Modern life, with all its pressures, can be taxing. But this year in the UK, some would argue, it’s become more taxing than ever.

That’s mostly due to the recent rise in VAT – three letters that should worry any cost conscious consumer. But the good news for all you cruisers is that your holidays remain zero-rated. When you book a cruise, you won’t be affected by the rise.

In fact, you won’t be charged any VAT at all. Out of all the money you hand over for your cruise not one penny will go to the…

Cue music . . . da da da da, da da da da VATman!

Now there’s a little ditty that should bring tears to the eyes of many. But not cruisers.

Cruisers have every reason to laugh when they hear that cheesy tune, because they know they won’t be paying the VATman anything.

High-ticket item

Let’s just try and get this whole VAT thing into perspective.

There are those who would claim the additional 2.5 per cent in VAT is only a modest increase. In practice, they would say, it adds a mere 2.08 per cent to prices.

But when you’re purchasing a high-ticket item, such as a major cruise, the extra money you pay can mount up.

The savings achieved when you’re booking a VAT-free cruise – as opposed to buying items attracting VAT – cannot be lightly dismissed.

So what we have here is yet another example of how cruising comes up trumps when compared to other activities.

Disposable income

In these recessionary times a lot of us are finding we have less disposable income.

Tough choices have to be made. Do we buy a brand new car, install that much needed fitted kitchen or take a dream cruise?

Well, if you’re looking for value for money, the third option wins hands down. Every time.

Cruise from New York

The extra value you gain by choosing to cruise and therefore not paying VAT can be significant. Let’s consider a couple of examples.

First this 15-night Queen Mary fly cruise from New York.

I wouldn’t blame you if you were tempted, after all you’d spend Christmas 2011 in the Caribbean and then see in the New Year as you sail back to the Empire State.

Refurbished kitchen

For two people the total starting price for this holiday would be £6,198. It’s by no means a trivial amount and of course that money could be used for other things.

But if you were to spend it on something else – a refurbished kitchen, for example – you’d be in for a shock. With VAT at 20 per cent, a total of £1,033 of your hard earned cash would go straight to the Chancellor of the Exchequer.

In other words, for all the money you’re splashing out on your new kitchen you’re only getting £5,165 of value.

Australia fly cruise

Let’s consider another example.

Who could resist this 16 night Australia fly cruise on Rhapsody of the Seas? Starting on 15 October 2011 it will take you to eight Australian ports as well as Bali.

Prices begin at £3,109 per person which means for a party of four, you’ll need to find a total of £12,436.

That’s a substantial investment, but what’s reassuring is that none of your money will be redirected into treasury coffers. The entire amount goes to pay for your holiday.

Inconsequential

If, however, VAT were then to be charged on that cruise, you’d have to find an extra 20 per cent.

That’s hardly inconsequential, but it’s what buyers of VAT bearing products have to pay, whenever they make a purchase.

For instance, if you bought a new car with the same pre-tax price as the Australia fly cruise, you’d have to pay an additional £2,487 before you could drive it out of the showroom.

Instant guide

For some people, calculating how much VAT they may or may not have to pay may seem complicated. So here’s my instant guide to working it out.

If a purchase attracts VAT at the rate of 20 per cent, then one sixth of what you pay will go to the government. Or to put it another way, for every £1,000 you spend, you are only buying £833.33 of goods or services.

Perhaps for that reason some have suggested VAT might be more accurately described as Value Amputated Tax.

Enjoy the benefits

So in 2011, taking everything into consideration, you may prefer to make do with your old banger and those slightly worn kitchen units for another 12 months.

Because this year, thanks to January’s rise in VAT, there’s never been a more value added time to enjoy the benefits of a cruise.

And guess who won’t be enriched by your decision to cruise? You’ve got it.

Cue music… da da da da, da da da da VATman!

And finally…

If you feel that little ditty sounds familiar, you’re probably thinking of this:

Bruce Beckett

Posted in Advice