What Might Happen to Your Finances in April 2022 | Cost of Living Increase
This April, inflation is expected to hit 6 per cent, the social care levy will kick in, the energy price cap will rise, income tax bands will be frozen and council taxes will go up. Many families will be up to £1,200 worse off due to this cost of living increase. What are your options to help ease the affects of these increases?
Why is the Cost of Living Increase so Significant This Year?
This year, inflation is at one of the highest rates but that’s not all. The increase in cost of living reflects the effect of the demand for goods and services decreasing after lockdown. In essence, prices fell sharply and the impact from supply chain disruption due to Covid-19 hitting factory production and global trade is also an explanation. Many countries around the world are facing similar situations but the added affects from Brexit has worsened the situation in the UK.
What is Being Affected by this Rise?
There are several major changes facing people’s finances this year. Firstly, council tax bills have already increased on average by £11 but they’re estimated to increase by 6% by the end of the year. Secondly, as a result of Brexit, roaming charges for UK residents to use their phones in Europe have returned! Another aspect which can affect the everyday lives of people is the rise in train fares in the UK. The cost of rail travel usually increases each July with its RPI inflation rate which was 3.8% last year. However, it is estimated that a season ticket between Oxford to London (including a London travelcard) will cost almost £6,700 a year from March.
More considerable changes include interest rates rising, a rise in dividend tax rates and UK inflation will continue to increase rather rapidly. Firstly, credit card, mortgage and overdraft costs are set to increase by hundreds per year. Secondly, the government anniunced in September 2021 that dividend tax rates are to increase which may affect those who own shares in a company or if you own your own firm. So this year, the rates for next year are rising by:
- Basic rate taxpayers rise from 7.5% to 8.75%.
- Higher rate taxpayers rise from 32.5% to 33.75%.
- Additional rate taxpayers rise from 38.1% to 39.35%.
Lastly, UK inflation is now at 5.1%, its highest reading for 30 years. Inflation is a measure of the price increases of goods and services. It has previously been increased by rising energy prices, as well as an increase in hospitality VAT.
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