VAT goes up from 17.5% to 20% on the 4th of January. This will affect us as both consumers & EREists.
As a consumer
The tax rate should equate to a 2.13% price increase. You can bet that many retailers will sneak price increases over the tax hike. So to give you a simple way of working out whether you are being fleeced[*] or not:
old price new price
(2 pence per pound)
(21 pence per tenner)
(£2.13 per £100)
You'll need to be aware that not everything incurs VAT most food (although see the Jaffa Cake Case), books, kid's clothes & public transport are all exmpt so shouldn't go up at all.
[*]I say fleeced but of course many retailers will be raising prices because they genuinely have to & it is easier to blame the government than to explain the rise in raw material/labour costs.
As an EREist
This is the difficult one, part of me thinks the FTSE will tank, part of me thinks it won't make a great deal of difference because for most people the shops are the only source of solutions so will choose to buy regardless of price.
I can see the big supermarkets getting bigger (no change there).
Any of the older hands here had investing experience around a VAT rise?