National Insurance hikes will pile more misery on families already beleaguered by soaring bills, experts warned last night.
Households are being battered by relentless cost increases, and pensions and wages are failing to keep up with inflation.
Analysts say April’s tax grab – which will deprive the average family of £600 a year – may prove too much for many.
Analysis for the Daily Mail by the Center for Economics and Business Research revealed on Monday that households were facing additional costs totaling £2,440 compared to before the pandemic. But at the same time, the added burden of Chancellor Rishi Sunak’s National Insurance will take more money out of employees’ salaries
The biggest strain on most household budgets is the energy crisis which has sent bills soaring.
The price cap, which dictates how much suppliers can charge, has already increased by more than £100, but is set to increase by another £600 in April.
The gas price crisis helped push inflation to its highest level in 30 years, at 5.4%. But economists predict it will hit at least 6.4% in April.
Analysis for the Daily Mail by the Center for Economics and Business Research revealed on Monday that households were facing additional costs totaling £2,440 compared to before the pandemic.
But at the same time, the Chancellor’s additional National Insurance burden will take more money out of employees’ salaries.
The hike will mean workers will pay an extra 1.25 pence for every pound to the taxman. It will cost someone earning £30,000 around £255 a year and a worker with a salary of £80,000 £880 a year.
Shadow Chancellor of Labor Rachel Reeves said: “Working families are already feeling the crisis. But the triple whammy of an impending energy price cap hike, falling real wages and impending tax hikes will further aggravate this crisis.
Laura Suter, head of personal finance at investment firm AJ Bell, said: ‘Although the Government did not plan it that way, the rise in National Insurance now looks very badly timed as it comes on same month that energy bills are again dramatically increased, in addition to record inflation and the rising cost of living.
“We have already seen an increase in the number of people using credit cards and other loans and once April we will probably see many more families who are already struggling, even before they are faced with an increase in taxes.
“The National Insurance increase means many people will lose hundreds of pounds from their take home pay, which could spell the end of the bucket for some families.”
Economists predict the Bank of England will raise the base rate further this year, raising the cost of mortgages for millions.
A 1 percentage point increase would add more than £2,000 to the annual cost of a £300,000 mortgage at the average standard variable rate of 3.74%.
Meanwhile, inflation is eating away at our savings. With the average interest rate paid on nest eggs now at 0.1%, every £10,000 set aside will be worth just £9,470 in real terms after a year, a loss of £530.
Wages also failed to keep up with inflation for the first time in a year and have now fallen in real terms by 1%, according to figures revealed this week.
Britain’s 12 million pensioners face cuts in real terms after the government abandoned its triple-lock promise to raise rates to the higher of inflation, earnings or 2.5%.
The Mail’s analysis shows that prices of basic necessities such as food and fuel are soaring well ahead of inflation.
While the consumer price index hit 5.4% this week, analysis from financial services firm Hargreaves Lansdown found the rate for commodities was 6.1%.
Petrol prices increased by 28%, from 114.1 p liter to 145.8 p in one year. Rail fares will also rise by 3.8% in March, adding £114 to a £3,000 season ticket.
Sarah Coles of Hargreaves Lansdown said: ‘Rapid increases in essentials should ring alarm bells because while we can cut back on life’s little luxuries to make ends meet, we can do far less for the cost of things which we cannot live without.’
It’s another kick after the pandemic
Ellie McCann will have to pay an extra £318 a year in National Insurance if the tax hike continues.
The 27-year-old marketing consultant has already seen her energy costs rise by around £50 a month.
She also expects her rent to go up soon.
She hailed the Daily Mail’s campaign to stop the rise.
Miss McCann, pictured, from Manchester, said: ‘An extra £300 a year is a big increase in my spending.
Ellie McCann must pay an extra £318 a year in National Insurance if tax hike continues
“We have just come out of this horrible pandemic experience and just when life is starting to get back to normal, it feels like another kick.
“It’s hard to see how I can cope with all these financial pressures.
“With energy bills and grocery stores rising, now is not the time to add such an expense to people’s bills.”
This will add £1,000 a year to our bills
Suzanna Samaka and her family are part of a high-income household, but they are already feeling the pinch.
If the National Insurance increase comes in, they will have to pay an extra £1,000 a year.
Miss Samaka has two-year-old Enya and 16-week-old daughter Betsy with her 51-year-old partner Steve Owen.
Suzanna Samaka and her family are a higher income household, but they are already feeling the pinch
She said: “Now is just not the time for the government to raise taxes any further.” Energy costs are rising and our grocery stores have become much more expensive.
“It seems like the government should be helping, not adding to our bills. We have always been reasonable with our money and we have savings to help us.
“But we are still very worried. It’s hard to see how low-income families will fare.
Miss Samaka works for a bank and founded #honestyaboutediting, a campaign for more transparency around edited online content. She and her partner have a shared income of around £100,000 a year.