Cut in VAT expected

News Article - 24 November 2008
Category: Regulatory

A cut in VAT is expected to be part of the pre-Budget report announced by the chancellor of the exchequer later today (November 24th).

Alistair Darling will reduce the tax by 2.5 per cent to 15 per cent, reports have suggested, which would cost the public purse roughly £12.5 billion annually.

At 15 per cent, the tax would be at its lowest value possible, as dictated by EU rules, and it would mark the first time that VAT has ever been lowered by the government.

The Treasury's move will be supported by the prime minister, who will tell business leaders in a speech later today: "This is not the time to become prisoners of the old dogmas of the past.

"All over the world, policy makers are leaving behind the solutions of yesterday and recognising that extraordinary times require extraordinary actions."

Other speculation has suggested that a new 45p income tax band will be announced for those earning more than £150,000 a year.

Many in the financial world are also expecting further cuts to the Bank of England's base rate, following the publishing of minutes from a meeting of its Monetary Policy Committee last week.

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