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.

This month, a raft of tax rises and reductions in state pandemic support is increasingly costs for businesses and will, ultimately, lead to higher prices for their customers.

Here are the changes which could impact your wallet.

National insurance

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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.

VAT increases

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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 yesterday 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 chief executives, 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.

Car tax

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Vehicle Excise Duty, which is known to most people as car or road tax, increased yesterday for most drivers and adds further pressure to budgets. But 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 and water bills

Council tax is another bill set to rise for many households this month, while water bills will also rise.

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.