Temporary VAT cut from 20% to 5% announced by government
The government has today announced a temporary VAT cut from 20% to 5%, meaning a saving of more than £4bn for firms in the food, drink and hospitality sectors. Many of these firms have announced that they will be passing on the savings to customers by reducing the prices of their products and services.
Value Added Tax (VAT) is paid on everyday goods and services for all companies, however, the tax is included in the final price.
HMRC has estimated that households in the UK could make savings of more than £160 a year on average as a result of today’s announcement.
Many companies are expected to use the windfall to shore up finances hit by the lockdown, rather than cut prices.
The reduction in VAT will remain in place until January 12th 2021.
Chancellor of the Exchequer Rishi Sunak announced last week during his ‘Summer Budget’ that this would be a part of the series of measures to help the country recover and get the economic recovery of the UK underway.