On April 1, you are probably going to get poorer.
Changes by the UK Government to National Insurance will mean that many working people will be seeing more of their income heading to the Treasury. In addition the rise in the energy price cap will mean serious rises to the cost of heating and powering your home. Set against a backdrop of rising costs of basics like food, interest rate rises and council tax hikes, belts are likely going to have to be tightened.
But when you are bombarded with figures and percentages it can be hard to work out what this actually means for you. Exactly how much worse off are you going to be once all these changes kick in at the start of April?
To give some context to this we are going to imagine a couple living together in the Welsh capital of Cardiff - Trevor and Dawn. Trevor is a senior nurse on £30,615 pounds a year and Dawn is a waste collection driver on £23,938. They live in a three bedroom house in the Adamsdown area of the city on which they have put down a small deposit.
It is important to say that every person's circumstances are different. To do this analysis we have used estimates based on the best available data. These are estimates, and the figures will likely vary from person to person.
National Insurance hike
From April, employees, employers and the self-employed will all pay 1.25p more in the pound for National Insurance (NI) meaning most people's contributions will increase from 12% to 13.25% - a hike in contributions of 10.4%. This rise was decided on by Conservative Chancellor Rishi Sunak to pay for increased spending on health and social care in England. Wales will get a share of this which, in reality, can be spent on whatever the Welsh Government decides (though health and social care is likely where the cash will end up ).
So what does this rise mean for Trevor and Dawn?
Well Trevor will now be paying £2,747.39 a year on NI, up from £2,525.64. This means he will be paying £221.75 a year more. This is £18.50 a month. Basically a gym membership.
Dawn will see her Ni payments go from £1,659.60 to £1,791.14. This £131.54 a year which adds up to £10.96 a month. So as a couple the NI changes will make them £353.29 worse off.
Energy bills
On April 1, an estimated 22 million people will be waking up to higher energy bills following an announcement that the energy price cap on certain deals is rising by 54% a year.
Clearly the amount that this will affect a person depends on their circumstances, whether they work from home, how well insulated their home is etc. For Trevor and Dawn we have taken the average energy bills for a three bedroom house which was about £1,165 a year or £97 a month. The increase in the price cap will see this rise to about £149 a month from April which is about £1,788 a year. So every year Trev and Dawn will be spending £623 more on energy, or £51.90.
Taking into account NI and energy cost, the pair will be paying £976.29 more a year - the equivalent to £81 a month.
What about other costs?
But all of this is also set against wider inflation and costs for consumers in the economy generally. Take council tax. The pair live in Adamsdown which is a band D for council tax cost £1,597 a year. There are suggestions that Cardiff’s council tax could rise by 4% this upcoming year which would mean another £63.90 a year for Trevor and Dawn. This may not be the case for other parts of Wales as some councils will not be raising tax.
Trevor and Dawn will also be getting hit because of their mortgage because the Bank of England has just raised interest rates. If they have £200,000 outstanding on a 25 year mortgage and they are on a standard variable rate which is 4.9% (the average in 2019 ). The 0.25% rise to 0.5% will cost them £29 a month, or £348 a year. It should be said that many people will still be on fixed rate mortgages so they won’t be affected until it comes to an end. Also, mortgage repayments can vary widely depending on your credit rating, size of your mortgage, deposit, and what type of mortgage it is. Most people who are on a variable rate will have seen an increase in their mortgage bill before April, but this increase will still be hitting people’s pockets when the NI and energy hits come round.
Poor Trevor and Dawn will not even be able to escape their money woes with a delicious meal. New CPI data charting take-home retail prices during December 2021 for commonly purchased food and drink items shows that prices have risen 4.4% compared to January 2020, and by 3.9% over the course of previous 12 months (since January 2021). Pasta on its own (key staple for poorer families) rose a staggering 26.3% in price in 2021. and between November and December 2021 alone, onions and canned tomatoes rose 5.1% and 2.2% respectively.
If we ignore the price of food increases (not to mention petrol) buy include their council tax and mortgage increases with NI and energy bills, Dawn and Trevor will be spending £1,388.19 a year.
What support is available?
To combat the cost of living crisis the Welsh Government has announced that it will offer all people in Wales and extra £150. This will apply to all people who live in properties in council tax bands A to D in Wales, as well as recipients of the Council Tax Reduction Scheme in all bands will get the payment.
