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Chancellor proposes slashing VAT rates as 2024 election looms

Any reduction in the duty would be welcomed by estate agents, whose 'inclusive of VAT' charges would look more attractive to prospective clients.

Nigel Lewis

vat rishi

Rishi Sunak looks set to step in and help estate agents once more following reports late on Friday that he is set to ‘slash’ VAT rates before the next election in May 2024.

Agents charge millions of pounds of VAT to their clients every day primarily through sales and lettings fees, so any reduction will make the quoted costs of their services look more attractive.

The proposal to cut VAT – which is currently charged at 20% to a lower rate – is in addition to a 2p in the pound income tax cut as are plans to scrap the higher rate 45p in the pound tax rate.

VAT is currently charged at the ‘standard rate’ of 20% with a ‘reduced rate’ of 5% while many essential items attract a zero rate.

The Times reports that targeted changes to the VAT system to persuade people to ‘go green’ are under consideration, with for example those using green energy paying a lower tax rate, or those selling homes that meet the minimum EPC band C not having to pay the duty on their estate agency fees.

The Treasury is also reported to be working on a plan to increase the £325,000 ceiling for inheritance tax exemption, as some 22,800 estates pay the punitive 40% levy on anything over that.

Zero rate

Any change to VAT would be good news for estate agencies, but removing them altogether would be best. Agents frequently get into trouble for quoting prospective clients fees exclusive of the duty in a bid to look cheaper, or just through administrative error.

For example, in June this year leading SW estate agency Staggs was admonished publicly by the ASA for publishing ‘confusing’ selling fees details, including some that were exclusive of VAT.

December 6, 2021

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