July 3, 2022

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Clever tips to protect your finances from Awful April

13 min read

From Friday, households will be hit by a barrage of bill, tax and price hikes – plunging the country into the worst cost-of-living crisis for more than half a century.

April marks the arrival of a series of money pressures, including a 54 per cent surge in energy costs, the new National Insurance levy and bigger council tax bills.

Chancellor Rishi Sunak’s Spring Statement last week offered some reprieve as he saved thousands of people from the new National Insurance hike (although not until July). 

Bills tsunami: April marks the arrival of a series of money pressures, including a 54% surge in energy costs, the new National Insurance levy and bigger council tax bills

But money experts and campaigners have warned that government support will simply not be enough.

Inflation is forecast to hit 9 per cent this year and, with wages failing to keep up, economists are warning Britain is heading for the worst fall in living standards since the 1950s.

So today, as awful April approaches, Money Mail sets out the ways in which you will feel the squeeze, and what you can do to protect your cash from the crunch.

Power bill surge

The energy price crisis is about to inflict the biggest hit on already cash-strapped households. 

From April 1, the cap on energy prices will soar by 54 per cent from £1,277 to £1,971 a year for the average household.

Despite pressure to announce more help with energy bills, the Chancellor did not reveal any further measures in his Spring Statement on top of the £200 energy bill clawback scheme and a £150 council tax rebate for some households.

He did reveal that VAT would be removed from energy-saving solar panels and heat pumps, which he said would save households £1,000 on average. 

But, as the cost for installing home solar panels is around £4,800, this measure is unlikely to help the most vulnerable in the short term.

Suppliers used to reward customers who shopped around for the best fixed-rate deals but at the moment variable rates capped by regulator Ofgem are cheaper than the fixed tariffs on offer. 

Electric shock: From April 1, the cap on energy prices will soar by 54%  from £1,277 to £1,971 a year for the average household

Electric shock: From April 1, the cap on energy prices will soar by 54%  from £1,277 to £1,971 a year for the average household

The average fixed rate is now £3,200 for a customer paying by direct debit.

But, as the Office for Budget Responsibility (OBR) predicts that the price cap could rise further to £2,800 in October, it is a good idea to keep an eye on rates.

If, for instance, you are offered a fixed rate tariff below the price cap, and it comes with no exit fees, it might be worth signing up.

Clever tips to protect your finances from Awful April

Take gas and electricity meter readings before prices rise in April and submit them to your supplier. This way, your energy company cannot charge you at the higher rate for units used prior to April 1.

British Gas estimates that as much as 23 per cent of our electrical usage could be down to everyday devices draining power when left on standby. 

The supplier says turning off the TV and unplugging your mobile phone charger when not in use could save as much as £200 a year. 

Turning down the flow temperature on your boiler could also cut your gas bill by up to 8 per cent, saving an average £80 a year.

Jo Alsop, energy expert and founder of independent consumer adviser The Heating Hub, says: ‘If you’re running your boiler at a high temperature, you might as well be leaving your back door open.’

Spike in National Insurance 

Despite calls on the Treasury to scrap the planned 1.25 per cent National Insurance (NI) hike on incomes starting on April 6, the tax grab is going ahead.

The Chancellor will raise the earnings threshold at which workers start to pay NI to £12,570 from July. This will save a typical employee £330 a year. 

Help: Chancellor Sunak will raise the earnings threshold at which workers start to pay NI from to £12,570 from July

Help: Chancellor Sunak will raise the earnings threshold at which workers start to pay NI from to £12,570 from July

But for three months until then, workers will have to pay the NI hike on earnings above the £9,880 threshold — costing the average person £89.

Someone earning a salary of £20,000 will pay £7.42 more tax per month for the next three months, while a £30,000 earner will have to pay £17.90 per month. Experts say the best way to beat tax rises is to put more income into a pension.

Stashing money in your pension attracts tax relief at the rate you pay income tax. So basic-rate taxpayers can save £100 into their pension instead of receiving £80 after tax.

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If your employer offers pension contributions via a salary sacrifice scheme, you will not have to pay either tax or NI on money put into your retirement fund.

This is because your salary is lowered by your pension contributions, so no NI or income tax needs to be paid on that portion of it. 

Cycle to Work schemes operate in the same way. Tax and employee share schemes, such as the share incentive plan, also allow workers to be paid in company shares without paying NI or income tax on their value.

Councils cash in

Local authorities have been given permission to raise council tax by up to 5 per cent from April.

This means that the average house in Band D rises £56.94 from £1,898 to almost £1,955 next year.

There are various ways that you can get help to pay the bill, but it depends on your financial circumstances. Everyone in council tax bands A to D, which is around 80 per cent of homes, will receive a £150 energy bill rebate.

Rising bills: Local authorities have been given permission to raise council tax by up to 5% from April

Rising bills: Local authorities have been given permission to raise council tax by up to 5% from April

If you do not pay by direct debit, it might be worth setting this up through the government portal to get the money more quickly. Otherwise, you will be invited by your council to make a claim.

If you suspect you might be in the wrong tax band, it might also be worth challenging this. If you are successful, you could get a refund and several hundreds of pounds off your bill.

The first step is to check what band your neighbours are in and the valuation of similar properties in your area. 

If this indicates you are in the wrong band, you can make a challenge through the government website at gov.uk/council-tax-bands, or by calling the Valuation Office Agency (VOA) on 03000 501 501 in England and 03000 505 505 in Wales.

But be warned, it could result in you and your neighbours paying more if you are bumped into a higher band instead.

Fuel fright

The Treasury has cut fuel duty on petrol and diesel by 5p per litre, lasting until March next year.

This reduction (plus the freeze in fuel duty which has been in place since 2011), represents a £5 billion saving over the next 12 months, which will save the average car driver £100 on fuel.

But, as motorists face increasing costs at the pumps following the Russian invasion of Ukraine, this cut will feel like a drop in the ocean for many.

Forecourt misery: Motorists face increasing costs at the pumps as the price of fuel continues to sky-rocket following the Russian invasion of Ukraine

Forecourt misery: Motorists face increasing costs at the pumps as the price of fuel continues to sky-rocket following the Russian invasion of Ukraine

Since the measure was announced last Wednesday, average fuel prices have fallen, but not by as much as many drivers would have been hoping. 

Petrol has dropped by 3.71p, and diesel has gone down by 2.79p. Myron Jobson, from broker Interactive Investor, says: ‘A 5p per litre reduction in fuel duty could cut the cost of filling an average family car by around £2.75, which is small change compared to the recent hikes in the cost of fuel and would barely cover a cappuccino from Costa Coffee.’

There are measures you can take to drive down fuel bills yourself. Consumer body Which? recommends filling up at supermarket pumps because they are often cheaper than the big-name petrol stations, and keeping the car free of clutter, emptying the boot and closing windows to reduce drag because a heavy car will guzzle more fuel.

Do not leave your engine running to heat up before starting a journey because this wastes fuel, and driving at lower speeds also helps keep costs down.

The Department for Transport says driving on the motorway at 80 mph uses 25 per cent more fuel than driving at the 70 mph speed limit.

Keep your tyres pumped up because under-inflated ones use extra fuel, and pre-plan your journey to reduce unnecessary mileage.

Pension pinch

Pensioners relying on the state pension face a difficult time as they are getting a below-inflation increase next month.

The Government last year abandoned its triple-lock pledge to ensure that pension pay rises with the highest of either inflation, wages or 2.5 per cent.

It means the state pension will instead rise by September’s 3.1 per cent rate of inflation, and so millions of pensioners will actually be taking a hit to their pay packets.

However, the Chancellor did confirm this week that the triple lock will be restored in April next year, which will see the state pension rise by more than 7 per cent.

The basic state pension will increase from £137.60 to £141.85 per week and the new state pension will rise from £179.60 to £185.15 in April.

But in real terms, this means the £9,648 state pension will be worth £427 less a year.

Pensioners also spend more of their money on energy bills and food, which are seeing large price rises.

There was no specific support for pensioners in the Spring Statement.

For those on the lowest incomes, the Chancellor did announce that the Household Support Fund would be doubled to £1 billion, which will allow local councils to give targeted help to the most vulnerable.

However, as Laura Suter, from AJ Bell, says: ‘By allocating the cash to local councils, it means people have to be aware that help is available and actively apply, rather than the money being handed to those who would benefit most.’

Pension Credit is available to help with living costs if you are over state pension age and on a low income. It tops up your weekly income to £182.60 if you’re single and your joint weekly income to £278.70 if you have a partner.

Anyone on the Guarantee Credit element of Pension Credit is automatically eligible for the Warm Home Discount Scheme, a one-off £140 discount on your energy bill.

Those who receive the state pension should have also received the Winter Fuel Payment, which offers between £100 and £300 to pay for heating bills during the coldest months.

Otherwise, you have to make a claim by the deadline of March 31, and you must have been born on or before October 5, 1954.

Phone hang-up

Most telephone and internet providers will hike prices this spring — many well above inflation.

The BT group, which also owns EE and Plusnet, said the average customer will see an increase to their bills of 9.3 per cent, which is a rise of £3.50 a month, or £42 a year.

TalkTalk prices will go up by 9.1 per cent, whereas Sky has said that the average broadband customer will pay an additional £3.60 a month from April.

Price hikes: Most telephone and internet providers will hike prices this spring - many well above inflation

Price hikes: Most telephone and internet providers will hike prices this spring – many well above inflation

O2 and Virgin Mobile bills will also rise by 11.7 per cent, although O2 customers will be capped at 7.8 per cent if they joined or upgraded before March 25 2021. 

Many of these rises are baked into contracts, meaning people have no choice but to pay. According to Which?, you are still likely to be better off in a fixed-term contract than staying out of contract on an old deal.

But there is help available, such as payment deferrals or payment plans. Special discount packages for financially vulnerable customers, known as social tariffs, are also on offer from providers BT, Community Fibre, G.Network, Hyperoptic, KCOM, TalkTalk and Virgin Media O2.

You can also make savings by threatening to switch supplier. Some firms offer a discount exclusively to customers who call up to negotiate, which isn’t available online.

A Which? report this year said half of customers who have haggled reported average annual savings of £85 on broadband, £128 on TV and broadband packages and £35 on mobile bills.

Harrowing calls to elderly helpline 

The 69-year-old widow on the phone has never needed any help from the Government before. But she now simply cannot afford to pay her shocking £156 energy bill in full.

Timidly, the well-spoken pensioner asks the question she has no doubt been dreading. ‘I want to know whether I’m entitled to any… benefits?’

I am listening to calls made to Independent Age’s helpline.

The charity provides older people with free information on everything from care to mobility and loneliness. 

Crisis: The Independent Age helpline has this year seen a 60% increase in calls around benefits and entitlements (picture posed by model)

Crisis: The Independent Age helpline has this year seen a 60% increase in calls around benefits and entitlements (picture posed by model) 

But today, I am getting a glimpse into the lives of pensioners left in financial dire straits by the cost-of-living crisis.

Independent Age advisers have this year seen a 60 per cent increase in calls around benefits and entitlements.

Some elderly people break down in tears on the phone and many have never claimed benefits before. One man in his late 60s insists he has ‘never owed anybody anything’ up until now.

He says he suffered a stroke in January and his wife now cares for him at home. Since then, he has received a bill for £517 from an energy supplier.

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A debt collection agency is demanding payment within ten days. He is worried it could lead to a county court judgment. 

But despite calling the firm three or four times to try to arrange a payment plan, the 69-year-old has heard nothing back.

He and his wife are also facing a council tax hike of more than £500 from April. He tells adviser Lorna: ‘I have worked all of my life and now I find myself in this position. I just can’t afford my bills.’

Other pensioners have already started cutting back on essentials to make ends meet. Another widow, also nearing 70, doesn’t go into detail about her personal finances — but says there is ‘more going out than coming in’. 

She says: ‘My mother always told me to pay my bills — and I do. But I go one day a week without food. You can always live off a tin of soup.’

In another heartbreaking exchange a Parkinson’s sufferer tells Lorna she cannot afford the specialist shoes she needs for her condition.

The 75-year-old is already struggling to pay for public transport to get to her appointments.

‘I’m in terrific pain when I’m out,’ she says.

Like all the other callers I listen to, this pensioner is booked in for an appointment with a specialist Independent Age adviser, who will be able to find out if they are entitled to any extra help.

However, demand for the service is now so high that they will have to wait for at least two weeks.

Kevin Tsang, one of the charity’s advisers, says: ‘A lot of our callers are really worried about the cost-of-living crisis and we expect this to continue on into the months ahead.’

[email protected] 

Dividend attack

Investors and the self-employed who pay themselves in dividends will have to shell out £600 million more when tax rates rise in April.

Basic-rate taxpayers currently pay 7.5 per cent on dividend income over the £2,000 threshold, with higher and additional rate investors paying 32.5 per cent and 38.1 per cent respectively.

Are YOU entitled to extra help? 

  • Call Independent Age on 0800 319 6789 or use its online calculator (independentage.entitledto.co.uk).
  • Citizens Advice can find out if you’re eligible for any benefits. Visit your local bureau or call 0808 223 1133.
  • Age UK’s free helpline is 0800 678 1602 (8am-7pm).
  • Debt charity StepChange offers free advice you can trust (0800 138 1111).

But from April 6, investors will be charged at 8.75 per cent, 33.75 pc and 39.35 per cent.

This means a basic-rate taxpayer will pay £263 on £5,000 of dividend payments — a £38 rise.

Higher-rate taxpayers will have to pay £2,700 on £10,000 of dividend rewards — up £100.

You can protect dividend income from tax by moving your savings into a stocks and shares Individual Savings Account (Isa). 

Yet investors can only save up to £20,000 each year into an Isa. 

Self-employed people such as small-business owners should check that they are claiming back all the tax they might be owed.

It is also worth saving into a personal pension or self-invested personal pension, as the self-employed are entitled to all the same tax reliefs as people on PAYE.

Other worries

The majority of free Covid testing is coming to an end in April too. Boots charges as much as £17 for a pack of four lateral flow tests. 

It means somebody who visits their loved one every day in a home could end up paying £136 a month for tests.

You can still order free tests through the government website, by calling 119 or by picking them up at a local collection point before April 1.

Going out to dinner or to the pub will also be more expensive as the hospitality tax break set up in the pandemic ends. 

The reduced rate of 12.5 per cent VAT for restaurants, bars and hotels will rise back up to 20 per cent, meaning that businesses will have to charge customers more.

Finally, first-class stamps will rise by 10p to 95p from April 4 — with second-class stamps also increasing by 2p to 68p. 

Stock up at old prices before they change but make sure they are the new barcoded stamps. Standard stamps will be rendered useless on January 31.

[email protected]

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