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"Purchase Tax" was replaced by "Value Added Tax" on 1 April 1973.[2][5][6] The then Conservative Chancellor Lord Barber set a single VAT rate (10%) on most goods and services.[2][5][6]
In July 1974, Labour Chancellor Denis Healey reduced the standard rate of VAT from 10% to 8% but introduced a new higher rate of 12.5% for petrol and some luxury goods.[2][5][7] In November 1974 Healey doubled the higher rate of VAT to 25%.[5] Healey reduced the higher rate back to 12.5% in April 1976.[5][7][8]
Conservative Chancellor Geoffrey Howe increased the standard rate of VAT from 8% to 15% and abolished the higher rate in June 1979.[2][5][9] The rate remained unchanged until 1991, when Conservative Chancellor Norman Lamont increased it from 15% to 17.5%.[2][5][9] The additional revenue was used to pay for a reduction in the hugely unpopular community charge.[9] During the 1992 general election the Conservatives promised not to extend the scope of VAT, but, in March 1993, Lamont announced that domestic fuel and power, which had previously been zero-rated, would have VAT levied at 8% from April 1994 and the full 17.5% from April 1995.[6][10] The planned introduction of VAT on domestic fuel and power went ahead in April 1994, but the increase from 8% to 17.5% in April 1995 was scuppered in December 1994, after the government lost the vote in parliament.[5][10]
In its 1997 general election manifesto, the Labour Party pledged to reduce VAT on domestic fuel and power to 5%.[11] After gaining power, the new Labour Chancellor Gordon Brown announced in June 1997 that the lower rate of VAT on domestic fuel and power would be reduced from 8% to 5% with effect from 1 September 1997.[12][13] In November 1997, Brown announced that the VAT on installation of energy saving materials would be reduced from 17.5% to 8% from 1 July 1998. Brown subsequently reduced VAT from 17.5% to 8% on sanitary protection products (from 1 January 2001); children's car seats (from 1 April 2001); conversion and renovation of certain residential properties (from 12 May 2001); contraceptives (from 1 July 2006); and smoking cessation products (from 1 July 2007).
In response to the late-2000s recession, Labour Chancellor Alistair Darling announced in November 2008 that the standard rate of VAT would be reduced from 17.5% to 15% with effect from 1 December 2008.[14][15] In December 2009, Darling announced that the standard rate of VAT would return to 17.5% with effect from 1 January 2010.[16][17]
In the run up to the 2010 general election there were reports that the Conservatives would raise VAT if they gained power.[18][19][20] The party denied the reports.[21][22] Following the election in May 2010, the Conservatives formed a coalition government with the Liberal Democrats and in June 2010 Conservative Chancellor George Osborne announced that the standard rate of VAT would increase from 17.5% to 20% with effect from 4 January 2011."
In July 1974, Labour Chancellor Denis Healey reduced the standard rate of VAT from 10% to 8% but introduced a new higher rate of 12.5% for petrol and some luxury goods.[2][5][7] In November 1974 Healey doubled the higher rate of VAT to 25%.[5] Healey reduced the higher rate back to 12.5% in April 1976.[5][7][8]
Conservative Chancellor Geoffrey Howe increased the standard rate of VAT from 8% to 15% and abolished the higher rate in June 1979.[2][5][9] The rate remained unchanged until 1991, when Conservative Chancellor Norman Lamont increased it from 15% to 17.5%.[2][5][9] The additional revenue was used to pay for a reduction in the hugely unpopular community charge.[9] During the 1992 general election the Conservatives promised not to extend the scope of VAT, but, in March 1993, Lamont announced that domestic fuel and power, which had previously been zero-rated, would have VAT levied at 8% from April 1994 and the full 17.5% from April 1995.[6][10] The planned introduction of VAT on domestic fuel and power went ahead in April 1994, but the increase from 8% to 17.5% in April 1995 was scuppered in December 1994, after the government lost the vote in parliament.[5][10]
In its 1997 general election manifesto, the Labour Party pledged to reduce VAT on domestic fuel and power to 5%.[11] After gaining power, the new Labour Chancellor Gordon Brown announced in June 1997 that the lower rate of VAT on domestic fuel and power would be reduced from 8% to 5% with effect from 1 September 1997.[12][13] In November 1997, Brown announced that the VAT on installation of energy saving materials would be reduced from 17.5% to 8% from 1 July 1998. Brown subsequently reduced VAT from 17.5% to 8% on sanitary protection products (from 1 January 2001); children's car seats (from 1 April 2001); conversion and renovation of certain residential properties (from 12 May 2001); contraceptives (from 1 July 2006); and smoking cessation products (from 1 July 2007).
In response to the late-2000s recession, Labour Chancellor Alistair Darling announced in November 2008 that the standard rate of VAT would be reduced from 17.5% to 15% with effect from 1 December 2008.[14][15] In December 2009, Darling announced that the standard rate of VAT would return to 17.5% with effect from 1 January 2010.[16][17]
In the run up to the 2010 general election there were reports that the Conservatives would raise VAT if they gained power.[18][19][20] The party denied the reports.[21][22] Following the election in May 2010, the Conservatives formed a coalition government with the Liberal Democrats and in June 2010 Conservative Chancellor George Osborne announced that the standard rate of VAT would increase from 17.5% to 20% with effect from 4 January 2011."
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