After what will be 13 months of VAT at 15%, the UK VAT rate will return to 17.5% on the 1st January 2010. The lower VAT rate was a temporary concession made by Alastair Darling to help the British Economy recover in the wake of the credit crunch.
This means that for all new cars delivered after January 1st 2010, our customers will unfortunately be invoiced for the car at 17.5% VAT. The net price of the car will remain the same but the amount of tax you pay will increase by 2.5% (see the example below). Unfortunately this increase in tax is applicable to cars being delivered in 2010, irrespective of when the car was ordered (as advised by HM Revenue and Customs).
The Value added tax on a new car is the same as any other product bought in the UK - it currently stands at 15% of the NET price - for example:
FINANCE EXAMPLE:
If you buy a car at £11,500 it is made up of 115% of the NET figure - so you divide 11,500 by 115 you get £100 which is 1%.
That means you are paying £1,500 of VAT (15 x ?100) on a £11,500 car.
When the VAT goes back up the price will go up to £11,750, so by £250.
