The new government has brought many changes to the economy, not least of which is a proposed increase in VAT at the start of 2011. “But house prices aren’t affected by VAT!”, I hear you say. True. But estate agency fees are.

From January 4th, 2011, the VAT rate rises to 20% – it is currently 17.5%, having risen from 15%. The usual fee charged by an agent is in the region of 1.5% of the value of the property. In real numbers, this is how it breaks down:

House value £100k – agent fees £1,500+VAT.

Total at 15%: £1725
Total at 17.5%: £1763
Total at 20%: £1800

House value £250k – agent fees £3,750+VAT.

Total at 15%: £4312
Total at 17.5%: £4406
Total at 20%: £4500

House value £500k – agent fees £7,500+VAT.

Total at 15%: £8625
Total at 17.5%: £8813
Total at 20%: £9000

Some agents charge 3% of the final value of the property, and VAT may rise in the future to 25% – this would bring the total fees on a £500k house to £18,750.

Quite simply, the sooner you sell, the lower your fees will be.