Family holiday costs are expected to rise after a ruling from the European Court on the calculation of VAT on package holidays.
According to StockMarketWire, the new rules mean that EU travel wholesalers will have to calculate the VAT for each transaction and not on the gross margin over an extended period or over multiple transactions.
Currently, wholesalers can sell flights or the passenger transport element of an EU package without VAT, but once the new rules come into force, they will have to account for VAT from the whole profit margin on sales of travel in the country.
The Daily Mail reports that this is likely to have the biggest effect on families. Tax experts believe there could be a three per cent rise in the average cost of a package holiday.
This means that a family of four travelling to Spain or Greece during peak season, with flights and a villa costing £4,000 in total, could pay £120 more.
Holiday companies could be forced to take on the new tax rules within six months.
Matthew Elliott, chief executive of the Business for Britain campaign told the Daily Mail: "Most people will be shocked to hear Brussels can influence UK taxes in this way. Bad directives like this one artificially raise prices, hurting consumers and businesses alike."
A HMRC spokesman told Travel Weekly: "We are considering the implications of the judgment carefully."
New EU ruling means families face £120 price hike for holidays
Silly though it sounds, the cost of a package is often cheaper than the cost of a flight. 'Tour operators have access to very cheap flights aren't available to the consumer,' says Emma O'Boyle from Tripadvisor. 'That's why you can book a seven-day holiday, including accommodation, in a destination like Bali for £600 even though a flight alone might cost £700.' You don't need to feel trapped by your package holiday if it's not what you're after - just use hotel as base and go exploring. 'Even if you add extra accommodation costs on top of the package holiday, it can still be cheaper than booking independently for many long-haul destinations. You'll also have the added benefit of being able to leave behind what you don't need on overnight excursions,' says Emma.
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According to Emma O'Boyle from TripAdvisor, planning ahead can leave you quids in. 'The idea of the "late deal" can be a myth. Often the earlier you book, the better the deal. It also leaves options open – waiting to book until two weeks before your holiday means you'll have extremely limited choices, but by booking early you'll likely find availability in any destination you want. If your schedule is flexible, fly during the middle of the week, as you can often find cheaper fares that way.'
'Shop around for airports before booking', advises Tripadvisor's Emma O'Boyle. It's often cheaper to fly in or out of an alternative airport. For example, Fort Lauderdale and Miami are less than 30 miles apart, but flying to Miami from London can often be over £100 cheaper than the fare to Ford Lauderdale.'
The joy of the all-inclusive package is that you know exactly what you're spending - but remember to read the small print: many 'all inclusives' have all sorts of hidden extras that aren't actually, er, included.
First Choice offers some jolly good deals (and it reckons a family of four can save up to £500 on a week's holiday by going all-in), and for five star luxury without the hidden extras, check out The Platinum Plan at the five-star Lily Beach in the Maldives (pictured). Your price includes buffet and a la carte fine dining, unlimited cocktails and all premium brand drinks (including those from your mini bar) as well as activities such as excursions to other islands, a sunset cruises and fishing expeditions, gym entrance, water sports.....
If you're going solo, book with a small-group tour company like Explore, which charges no single supplements on its small group tours. Explore has introduced a new range of Solo Traveller tours in response to the fact that more than half of its customers travel alone. Destinations include Morocco (pictured) and Thailand, with single rooms for everyone at no extra supplement.
According to HomeAway Holiday Rentals, renting an apartment can be up to four times cheaper per square foot than hotels, and, as they sleep more people, they allow you to spread the cost if there are more than two of you. You get space and flexibility too. And best of all, they allow you to get out of the usual tourist zones and shop where the locals shop, which is always cheaper than shopping in city centres. For example, this lovely apartment in Paris (pictured) works out from 43 Euros per night.
'Most airlines are now charging some type of baggage fee,' says Tripadvisor's Emma O'Boyle. Some charge for additional bags, some charge by weight, and some even charge for your first checked bag. Do your homework and find out what your airline charges before you book. You could use a comparison service such as the new TripAdvisor Fees Estimator to avoid any nasty surprises when you get to the airport. Not only will it calculate additional charges for baggage but will even factor in additional sneaky meal and credit card charges.'
If you know you're going to want to go sightseeing, it's well worth pre-booking. For holidays to Florida, for example, you can buy exclusive combined tickets to theme parks before you depart which are not available on the gate. 'It's a bit like pre-booking a cheap train ticket in the UK, the earlier the better! Says Oliver Broad, Chairmman of AITO Specialist Travel Agents.
'Many travellers may balk at the idea of a holiday in Southeast Asia because of the flight cost, but it's worth considering exchange rates and the cost of living once you arrive,' says Tripadvisor's Emma O'Boyle. 'A flight to Italy may be cheap, but paying for meals, hotels and activities in Euros will quickly add up, while exchange rates in destinations like Thailand and Vietnam strongly favour the pound and meals are readily available for less than £1.'