious way to be sure the item you are buying is taxed. On the whole, healthy items such as fruit and vegetables are not taxed while confectionery items commonly are.

A large number of confectionery items and savoury snacks are taxed at the new 20% rate. However there are always some exceptions, for example Jaffa Cakes are not taxed.

If you like your nuts then it depends on whether you buy them in their shells or not as to whether they are taxed. While peanuts and cashews are charged VAT, pistachios and other shelled nuts are not. For a full list of which food items are taxed at standard rate visit the HRMC website.

Even if you do take the time to find out how much of your shopping basket is taxed you are still likely to find that the cost of your weekly shop will rise this year. Food crops such as wheat, corn, and rice have all increased in price, this means 2011 is set to become more expensive for food lovers.

However by shopping smart you can not only save money but also eat better, make sure you keep up to date with all the latest money saving deals and don’t forget to take advantage of the food vouchers on offer at your supermarket.


0 Responses to "How does the VAT rise affect your shopping basket?"