UK Government cuts VAT rate
Chancellor of the Exchequer Alistair Darling has announced a 2.5% cut in VAT, from 17.5% to 15%.
The cut will remain until 2010, when VAT is expected to return to previous levels.
Small business will also benefit as their 1% tax rate rise has been suspended. It was due to increase to 22%.
In total, the tax cuts will inject £20 billion into the struggling UK economy.
Darling plans to pay for slashing VAT through government borrowing and by increasing the tax on alcohol, cigarettes, and petrol.
In addition, from 2011 those earning over £150,000 per year will pay a 45% rate of income tax, increased from 40%.
National insurance will also increase.
City traders responded positively to the news, with the FTSE 100 shooting up 10% in its biggest ever one day rise.
However, Liberal Democrat treasury spokesperson Vince Cable warned that VAT cuts would not be enough to boost consumer spending.
Cable believes it would make more sense to put money directly into the pockets of low paid workers through cuts in income tax.
Category: Insurance News
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