Inflation-hit households ‘typically needed £5,455 extra over past two years’
Households should not be afraid to reach out and ask for help, according to interactive investor, which made the calculations.
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Your support makes all the difference.Households have typically needed to find an extra £5,455 in total over the past two years, just to keep up with surging inflation, according to calculations by an investment platform.
Price rises across key areas of household spending have “robbed” people of their purchasing power, interactive investor said.
It made the calculation by looking at inflation between March 2021 and March 2023. It looked at Office for National Statistics (ONS) household spending data for part of the research.
Some of the £5,455 figure will have been offset by the Government support put in place to help households with rising bills as the calculation did not factor this in.
Inflation is expected to cool further this year - but that doesn't mean that the cost-of-living burden on personal finances will lift anytime soon
Government support with energy bills has kept them lower than they would have been otherwise and cost-of-living payments have provided additional financial support to groups considered particularly vulnerable.
People can find out more about the cost-of-living support available at helpforhouseholds.campaign.gov.uk.
Myron Jobson, senior personal finance analyst, interactive investor, said: “Inflation is expected to cool further this year – but that doesn’t mean that the cost-of-living burden on personal finances will lift anytime soon.
“When every pound counts, it is important to keep tabs on your spending habits to get a better idea of the goods and services that are eating most into your budget, and where you could cut back as inflation remains stubbornly high and the cost of borrowing rises.”
Alice Guy, head of pensions and savings at interactive investor, said: “If you are struggling to make ends meet then don’t be afraid to reach out and ask for help.
“Banks and lenders have a duty to support their customers and debt charities can help review your budget and may be able to help you cut your debt costs by speaking to your lenders.”
Interactive investor also looked at the impacts of frozen income tax thresholds.
It said “fiscal drag” – where rising earnings push some people into higher tax bands – could cost some taxpayers a similar amount to the basic rate of income tax rising to 25% or 30% by 2028, depending on their income levels.
Its projections suggest that low earners on £20,000 will pay £3,762 in tax by 2028, including income tax and national insurance, assuming their wages keep pace with inflation.
This compares with a £3,796 tax bill in 2028 if tax thresholds kept pace with inflation, but basic rate income tax was raised from 20% to 30%.
Middle earners on £30,000 could pay £7,654 tax by 2028, including income tax and national insurance, assuming their wages keep pace with inflation.
This compares with a £7,844 tax bill in 2028 if tax thresholds kept pace with inflation, but basic rate income tax was raised from 20% to 25%, interactive investor said.
Ms Guy added: “Fiscal drag is largely hidden because tax is complicated and not many people check their payslips.”