The chancellor has confirmed that he will not extend the VAT cut made in November's pre-Budget report.
Instead, Alistair Darling said that the VAT reduction will continue until December.
Darling announced: "In the pre-Budget report, I announced a range of measures to help the country through the recession, putting £20bn back into the economy.
"This help is coming through now - from an income tax cut, and a VAT reduction which will continue until December."
And with the VAT rate back at 17.5 per cent in 2010-11, a rebound in VAT receipts is forecast.
In addition, the government will increase from 1 May 2009 the VAT registration threshold in line with inflation from £67,000 to £68,000, keeping around 6,000 small businesses out of the VAT system.
Stakeholder Response: British Retail Consortium
The BRC said the Chancellor should have announced a delay of at least a month in the date for ending the current temporary VAT reduction.
Jane Milne, BRC Business Director said: "The Budget was the ideal opportunity to announce a delay in the planned VAT reversal date. Achieving this huge repricing exercise for 31 December will soak up resources at retailers' busiest and most important time of year.
"Instead the Chancellor appears to have confirmed VAT will rise on that date. The change should be postponed until at least the end of January with retailers given the notice they need."
Stakeholder Response: Campaign to Protect Rurual England
Ben Stafford Head of Campaigns at CPRE said: "Sadly, the Chancellor has again chosen to take no action to cut VAT on building repairs and renovations, despite being given a green light by the EU to do so. Making this cut, and levying VAT at 15 per cent on building on greenfield land, could have boosted urban regeneration, while protecting our countryside from indiscriminate bulldozing by under-pressure developers."
