VAT to rise to 20% - but small businesses to benefit overall

[The Hat]

It was revealed in yesterday’s Budget that VAT is to increase from 17.5% to 20% in a move that aims to contribute £1bn a month towards cutting the vast public finances deficit.

"This single tax measure will by the end of this Parliament generate over £13bn a year of extra revenues," chancellor George Osborne confirmed during his speech.
His announcement, which comes into force in January 2011, brings the UK into line with the average VAT rate across Europe and will cost UK households an average of £500 each every year.

While the Budget has its critics, some organisations claim there are real benefits, especially for small businesses.
The Forum of Private Business, for instance, welcomed a number of key victories for private firms and believes the 1% cut in small companies’ tax, together with the new £5 million threshold for entrepreneurs’ relief on capital gains tax (CGT), are positive measures which contributed to a small business-friendly Budget overall.

 

[The Geek]

This will obviously negatively impact salons NOT VAT registered as they will not be able to reclaim the VAT on goods purchased.

Overall, at this stage I think its a fairly positive budget all things considered. Though it will take some time for all of the proposals to trickle through the system to see how effective they really are.

 

[nixnewcastle]

I dont think I know a beauty salon in Newcastle who are VAT registered. Unfortunately because of the recession we're not making anywhere near enough money to register ourselves. Im just wondering when any of us are going to start making money again with all this extra financial pressure.

 

[persianista]

Ithink the vat threshold is only about 70k.That is only about 1200 a week. Not much before the dreaded VAT gets its fingers in your till.

 

[Nailsinlondon1]

I am not VAT registered and it just adds to my product cost..... every body is tightening their belts spending wise, so increasing prices by another 2.5% just to cover my VAT charge may not go down to well...... oh well lets see what we all think by the end of 2011 xxx

 

[The Geek]

Keep it in perspective

Fortunately for at least nail professionals, cost of goods should never really be more than 10% of revenue.

If you're not VAT registered, then one must assume income is less than 70k and on that assumption your maximum COG's should be 7k per year. 2.5% increase on that is like £175 per year (or £14 increase on income of £5,833 per month).

None the less, you SHOULD give yourself a 5% raise. Because you rock!

 

[Nailsinlondon1]

LOL I just raised my prices to cover the rent increase, but you know at the end of the day, we will survive this, we always do and can I quote this on my website lol.....
Samuel Sweet the GMG said I rock so there nah nah nah nahhhhhhhh naaaaaaaaaa.

Sam as always the voice of reason and sound perspective.xxx now I can stock up on Voddy and Orange as they haven't increase the price on ciggies or booze.... every cloud eh lol xxxx