Fuel and travel costs are pushing prices up again
Thursday 5 November 2026
Inflation has risen to 3.1%, meaning everyday spending is getting more expensive just as household budgets are already under pressure.
Value added tax (VAT)
A UK tax added to the price of many goods and services people buy.
Key term
What it means
Value added tax (VAT) is charged on many purchases. A VAT-registered business charges it where the rules require and sends the tax it owes to HMRC, taking account of VAT it can reclaim on business purchases. The final customer usually sees VAT in the price they pay. Different goods and services can have different VAT treatment: some have a lower rate, some are zero-rated and some are exempt. VAT is a tax on spending, rather than a direct tax on wages.
Example
A VAT-registered shop sells a product subject to VAT. The price the customer pays includes the tax; the shop records the VAT and deals with it in its return. A different product might be zero-rated, so it would not have VAT added to its selling price.
Why it matters
VAT affects what purchases cost, and a price difference may partly reflect whether the item is taxed and at what rate.
Also known as
VAT
Related terms
-
Disposable household income
Money a household receives after direct taxes have been taken off and cash benefits have been added.
Read more -
Effective tax rate
The total tax someone pays, shown as a percentage of the income or other amount being measured.
Read more -
Progressive tax
A tax under which people with more income pay a larger share of it in tax.
Read more -
Regressive tax
A tax that takes a larger share of income from someone on a lower income than from someone on a higher one.
Read more
Keep in the loop
News
Highlights from about the UK economy, the UK government and the UK public sector.
Mortgage relief will have to wait a little longer
Wednesday 4 November 2026
Interest rates are staying at 3.75%, so households with mortgages and other borrowing may have to wait longer for costs to come down.
Energy bills are going up as winter approaches
Wednesday 4 November 2026
A higher energy price cap means many households will be paying more to heat and power their homes during the colder months.
Guides and insights
Analysis
Clear, accessible analysis of the economic issues shaping everyday life
Living standards
What does a day’s work buy?
Comparing the cost of everyday life across generations, from bread and beer to buying a home.
Food & prices
The journey behind your grocery bill
How farming, energy, transport and supermarket competition shape the price on the shelf.
Prices & inflation
Inflation is falling. What happens next?
What slower price rises mean for wages, purchasing power and economic recovery.
Shared prosperity
What would shared prosperity look like?
Beyond GDP: how we could measure economic success through security, opportunity and living standards.
Let's work together
Get in touch
We're looking to work with individuals and organisations who can contribute funding, expertise, data, technology, or strategic connections to help build better economic tools and research.