Chancellor Alistair Darling has cut VAT by 2.5% for 13 months in his pre-Budget report announced today.
Darling also said the empty property tax relief threshold will also be increased for smaller businesses.
Yet Darling said he will be increasing tax on alcohol, tobacco and petrol in an effort to offset the drop in VAT, which will begin on Monday (1 December).
He argued that the impact of the recession will be minimised if these changes are made.
Darling said an extra £12.5bn will be placed in people’s pockets thanks to the amendments.
Prime minister Gordon Brown had said earlier that the moves are not “a gamble” and action is needed to stimulate the economy in the current climate.
Last week, the British Retail Consortium said businesses should be offered extra support such as a delay in Business Rates Revaluation, so that jobs are not lost.
