How will the VAT change affect my BT landline bills?

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Our expert says...

Dear Yvonne, thanks for your email about how the VAT increase will affect your home phone bills.

Because the government is hiking VAT to 20% on 4 January 2011, BT (www.bt.com), as well as many other landline providers, is adjusting its prices to accommodate the changes. Below is some more information about BT prices post-VAT increase, and how the change in VAT will affect your bills…

BT VAT price changes

BT says that because amending VAT to 20% has resulted in some inconsistent prices, to keep things simple it has rounded down some prices and rounded up others. “More prices have been rounded down than up”, adds the home phone giant.

Which prices have changed?

If you’re a BT line rental customer who pays by direct debit and receives online paperless bills, you’ll be charged £13.60 a month from 4 January - instead of the current £13.29.

However, this increased to £14.60 on 3 December, 2011 following a round of price rises by BT.

The price of the Unlimited Evening & Weekend Plan is increasing by 15p to £3.15 a month, while the Unlimited Anytime Plan is also going up by 20p to £4.90 a month following these price rises.

For those on either the Unlimited Evening & Weekend Plan or the Unlimited Weekend Plan, daytime calls to UK landlines beginning 01, 02 and 03 will now cost BT customers 7.95p per minute (up from 7.6p), and all calls will be charged a one-off call connection fee of 13.1p per call - this is up from the previous charge of 12.5p per call - under the new price plan.

However, BT also announced it is freezing many of its home phone prices until 2013 following these rises.

Under the January 2011 changes, customers with only the Unlimited Weekend Plan, BT’s basic call plan that comes free with BT line rental, will only have to pay 1p per minute (plus the one-off call connection fee per call) for evening calls - a reduction of 0.5p. Other changes include:

• Some increases to international call rates (varies depending on country), though some prices have decreased
• Increases to BT’s most popular calling features, including call divert, call waiting and caller display, up from £2.59 to £2.70 a month
• Increase in the standard line installation charge, from £127.99 to £130.

Also, from 29 January 2011, BT is increasing its payment processing fee (PPF) to include UK VAT at 20%. This means that the price will increase from £1.50 per month to £1.80 per month, “which remains less than half the price charged by some of our competitors,” says BT.

To avoid paying the PPF, opt to pay your bills by monthly direct debit - visit www.bt.com/directdebit to find out more.

What if I pay my home phone bills quarterly?

If you choose to pay your home phone bills quarterly, this will be taken into account and BT says any adjustments will be made on either your first or second bill of 2011. You’ll only pay the 20% VAT rate on charges from 4 January 2011.

So if you have BT line rental and the Unlimited Anytime Plan, and you receive your quarterly bill in February, you will be charged a total of £55.16 for November, December and January’s home phone service - November and December’s service will be charged at the 17.5% VAT rate, and January’s at the 20% VAT rate.

What if I pay my line rental in advance?

BT says that if you pay for your line rental and calls in advance, and your account is in credit at the time the VAT rate increases, your bill needs to have 17.5% VAT applied until the credit has been fully consumed or refunded, and any adjustments will be applied on your next bill.

If you have already paid your latest bill and it includes some charges beyond 4 January 2011, BT will only charge you 17.5% VAT, even if the bill includes services to be used after the VAT increase - any adjustments will then be applied on your next bill.

VAT changes with other landline providers

BT customers are not the only ones that will be affected by the VAT increase on 4 January; the majority of landline providers are hiking their line rental and call rates to accommodate the 2.5% increase.

Homes with Virgin Media’s cable phone service will see their monthly line rental charge rise from £11.99 to £13.90, and TalkTalk customers will pay £14.50 a month (up from £12.04) for their line rental. Other charges are going up too, so be sure to check with your provider if you’re unsure about anything VAT-related.

I hope this helps you understand how BT is applying the VAT increases Yvonne - for more details about the pricing of BT packages, take a look at the table below:

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