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What Does 2011's VAT Increase Mean for You?

With all the talk about the upcoming increase in VAT from 17.5% to 20% in January, many people are wondering how they’ll need to tweak their holiday budgets for 2011. But one thing you might not have expected is that holidays outside the UK will only increase minimally, and some UK hotels are offering ways to beat the increase by booking in advance.

What does this mean in real terms? Say you book a British holiday £500 — in 2010, the VAT would equal £87.50 but in 2011, this would equal £100 — an extra £25.50 out of your pocket. The good news is that rates for European and longhaul holidays will rise by far less. For example, a £500 holiday overseas yields a £4.37 VAT charge in 2010, but the only rises to £5 in the New Year. Because VAT is only charged on the margins made by the tour operator or travel agent, you won’t be paying extra for the flight or hotel itself, so you don’t have to worry about putting off that city break or beach escape.

But if you’ve had your heart set on a staycation next year, don’t worry. Yes, VAT on UK hotels will be charged at the new rate next year. However, we’ve found a few properties offering consumers the chance to beat the taxman by reserving early. If you book your stay before the end of the year Lake Vyrnmy Hotel and Spa in Snowdonia, London’s Cumberland Hotel at Marble Arch and Cumbria’s Appleby Manor Country House Hotel, you’ll still pay 2010 VAT rates — even if your reservation takes place in 2011.

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Tips by
Caroline

Deal Expert, London
Tuesday, 14 December 2010
See more Tips from
Caroline Sieg