The rate of VAT has jumped from 17.5% to 20% today, a move the Government hopes will help to reduce the UK's vast debts.
VAT is charged on almost everything we buy, although there are notable exceptions such as food and children's clothes.
Consumers will be hit in the pocket when it comes to petrol, however, and with a further rise in fuel duty to come into effect, drivers face prices of up to £1.40 a litre at the pumps.
The rise in VAT was first unveiled as part of the coalition Government's summer Emergency Budget, with more than £13 billion a year to be raised by the end of the current parliament.
Labour have hit out at the rise, claiming the higher rate will hit the poorest hardest.
While accepting the needs for the rise, the British Retail Consortium has predicted that in time, the VAT increase will push inflation up and - along with National Insurance rises and public sector job losses - harm sales as the year continues.
High streets up and down the country were bustling yesterday, as shoppers raced to beat the rise.
"In the excitement of a new purchase, updating your contents insurance may be the last thing on your mind," Nick Starling, the Association of British Insurers' director of general insurance, said.
"Yet, a simple phone call to your insurer will ensure your new items are covered for damage or theft. It is also sensible to keep receipts, as this always helps when making any claims."
More than 70% of small businesses expect today's VAT rise to have a negative impact on their business, according to a member survey by Federation of Small Businesses (FSB).
Some 71% of firms said they expect the rise to be unbeneficial to their business. A further 52% expect to increase prices, 45% expect a fall in turnover, and 36% expect a loss of customers as a result.
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