The energy price cap is rising, but what other costs are rising?

The cost of living crisis will deepen for many households as energy bills soar due to an increase in the price cap.

However, rising energy prices are not the only way for households and businesses to feel the effects.

From the start of the month, a series of tax hikes and cuts in state support for the pandemic will increase costs for businesses and ultimately drive up prices for their customers.

Here are the tax changes that could impact your portfolios.

– Increase in VAT

The cost of buying a meal in a pub, a soft drink or a hotel stay could become more expensive from April, as VAT levels in the hospitality sector go up at 20%.

The industry has seen VAT drop 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 was back to 20%.

Despite the initial tax cut, few groups of pubs, restaurants and leisure businesses were able to pass on the benefits of the tax relief – which covered soft drinks, food, event tickets, l accommodation and other areas – to customers due to the financial impact of the pandemic.

Wetherspoons boss Tim Martin has spoken out on planned changes to VAT (Dominic Lipinski/PA)

Bosses said the protracted Covid disruptions, high debt levels and soaring cost inflation in recent months meant the reduced level of taxation was used to help absorb the costs.

However, industry leaders including Wetherspoon founder Tim Martin and Young boss Patrick Dardis have said prices will now have to rise significantly for customers due to reduced support for the VAT.

Leaders warned the government that the VAT hike will contribute to a “cliff edge” on Friday, as changes to wages and participation rates also come into effect.

Emma McClarkin, chief executive of the British Beer and Pub Association, said the rise in the VAT rate alone is expected to cost UK pubs more than £500million over the next year.

UKHospitality boss Kate Nicholls said it ‘could prove fatal’ for business owners.

– Business rates

Retail, hospitality and leisure businesses have been supported during the pandemic with financial assistance, including a property tax reduction on business rates.

Tax relief in England has been rolled back on a regular basis, with businesses enjoying a 66 per cent reduction in tariffs of up to £2million per business over the past nine months.

However, this has now been reduced to 50% with a cap of £110,000 per company.

A big empty street
High Streets will face higher business rate bills (Adam Davy/PA)

The reduction, and even steeper cuts from previously more generous schemes elsewhere in devolved regions, means businesses across the UK will face a £7.1billion rise in rates for l ‘year.

This could cause companies to raise prices to help cover higher property costs.

Robert Hayton, UK chairman of property adviser Altus Group, said: “Government and devolved administrations are acting as if there was no pandemic and seem oblivious to the cost of the business crisis.

“The decrease in corporate rate relief takes vital breathing space away from high street businesses.”

Business leaders in the retail and hospitality sectors continue to call for widespread reform of the business pricing system, which is still tied to property valuations as of 2015.

– National Insurance

On April 6, the government’s proposed National Insurance tax increase will come into effect.

Ministers said the plan was to use the extra revenue to fund the NHS, health and social services.

It will see employees, employers and the self-employed all pay 1.25 pence more in the pound for NI.

For employees, they would previously pay 12% on earnings up to £50,270 and 2% on anything over that. From April 6, the rate goes to 13.25% and 3.25% respectively.

For the self-employed, the rates will drop from 9% and 2% to 10.25% and 3.25%.

Payments will only be made on salaries above £9,880, although this will rise to £12,570 in July – a threshold change announced by Chancellor Rishi Sunak during the recent spring statement.

Parking
Excise duty on vehicles will increase on April 1 depending on the level of vehicle emissions (Steve Parsons/PA)

-Car tax

Excise duty on vehicles, known to most people as car or road tax, will increase from April 1 for most drivers and add further pressure on budgets.

However, the magnitude of the increase will depend on your vehicle’s emissions levels.

The fee will increase by the measure of retail price index inflation, but people with more environmentally friendly vehicles will see smaller increases.

If your car does not emit CO2, your car tax will be zero. The regulation means that if your emissions are between 1 and 50g of CO2 per kilometer your standard car tax rate will increase from £155 to £165, although the rate for the first year will be £10.

Drivers with higher emissions levels will see the same increase in the standard rate, but will pay a higher rate in the first year that increases in increments along with emissions.

– Housing tax

Council tax is another bill expected to rise for many households this month.

It comes after Chancellor Rishi Sunak gave local authorities the go-ahead to raise rates to 2.99% without needing a referendum, on top of an additional 2% increase which is earmarked for care social for adults.

The tax picture will vary from region to region of the country, but many authorities have confirmed that they will implement the maximum increase.

The majority – 17 – of London’s 33 boroughs said they planned to raise their share of upper limit bills by 2.99%.

Households may be able to cut their bills by claiming a £150million council tax rebate, which is expected to be available to four in five households in England.

– Water bills

In February, the water regulator announced that average bills would rise by 1.7% from April.

This will add £7 to the average bill, an increase that pales in comparison to gigantic energy increases, but will add to the cost of living crisis nonetheless.

Water bills will go up
Water bills will rise by an average of 1.7% (John Stillwell/PA)

This means the average annual bill will rise to £419, with support available for thousands more.

At present, 1.1 million customers receive help to pay their water bills, according to Water UK. This number will increase by another 300,000 by the middle of the decade.

– Tax on plastic packaging

A new tax on plastic packaging could increase inflationary pressures in some regions.

Businesses that import or produce more than 10 tonnes of plastic packaging a year will have to pay £200 per tonne, but they can get around this by including 30% recycled plastic in their packaging.

It is therefore likely to become an issue only for packaging that cannot be made from recycled plastic.

Experts told the Financial Times last week that, for example, soup pots and some other food-grade items that cannot use recycled plastic could rise in price.

About Mary Moser

Check Also

Hungerford, Reading and Twyford are among the best places to live in 2022

Key towns and villages in Berkshire have been ranked and the results may shock some …