A New Year nightmare: Average family faces £1,200 hit to their budget from soaring bills, tax rises, less spending power and the highest inflation for 30 anni, worrying new report warns
Famiglie face a ‘cost of living catastrophe’ next year thanks to soaring energy bills, tax increases and the highest inflation in 30 anni, a report warns.
It predicts that 2022 will be the ‘year of the squeeze’, with households facing a hit of at least £1,200.
With inflation projected to reach 6 per cent in spring, wages next Natale could be no higher in real terms than they are today, the study by the Resolution Foundation think-tank forecasts.
Nel frattempo, it says rising gas prices could add at least £600 to family budgets when the energy price cap is reviewed in spring.
On top of this, households face higher taxes from April when National Insurance goes up by 1.25 percentage points to fund the NHS and social care – a rise that will affect middle-income earners more.
Families face a ‘cost of living catastrophe’ next year thanks to soaring energy bills, tax increases and the highest inflation in 30 anni, a report warns (File image)
The report predicts that 2022 will be the ‘year of the squeeze’, with households facing a hit of at least £1,200
Rishi Sunak (nella foto) announced in his Budget that town halls will be able to put up the levy by 3 per cent in April, partly to pay for social care
Most town halls are also expected to put up council tax by almost 3 per cent in the same month.
The think-tank said the combined impact of these factors would leave the average household at least £1,200 worse off – but warned that even this may be an under-estimate because energy bills could rise by more than expected.
Some experts have warned that surging wholesale gas prices could add as much as £1,000 to household bills.
Torsten Bell, chief executive of the Resolution Foundation, disse: ‘2022 will begin with Omicron at the forefront of everyone’s minds.
‘But while the economic impact of this new wave is uncertain, it should at least be short-lived. Anziché, 2022 will be defined as the year of the squeeze.
‘The overall picture is likely to be one of prices surging and pay stagnating. Infatti, real wages have already started falling and are set to go into next Christmas barely higher than they are now.
‘The peak of the squeeze will be in April, as families face a £1,200 hit from soaring energy bills and tax rises. So large is this overnight cost-of-living catastrophe that it’s hard to see how the Government avoids stepping in.
‘Top of the Government’s New Year resolutions should be addressing April’s energy bills hike, particularly for the poorest who will be hardest hit by rising gas and electricity bills.’
Although the Resolution Foundation is Left-leaning and is run by a former adviser to Ed Miliband, it employs the Tory former minister David Willetts. Its predictions for the cost-of-living squeeze are in line with those of many other leading experts.
Inflation, which stands at 5.1 per cent now, is expected to peak at 6 per cent in spring, which would be its highest since 1992, with pay packets stagnating as a result.
Some experts have warned that surging wholesale gas prices could add as much as £1,000 to household bills
Most town halls are also expected to put up council tax by almost 3 per cent in the same month
The report says real wage growth was flat in October, but almost certainly began falling last month, and is unlikely to start growing until the final quarter of 2022.
Di conseguenza, real wages are on course to be just 0.1 per cent higher at the end of 2022 than at the start. Entro il 2024, real wages are set to be £740 a year lower than if the UK’s already sluggish pre-pandemic pay growth had continued.
The think-tank said that in April the cap on energy bills is expected to rise by around £500 a year. Coupled with a further £100 to recoup the costs of energy firm failures, this could mean a typical energy bill rising by around £600 a year.
This increase will fall disproportionately on low-income families as they spend far more of their income on energy.
The share of income spent on energy bills among the poorest households is set to rise from 8.5 per 12 per cent – three times as high as the share spent by the richest households.
The report said there was significant variation in energy usage within income deciles – groups created by ranking Britons into ten bands according to earnings – meaning some households faced increases of far more than £600.
This increase will fall disproportionately on low-income families as they spend far more of their income on energy
The share of income spent on energy bills among the poorest households is set to rise from 8.5 per 12 per cent – three times as high as the share spent by the richest households
Ha aggiunto: ‘One in six households in the poorest two deciles have energy bills at least 25 per cent above the typical household.
They could see an increase of £750 or more in April thanks to larger families, outdated boilers or poorly insulated properties.’
Higher-income families will be disproportionately affected by rising tax bills in April. The average combined impact of the freeze to income tax thresholds and the increase in personal National Insurance contributions is £600 per household.
For the richest 50 per cento, the NI rise alone will raise tax bills by £750 on average. Inoltre, the VAT rate for hospitality and accommodation is set to return to 20 per cent on April 1, and dividend tax rates will also rise.
Il rapporto ha detto: ‘There is a consensus that taxes will be rising in the years ahead given the long-term impact of the pandemic as well as existing fiscal pressures.’
The Government said ‘decisive action’ to offer support worth £4.2billion for families included changes to Universal Credit and measures to help with bills, including the energy price cap and cold weather payments, as well as freezing alcohol and fuel duty.
… and council tax could surge by 6%
By Policy Editor
Millions face catastrophic council tax rises of up to 6 per cent next year because of small print which has only just come to light.
Rishi Sunak announced in his Budget that town halls will be able to put up the levy by 3 per cent in April, partly to pay for social care.
But it has now emerged that if local authorities did not use their full ability to increase council tax this year, they will be able to carry this entitlement over to next year.
It means some town halls – believed to be around 36 – will be able to add up to 3 per cent on top of the 3 per cent announced by the Chancellor.
Millions face catastrophic council tax rises of up to 6 per cent next year because of small print which has only just come to light (file di foto)
Levelling Up Secretary Michael Gove has also announced that police authorities will be able to increase their share of council tax bills by £10, and some fire brigades by £5.
All of this could see average Band D council tax bills soar by more than £100 in a year – with many areas breaching £2,000 for the first time. The rises come on top of the 1.25 percentage point rise in National Insurance to pay for the NHS and social care, which will come into force in April.
Last night Harry Fone, of the TaxPayers’ Alliance campaign group, disse: ‘Another inflation-busting council tax hike will decimate many households’ finances…
‘Town hall bosses must get a grip, ramp up efficiency and keep tax rises to an absolute minimum.’
The current inflation rate is 5.1 per cento. In April this year, the average Band D council tax bill in England was £1,898 – up £81 on 2020.
A document published by Michael Gove outlined the Government’s proposed ‘council tax referendum principles’
In his Budget, Mr Sunak said town halls would be able to add 2 per cent next year without the need to hold a local referendum, plus another 1 per cent for social care. If all areas do this, it could see half of districts imposing council tax bills of £2,000 a year.
But it has now emerged that the increases could be even higher: Four, five or even 6 per cent in some areas.
A document published by Mr Gove outlined the Government’s proposed ‘council tax referendum principles’ – the rules by which town halls can avoid having to hold a local vote if they put up bills too high.
As well as the 3 per cent announced in the Budget, it said there would be an ‘ability to add any unused parts of the 3 per cent adult social care precept flexibility available in 2021/22’. It is believed there are four councils which could carry 3 per cent from last year, e 32 which could use 2 per cent or less.
Police and crime commissioners will also be able to add £10, while the eight lowest-charging fire authorities will be able to add £5.
The Department for Levelling Up said it has given an additional £3.5billion to help councils. Un portavoce ha aggiunto: ‘Local people will continue to have the final say on council tax with the ability to veto excessive rises.’
Countdown to the 2022 cost of living crunch: From tax rises to energy bill hikes, key dates for your calendar – and some money-saving ones too!
By Sylvia Morris For The Daily Mail
Households are facing their biggest squeeze for a decade in 2022 as inflation soars and tax hikes bite.
in ritardo 2021 saw prices surge as the cost of energy and fuel rocketed. Inflation hit 5.1 per cent and is now predicted to reach 6 per cent in the New Year.
Retired people face a difficult year as the state pension will only rise 3.1 per cento, while many will have pensions that don’t keep pace with inflation.
in ritardo 2021 saw prices surge as the cost of energy and fuel rocketed. Inflation hit 5.1 per cent and is now predicted to reach 6 per cent in the New Year
The Bank of England is also tipped to keep raising the base rate, meaning mortgages will get more expensive for millions. Ancora, allo stesso tempo, interest rates paid on savings are still pitifully low — leaving nest eggs savaged by inflation.
Charity The Resolution Foundation warns that 2022 will be the ‘Year of the Big Squeeze’ with families expected to take a £1,200 annual hit on income from April.
And it seems nobody will escape unscathed. Lower-income families, who spend a higher proportion of their salary on energy, will be hit hardest by rising bills, while wealthier households will be struck by tax hikes.
Sarah Coles, senior personal finance analyst at investment service Hargreaves Lansdown, insists: ‘2022 is a year of change — but not in a good way.
Most of the financial developments in the pipeline will leave us worse off by the time we struggle to the end of next year.
‘It’s not all bad news though. Buried among the price rises are a few more positive changes, including the end of the loyalty penalty for insurance customers, lower water bills and easing the admin burden for families of those who pass away.
'Sfortunatamente, for most of us the bad outweighs the good so we need to plan ahead and be prepared for the worst 2022 can throw at us.’
Qui, Money Mail sets out the dates on which you’ll start to feel the pinch…
Nuovo anno, new rules
Da gennaio 1, your insurance company has to offer you the same deal it gives new customers when it sends you a renewal quote for your home or car cover.
Nel passato, insurers saved much better deals to lure in new customers, while loyal policyholders were forced to pay more every year.
It is good news for those who stick with the same insurer each year but could be the end of very cheap deals for savvy switchers.
City watchdog the Financial Conduct Authority says six million loyal car and home insurance policyholders would have saved £1.2 billion in 2018 if they had paid the average price for their policies — amounting to £200 each.
The New Year also brings about a tweak to the rules which will mean there is less paperwork for thousands of people with no inheritance tax to pay — sparing 230,000 of us extra admin.
Interest rate threat
When the Bank of England’s monetary policy committee meets in February the base rate could rise again — sending the cost of borrowing up for millions.
Rate hikes: The Bank of England’s monetary policy committee is to meet in February , at which point the base rate could rise again – sending the cost of borrowing up for millions
It was hiked from 0.1 per cento a 0.25 per cent this month. Experts fear mortgage and credit card rates will rise yet banks are less likely to pass on rate increases to savers.
If the base rate rises to 1 per cento, borrowers with a typical £150,000, 25-year mortgage, on a standard variable rate of 3.59 per cento, would pay an extra £75 a month, or £900 a year, according to broker L&C. Those with £450,000 loans will pay £2,688 a year more.
Rail fares’ 3.8% hike
Train companies are predicted to raise ticket prices by 3.8 per cent from March 1.
This will add £149 to the cost of an annual season ticket from Guildford to London and £215 to a Milton Keynes to London fare.
March will also see the end of the reduced 12.5 per cent VAT rate for hospitality and tourism. This could prompt price rises in pubs and restaurants.
Bills to boil over
Energy watchdog Ofgem will announce its new price cap on February 4. Analysts Cornwall In-sight have predicted the £1,277 cap will increase to £1,865 on April 1 as the cost of wholesale gas keeps rising.
The cap dictates how much providers can charge those on standard variable tariffs per kilowatt of gas or electricity.
On this basis, the average household currently pays £1,277 a year but the actual amount depends on how much energy you use and how you pay.
Rising bills: Analysts Cornwall In-sight have predicted the £1,277 price cap will rise to £1,865 on April 1 as the cost of wholesale gas keeps rising
The cap for prepayment meters is £1,309.
The Resolution Foundation’s Labour Market Outlook estimates a typical energy bill could rise by as much as £600 a year.
Yet there is a glimmer of hope as from April 1 water firms will be ordered to drop prices gradually until 2025.
April tax trauma
Workers will lose 1.25 per cent of their pay to the new Health and Social Care levy which starts in April.
The hike, which applies to England, Scozia, Galles e Irlanda del Nord, means you will pay National Insurance at 13.25 per cent on earnings between £9,880 and £50,270 and 3.25 per cent on earnings above.
Someone on a salary of £20,000 will pay £130.40 extra, while at £40,000 it’s £380.40. On £60,000 you’ll pay an extra £630.40, say accountants Deloitte.
Those over state pension age who are still working will not have to pay the new levy until April 2023.
A freeze on tax bands will also hit as wages rise. Currently income tax kicks in on earnings above £12,570 — anything you earn under that amount is tax free.
Dopo di che, you pay 20 per cent income tax on your salary. The higher-rate threshold is £50,270 — and you pay 40 per cent income tax on earnings above this amount.
But the income tax bands are set to remain at these levels until April 2026, eating into pay as inflation rockets.
Income grab: The new 1.25% Health and Social Care levy means someone on a salary of £20,000 will pay £130.40 extra annual tax while at £40,000 it’s £380.40
Council tax hikes are also expected in April. The Institute for Fiscal Studies says a rise of 3.6 per cent a year is needed for the next three years just for town halls to keep services running at pre- pandemic levels.
This would add an extra £68 a year to the average Band D property bill of £1,898.
In Scozia, a freeze on council tax rises will come to an end, meaning local authorities will be free to charge what they like for the first time since 2007.
The rate of dividend tax paid on share income will also rise an extra 1.25 per cento.
The tax is paid on dividend income above the £2,000 allowance. It will rise from 7.5 per cento a 8.75 per cent for basic rate taxpayers, while higher-rate taxpayers will pay 33.75 per cento.
Pay rise pittance
Pensioners across UK will be hit from April because the state pension rise of only 3.1 per cent is well below the rate of inflation.
The Government suspended the ‘triple lock’ guarantee for a year after the pandemic distorted wage inflation which stood at 8.3 per cento.
Pensioners across UK will be hit from April because the state pension rise of only 3.1 per cent is well below the rate of inflation (File image)
The ‘old’ basic state pension goes up by £4.25 a week to £141.85 while the new flat-rate state pension rises £5.55 a week to £185.15.
The decision to ignore the earnings link of 8.3 per cent will cost those on the new flat-rate pension £486.20 this year — or £9.35 a week.
Under the triple lock it would have risen to £194.50 a week or £10,114 a year.
Take note of deadline
Finalmente, da settembre 30 old £20 and £50 notes will no longer be legal tender. Be sure to give yourself lots of time to spend them before the deadline.