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Chancellor Rishi Sunak announced a package of measures designed to ease the rising cost of living in the UK in the 2022 Spring Statement.
It follows the latest inflation figures indicating a 6.2% rise in the cost of living, the highest increase in 30 years.
From increasing the National Insurance threshold to cutting fuel duty we explain how the Spring Statement affects your finances.
National insurance threshold increases
One of the most significant announcements was that the earnings threshold at which workers will have to start paying National Insurance will increase to £12,570 from July 2022.
Currently, most workers pay National Insurance contributions on earnings over £9,568. This means the average worker will save around £330 a year, according to government estimates.
The government is still going ahead with plans to increase National Insurance by 1.25%, which was announced last September.
» MORE: How to get a council tax rebate
Fuel duty cut by 5p per litre
The Chancellor announced a temporary fuel duty cut of 5p per litre to help motorists combat surging fuel prices.
The change came into effect from 6pm on 23 March 2022 and will last for 12 months.
Drivers could save an average of £3.30 filling up a 55-litre family car, according to figures from the RAC. While every little helps, the saving for most motorists is unlikely to make a huge difference as fuel prices continue to increase.
Petrol and diesel prices have risen significantly over the past year, reaching an average 147.6p per litre and 151.7 pence per litre respectively in February 2022. And as supply chain disruption and Russia’s invasion of Ukraine continue, it’s unlikely that wholesale prices will decrease any time soon.
Energy-efficiency savings
Sunak announced plans to reduce VAT on energy-saving materials, such as solar panels, heating pumps and roof insulation, from 5% to zero for the next five years.
While this may help households with plans to invest in making their homes more energy-efficient, most consumers will see a steep rise in energy bills from next month.
The energy price cap will increase 54% from 1 April. This means that default tariffs will increase to £1,971 a year, up from £1,277, while prepayment tariffs will rise to £2,017 a year, up from £1,309.
» MORE: How to save energy at home
How to manage the rising cost of living
Understandably, many households will be worried about increasing pressures on their finances. While the rising cost of everyday essentials is unavoidable, there are ways to help reduce the impact on your finances.
- Budget:Having a clear picture of your finances is key to managing your money. A budget enables you to track your income and where the money is spent. This can help highlight areas where you can cut costs and make savings. It will also help you get ahead of shortfalls in your income, which may affect your ability to cover your expenses.
- Save on essentials:Most of your income will go towards essential spending, including mortgage or rent payments, household bills, transport, food and childcare. So taking extra steps such as saving money at the supermarket can help unlock savings in your budget.
- Get help:If you’re worried you won’t be able to afford your essential expenses, it’s vital to get help as soon as possible. Your lenders and utility providers may offer schemes to help support your repayments and bills. You may also be eligible for government support such as universal credit to help top up your income. If you’re struggling to afford food, contacting charities such as The Trussell Trust and Bankuet can help put you in touch with local food banks in your area.
» MORE: How to manage the rising cost of living
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