Households are facing the biggest fall in disposable income for three decades, according to the Bank of England, with rising energy prices and other consumer inflation hitting incomes. The government has responded to the cost of living crisis with the announcement of a package of measures. Here we look at the impact on a range of different people.
Family with three children living in a band D property, parents each paid £30,000
This family uses 25% more gas and electricity than the average household and their annual dual-fuel bill will rise from £1,600 a year currently to a whopping £2,464 a year in April – an increase of £864.
Like everyone else they will receive the chancellor’s £200 payment in October, and their property qualifies them for the £150 council tax rebate in April. However, their £200,000 tracker mortgage will also rise £20 a month or £240 a year on 1 March after the interest rate rise.
At the start of April the net wages of both parents will fall by £255 a year as a result of the higher national insurance charge.
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Low-income pensioner who lives in band E property
For this pensioner, medical conditions mean she keeps the heating on in at least two rooms from October to April, so she uses 15% more gas and electricity than the average household. She can expect to pay an extra £800 a year to her energy supplier after April. That will be mitigated by the £200 energy rebate loan.
Because she lives in a large band E home, she is not entitled to the £150 council tax rebate. Her low income may entitle her to a discretionary payment from the local authority, and she may already qualify for reduced council tax because of benefits she receives. The warm home discount she gets because she is on pension credit payment is worth £140 a year, and will be £150 next year. She pays no national insurance and her mortgage is long paid off.
Low-income family with two children living in a band A property, one parent paid £20,000
This family rent a council home, so they are not facing a hike in their mortgage costs. The energy price cap change will hit them harder than most because they pay with cash – they are likely to face bills of £2,101 a year. They will receive £200 off that via the rebate loan.
They also qualify for the £150 council tax rebate. They currently don’t get the warm home discount but might do next winter as eligibility is to be expanded, so they could get £150 off.
At the start of April the take-home pay of the working parent willfall by £130 a year as a result of the national insurance surcharge.
Single-parent, two-child family with £20,000 income, renting a band B property for £500pcm
This family has a prepayment meter. They try to keep the heating off as much as possible but still manage to use what the energy regulator, Ofgem, considers average use, which means in April their costs will increase by £708 to £2,017 a year. This is £46 a year more than if they were able to pay by direct debit.
The chancellor’s loan of £200 in October and the £150 council tax rebate will partially offset their energy bill rise. They have no mortgage but their rent could go up when their current tenancy ends. The parent’s net income will fall £130 a year after April, as a result of the national insurance increase.
Well-off family living in a band G home. The main breadwinner makes £100,000 a year
Their six-bedroom detached house eats energy to the extent they use twice as much as the average UK household. They are in for a very nasty shock in April, when their bills will rise to just under £4,000 a year – an increase of £1,386 compared with the previous year. This will be barely offset by the £200 energy payment paid to all households. Their home doesn’t qualify for the council tax rebate.
The 1.25% national insurance surcharge that hits salaries in April will cost the high-earner £1,130 a year. Their £400,000 mortgage payments are rising £44 a month to £2,438.
