A DEBT advice charity has warned that one in eight Brits are not aware of a tax rise on Tuesday.
A study by Citizens’ Advice Bureauxhighlighted that many households were not aware of the forthcoming VAT rise.
The survey also found one in 10 people in Yorkshire could not identify the current rate of VAT with one in five people not knowing what VAT stands for.
VAT (Value Added Tax) is set to increase from 17.5 per cent to 20 per cent on January 4.
It is estimated the rise could cost families an extra £425 a year, with unleaded fuel increasing by two-and-a-half pence per litre.
The change is set to increase the pain of any Christmas debt hangover with families forced to pay more for many goods.
Big ticket items such as white goods, electricals, furniture and cars will be most affected, for example a new Ford Focus would increase by £382.
Essential items including food, children’s clothing and newspapers are set to remain free from VAT.
Kirsty Elwick from Kirklees Citizens’ Advice, in Huddersfield, said they were worried people were ill-prepared for the rise.
She said: “This January could be worse than most for those who are not planning ahead as the VAT increase will put more pressure on budgets.
“Christmas is a time of giving and it’s all too easy to overspend.
“There are enticing offers and pressures to buy and it can be tempting to ignore how much you are spending which may lead to problems in the New Year.
“Planning, budgeting and organisation are key to avoid getting into debt at Christmas and beyond.
“At this time of year we urge people to consider their spending carefully.
“This is why we are issuing a ‘Top tips for Christmas’ leaflet in association with Barclaycard.
“If you do get into difficulties, get advice as soon as you can from your local Citizens Advice Bureau or visit www.adviceguide.org.uk
“Luckily the majority of people from Yorkshire (58 per cent) say that they do budget for Christmas to make sure they don’t overspend.
“The savviest budgeters are younger than people might think, with those aged 24-35 the most likely age group to keep on top of their Yuletide spend. However, it is women who will be worrying about their cash more than their male counterparts, with 44% not cutting back for Christmas.”
Citizens’ Advice, supported by Barclaycard, produced a leaflet which outlines ten top tips to help people prevent their finances getting out of control:
1 Plan early: Be realistic and budget accordingly.
2 Don’t forget the everyday bills:
Remember that rent, the mortgage, utility bills, food bills and other existing debts still have to be paid– and the consequences can be severe if they’re not.
3 Don’t bank on an overdraft:
If you do need more money, don’t just run up an overdraft without talking to your bank first – it will work out much more expensive.
4 Keep things simple:
If you can afford to pay for your goods outright by cash, cheque, or debit card, don’t be persuaded to take out extended credit agreements unless they really do work out cheaper.
5 Shop around:
Try as many different places as possible to find the best price. Buy what you want and not what other people say you need. Be wary of extended warranties; the cost of a repair could be less than the cost of the warranty.
6 Buy safe to be safe:
Whatever the deal, whatever the temptation, don’t buy from unauthorised traders and don’t borrow from unauthorised lenders.
7 Read the small print:
Check for hidden extras in any credit agreement. Work out the total amount payable. Ensure that the monthly instalments are within your budget before signing.
8 Do your own credit checks:
If you are going to use a credit card, shop around and compare terms. Some cards charge high interest rates, but provide interest free periods or discounts. Budget for all these costs and put the payment dates in your diary.
9 Be organised:
There’s a lot to remember – if you’ve borrowed money don’t forget that it won’t be long before you have to make a payment. Make sure you pay on time, even if it is only the minimum, or you will be faced with additional charges.
10 Start planning and saving for next Christmas:
Once Christmas is over, it’s worth looking at what you did well and what you didn’t. Learn from your mistakes and start planning how you will do things differently next year. This might also be a good time to start saving for next Christmas.