I have setup the tax rate and set as default but all I see is this (an example)
 
Price: £6.09 (£6.09 incl. TAX)
 
instead of what it should be with 17.5% tax
 
Price: £6.09 (£7.16 incl. TAX)

snixx, try to clean your cookies - it helps in 99% cases
 
You can also open the site from another browser or computer to check if the tax settings are working.

I opened it in IE (normally I use firefox) and it does work, its a bit strange that it didnt update when I refreshed (f5 and also ctrl - f5)
 
Thanks

ctrl + F5 combination doesn't help in this case, you have to physically remove cookies by going to your browser settings, for example Tools > Options > Privacy > Show cookies > Delete Cookies in FireFox.