VAT rate rises from 17.5% to 20%

The top rate of VAT has risen from 17.5% to 20% as the government looks to boost tax revenues to cut the UK's debt levels.

Business groups have warned retailers will be hit by the increase, while opponents of the rise have cautioned the poorest will face the hardest blow, the BBC reports.

The government says the rise is necessary to help bring down the UK's high budget deficit.

Food, children's clothing, newspapers and magazines are not subject to VAT.

Research by the Centre for Retail Research and online shopping group Kelkoo has suggested retail sales will fall by about £2.2bn in the first quarter as a result of the VAT rise.

The British Retail Consortium (BRC) has also warned the rise, announced in the June budget, may have squeezed the traditional January sales period into a concentrated burst around the New Year.