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CAB - VAT is a mystery to one in five Brits

Lack of awareness over VAT and Christmas spending threaten New Year debt hangover

Almost a fifth of the population (18 per cent) don’t know what VAT stands for, let alone understand how to budget for the forthcoming VAT rise this January, according to a survey conducted by national charity Citizens Advice.

The VAT rate is set to increase from 17.5 per cent to 20 per cent on New Year’s Day but, alarmingly,  one in eight people (13 per cent) are not aware that the rate of VAT will rise, and that this could increase the pain of any debt hangover after Christmas. Nearly a fifth of people (18 per cent) surveyed could not identify the current rate of VAT.

Citizens Advice Chief Executive Gillian Guy says,

“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, but this may lead to problems in the New Year. Planning, budgeting and organisation are key to avoid getting into debt at Christmas and beyond. This is why we are issuing a ‘Top tips for Christmas’ leaflet in association with Barclaycard.

“This January could be worse than most for those who are not planning ahead as the 20 per cent VAT increase will put more pressure on budgets. At this time of year we urge people to consider their spending carefully. If you do get into difficulties, get advice as soon as you can from your local Citizens Advice Bureau or visit (New window)”

Luckily the majority of Brits (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, 44 per cent of whom claim they will not be cutting back at all this Christmas.

Citizens Advice, supported by Barclaycard, has produced a leaflet which outlines ten top tips to help people prevent their festive finances getting out of control:

  1. Plan early for Christmas
    Be realistic and budget accordingly. Work out how much you are going to spend on each person– and stick to it. Manage expectations as to what you or Santa can give!
  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.  Even though it’s Christmas, get your priorities right.
  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 takeout extended credit agreements unless they really do workout 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.  The initial savings and convenience may prove to be a false economy.
  7. Read the small print
    Check for hidden extras in any credit agreement.  Workout the total amount payable. Ensure that the monthly instalments are within your budget before signing. Interest free credit can seem attractive, but if you don’t pay on time, or miss a payment, you could have to pay a lot more.
  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 at Christmas. 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.

If you want to find out more information about these tips or further money management advice this Christmas, please visit or visit your local Citizens Advice Bureau.

Notes to editors

  1. More information on the tips can be found on
  2. Along with Gingerbread and Family Action, Citizens Advice is one of the partners of Barclaycard’s Horizons initiative, designed to help lone parent families.  The scheme funds a variety of different initiatives, including the Your Money programme, which offers a range of courses and individual support sessions to help one parent families manage their money.
  3. The research for Citizen’s Advice was carried out by Opinion Matters between 28 / 10 / 2010 and 11 / 11 / 2010 with a sample of 2001 UK Adults .
  4. The Citizens Advice service comprises a network of local bureaux, all of which are independent charities, and national charity Citizens Advice. Together we help people resolve their money, legal and other problems by providing information and advice and by influencing policymakers. For more information in England and Wales see
  5. The advice provided by the Citizens Advice service is free, independent, confidential, and impartial, and available to everyone regardless of race, gender, disability, sexual orientation, religion, age or nationality. For online advice and information see
  6. Citizens Advice Bureaux in England and Wales advised 2.1 million clients on 7.1 million problems from April 2009 to March 2010, an 18% increase on the previous year. For full 2009/2010 service statistics see:
  7. Out of 22 national charities, the Citizens Advice service is ranked by the general public as being the most helpful, approachable, professional, informative, effective / cost effective, reputable and accountable. (nfpSynergy’s Brand Attributes survey, May 2010).
  8. Most Citizens Advice service staff are trained volunteers, working at around 3,300 service outlets across England and Wales.




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