Although a lot of people wait until the January sales before making a large purchase, in some cases you might find that it’s worthwhile to buy before the end of the year so that you only pay the lower 17.5% VAT. However, bear in mind that the amount of VAT increase is only small (a little over 2%) compared to the kind of discounts often offered in January sales.

For large purchases, such as a new car, the VAT increase could lead to a significant increase in price so it is worth checking what the VAT increase means for you. Fortunately, over at our sister site The VAT Calculator we have created a simple tool that shows you how much more something will cost if you buy it after the VAT increase. Just enter the current cost (including VAT) and see what the cost changes to with 20% VAT – try out the 20% VAT comparison calculator.

You can learn more about VAT by reading the information here.

Unfortunately, a lot of the figures won’t be confirmed until towards the end of this year, so I have had to make some estimates based on what was described in the Emergency Budget report. For those who want to know, details of the figures I’ve used are below. For those who don’t – you can go straight to the “April 2011″ row of the Salary Calculator for April 2011 values.

Another change announced in the Budget was an increase in standard VAT rate from 17.5% to 20% effective from 4th January 2011. The VAT Calculator has also been updated so you can see what a difference this will make to purchases.

The calculations for the April 2011 values in The Salary Calculator are based on the following assumptions. Under 65 personal allowance increased to £7,475, over 65 allowance increased to £9,940, over 75 allowance increased to £10,090. Threshold of 40% tax lowered to £35,000 from £37,400. National Insurance rates increase from 11% to 12% for basic and 1% to 2% for additional, as set out by the previous government’s budget. National Insurance basic rate threshold increased to £7,475, additional rate lowered to £42,875. All other values unchanged.

Edit (5th January 2011): The values above have been updated with the latest information from the Treasury and the April 2011 calculations have been updated in line with these. The Salary Calculator will be updated again with final values in early Spring 2011, following the budget update.

Yes – it’s two relatively simple calculations, but I hope it that some visitors will find it useful! Comments and suggestions are as ever welcome, either here at The Salary Calculator or email The VAT Calculator.

Take a look at The VAT Calculator.