Energy price cap rises hit, but what other costs are going up?
The cost of living crisis will deepen for many households as energy bills are set to skyrocket due to an increase in the price cap.
However, higher energy prices are not the only way households and businesses are set to feel the pinch.
From the start of the month, a raft of tax rises and reductions in state pandemic support will increase costs for businesses and, ultimately, lead to higher prices for their customers.
Here are the tax changes which could impact your wallets.
– VAT increases
The cost of buying a pub meal, soft drink or hotel stay could become more expensive from April as VAT levels across the hospitality sector lift back to 20%.
The industry saw VAT dropped to 5% to support its recovery during the pandemic.
It rebounded to 12.5% in October last year as restrictions eased, but from Friday it returned to 20%.
Despite the initial fall in tax, few pub groups, restaurants and leisure businesses were able to pass on the benefits of the tax break – which covered soft drinks, food, events tickets, accommodation and other areas – to customers due the financial impact of the pandemic.
Bosses said lengthy Covid disruption, significant debts and soaring cost inflation in recent months mean the reduced tax level has been used to help absorb costs.
However industry chiefs, including Wetherspoon founder Tim Martin and Young’s boss Patrick Dardis, said prices will now have to increase significantly for customers as a result of reduced VAT support.
Leaders warned the Government that the VAT increase will contribute to a “cliff edge” on Friday as wages and business rates changes also come into force.
Emma McClarkin, chief executive of the British Beer and Pub Association, said the VAT rate increase alone is expected to cost UK pubs more than £500 million over the next year.
UKHospitality boss Kate Nicholls said it “might prove fatal” for business owners.
– Business rates
Retail, hospitality and leisure businesses were supported during the pandemic with financial help including a break to the business rates property tax.
The tax break in England has been steadily unwound with businesses receiving a 66% reduction of their rates up to £2 million per firm over the past nine months.
However, this has now reduced to a 50% reduction with a cap of £110,000 per business.
The reduction, and even sharper declines from previously more generous schemes elsewhere in the devolved regions, means business across the UK will face a £7.1 billion increase in rates for the year.
This could lead to firms increasing prices to help cover higher property costs.
Robert Hayton, UK president of real estate adviser Altus Group, said: “The Government and devolved administrations are acting as if there hadn’t been a pandemic and seem oblivious to the cost of doing business crisis.
“The tapering off of business rates relief takes away vital breathing space for high street businesses.”
Business leaders across the retail and hospitality sectors are continuing calls for widespread reform of the business rates system, which is still linked to property valuations from 2015.
– National insurance
On April 6, the Government’s proposed national insurance tax rise will come into force.
Ministers have said the plan is to use the extra revenue to fund the NHS, health and social care.
It will see employees, employers and the self-employed all pay 1.25p more in the pound for NI.
For employees they would previously pay 12% on earnings up to £50,270 and 2% on anything above that. From April 6, the rate goes up to 13.25% and 3.25% respectively.
For the self-employed, rates will go up from 9% and 2% to 10.25% and 3.25%.
Payments will only be collected on wages above £9,880, although this rises to £12,570 in July – a threshold change announced by Chancellor Rishi Sunak at the recent spring statement.
-Car tax
Vehicle Excise Duty, which is known to most people as car or road tax, will increase from April 1 for most drivers and add further pressure to budgets.
However, the size of the increase will depend on your vehicle’s emission levels.
The duty will rise in line with the Retail Price Index measure of inflation, but people with more environmentally friendly vehicles will see smaller rises.
If your car emits no CO2 then your car tax will be zero. The regulation means that if your emissions are between 1 and 50g of CO2 per kilometre, your standard rate of car tax will increase from £155 to £165, although the first year rate will be £10.
Drivers with higher levels of emissions will see the same increase in the standard rate, but will pay a higher first year rate which increases in increments parallel with emissions.
– Council tax
Council tax is another bill set to rise for many households this month.
It comes after Chancellor Rishi Sunak gave local authorities the go ahead to increase rates by up to 2.99% without the need for a referendum, on top of an additional 2% increase which is ringfenced for adult social care.
The tax picture will vary across different parts of the country but many authorities have confirmed they will implement the maximum increase.
The majority – 17 – of London’s 33 boroughs have said they are planning to increase their share of bills by the 2.99% top limit.
Households might be able to reduce their bills by applying for a £150 million council tax discount which is expected to be available for four out of five households in England.
– Water bills
In February, the water regulator announced that average bills will increase by 1.7% from April.
It will add £7 to the average bill, an increase which pales in comparison to mammoth energy rises but will nonetheless add to the cost-of-living crisis.
It means the average yearly bill will rise to £419, with support available for thousands more.
At the moment, 1.1 million customers get some form of help to pay their water bills, according to Water UK. This will grow by another 300,000 by the middle of the decade.
– Plastic packaging tax
A new tax on plastic packaging might add to inflationary pressures in some areas.
Those companies who import or produce more than 10 tonnes of plastic packaging a year will need to pay £200 per tonne, but they can get around this by including 30% recycled plastic in their packaging.
It is therefore only likely to become an issue for packaging that cannot be made from recycled plastic.
Experts told the Financial Times last week that for instance soup pots, and some other food-grade items that cannot use recycled plastic, might go up in price.
Published: by Radio NewsHub