Families across the country will be bracing themselves for financial crisis over the coming months as the cost of living rises at its fastest rate in decades.
The Office for National Statistics (ONS) recently revealed that consumer price inflation – a measure of the rate of increase in the price of goods and services – hit 5.4% in December, its highest since 1992.
And household budgets are likely to be squeezed further this year with price hikes predicted in various parts of the economy.
Use this cost of living calculator to see how much worse off you could be a month:
Energy bills
Soaring wholesale gas and electricity prices have seen swathes of energy suppliers going bust in recent months.
This is expected to hit consumers in April when a rise in the price cap – which limits the amount that can be charged per unit of gas and electricity – comes into effect.
Regulator Ofgem is set to announce the latest changes in February, but analysts are predicting that household energy bills will increase by around 50% for customers on standard variable and default tariffs.
This could push the average household energy bill from £1,277 a year to more than £1,900, or roughly £50 extra a month.
Mortgage rates
In February, the Bank of England is expected to announce that it will raise its main interest rate from 0.25% to 0.5% in a bid to tackle rising inflation.
Variable rate mortgages are likely to mirror the 0.25 percentage point rise, meaning someone borrowing £140,000 over 20 years on a standard variable rate of about 3% could see their monthly payments rise by nearly £20.
Most mortgages are on fixed rates, although people on such deals could be hit by the bank rate rise when these expire.
National Insurance
Last year, the Government said it would bump up National Insurance (NI) contributions to shore up the finances of a severely overstretched NHS and social care sector.
From this April, the NI rate for employees is set to rise from 12% to 13.25% on incomes of £9,880 to £50,270 a year, and from 2% to 3.25% on anything earned over that.
This would see the NI contributions of someone earning £30,000 go up by around £18 a month.
For the self-employed, the rate would go up from 9% to 10.25%, and from 2% to 3.25% respectively on the equivalent levels of profit. Additional weekly payments on any profits over £6,725 will also rise from £3.05 to £3.15.
Rail fares
Just as millions of workers are expected to rejoin daily commutes as they head back to the office, rail fares are also expected to rise.
Ministers announced last year that fares will increase by 3.8% in March, and while this applies to “regulated” fares in England such as season tickets and long distance returns, similar price hikes are expected elsewhere.
Scottish peak and off-peak regulated fares went up by the same amount this month.
Council Tax
Chancellor Rishi Sunak revealed in his October Budget that local authorities in England could increase Council Tax by up to 3% without a referendum this April.
Many are expected to raise it by the maximum amount after losing precious revenue due to the Covid-19 pandemic. Similar size rises are expected in Scotland and Wales.
A 3% rise would add nearly £5 a month to the average Band D council tax bill in England, which was £1,898 a year in 2021-22.
Food bills
Consumer price inflation for food and non-alcoholic drinks rose by 4.2% in the year to December, and some experts predict grocery bills could rise further in the coming months.
It is impossible to know how prices will change this year, but assuming they continue to rise at the same rate, shoppers could be feeling the pinch even more by the end of 2022.
How calculator works
Energy bills: Assumes a 50% increase to default tariff bills due to price cap rise, in line with market predictions.
Mortgage rates: Assumes a 0.25 percentage point rise to a standard variable mortgage rate payment, in line with the expected rise of the Bank of England’s base rate from 0.25% to 0.5%.
National Insurance: Based on rate rise for employees from 12% to 13.25% on incomes of £9,880 to £50,270 a year, and from 2% to 3.25% on anything over that. For the self-employed, the rate will go up from 9% to 10.25% and from 2% to 3.25% respectively on equivalent profits, plus new weekly payments of £3.15 on profits over £6,725, up from £3.05.
Rail fares: Assumes planned 3.8% rise on regulated fares in England in March will apply across rail network.
Council Tax: Assumes an increase of 3% to Council Tax bills.
Food Bills: Consumer price inflation on food and non-alcoholic drinks rose by 4.2% in the year to December. The extent of future rises is very difficult to predict. This shows how shopping bills would increase over the course of 2022, assuming the same rate of increase.
