How Will VAT Rise Impact Your Shopping Basket?

13 December 2010

How Will VAT Rise Impact Your Shopping Basket

Changes to the VAT rate, coming into effect on 4 January 2011, will have a noticeable impact on the price of a basket of groceries.

While most food is exempt from VAT, many shoppers are unaware that plenty of grocery staples such as the majority of confectionary, drinks and snacks are not.

From 4th January these will cost 2.5% more. Non-food grocery items such as toothpaste and cleaning products will all also be affected by the VAT rise.

Based on the average basket of goods, the VAT hike of 2.5% could cost consumers up to £33 a year more from January 4th next year, and £66 more form when VAT was temporarily reduced to 15% in 2009.

Jonny Steel, spokesperson for mySupermarket says: “Consumers should be aware that the VAT rise from 4th January will affect the cost of their basic weekly groceries, as not all products are exempt.

"There are some strange discrepancies between the types of foods that qualify for VAT making it hard to predict where the increase will hit shoppers most. By making some smart decisions, consumers can avoid paying VAT on a lot of convenience food.

"For instance, a gingerbread man decorated with two chocolate eyes is exempt from VAT, but if it contains any more chocolate, standard-rated VAT is charged. Likewise, unshelled salted nuts are exempt, but shelled salted nuts are not.”

Other foods that come under the zero-rated VAT banner, despite being “convenience foods” include Jaffa cakes, milkshakes, chocolate spread and tortilla or corn chips.

Jonny Steel continued: “It may not seem like a great deal of money, but by making some wise decisions, consumers could save up to £33 a year, which for ‘Austerity Brits’ is a lot of money.”

Furthermore, with alcohol being one of the products with standard rate VAT added, consumers can now use mySupermarket Wine – the UK’s first online comparison service for wine and spirits to get the best deals on alcohol.

The site enables shoppers to fill a virtual trolley and compare prices from the four major online supermarkets, Tesco, Asda, Sainsbury’s and Ocado, alongside two new retailers to join the site, Virgin Wines and Majestic Wine. Another great way to stretch the pennies!

Zero-rated VAT products

Chocolate chip biscuits

Jaffa Cakes

Cream Gateaux

Mousse

Chocolate Spread

Toffee Apples

Milkshake

Tortilla or Corn Chips

Roasted or salted nuts supplied in shells - monkey nuts, pistachios

Standard-rated VAT products

Wholly or partly chocolate coated biscuits