UK cuts 20% VAT rate to 15% till 31 December 2020

  • Jun 1, 2020 | Richard Asquith

The UK has today announced in the Chancellor's Summer Statement that it will cut its standard VAT rate from 20% to 15% until 31 December 2020. This is designed to give consumer confidence a boost as the COVID-19 lockdown eases. The UK has already spent £49billion in public support.

The UK announcement by Rishi Sunak follows last month’s news of a cut in the German headline rate from 19% to 15% between 1 July and 31 December 2020. Many other countries have cut their reduced VAT rates to support the hospitality and tourism sectors. See all major COVID-19 VAT rate cuts

2008 Labour’s VAT cut to 15% limited benefit

The UK Labour government temporarily cut VAT from 17.5% to 15% between 1 December 2008 and 31 December 2009. This emergency measure was implemented to support consumer confidence as the 2008 financial crisis gripped the country. It was estimated to cost around £12bn.

Shoppers canvassed at the time by a number of organisations overwhelmingly said it had no impact on their expenditure. Retailers, when surveyed, gave a similar response. Only 20% of them claimed to have not passed the reduction on.

The Conservative / Labour coalition went on to raise the VAT rate from 17.5% to 20% in 2011 to help reduce the government's deficit.

Explore more content like this in our Building for COVID-19 recovery hub

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is the former VP Global Indirect Tax at Avalara
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