Interest rates have reached a 15 year high of 4.25 per cent while inflation has also continued to rocket, now sitting at 10.4 per cent leaving consumers likely to face the largest hikes to their bills in decades.
Forget January’s “new year, new me” motto — as far as money is concerned, April is the time of year when your finances get their annual overhaul.
From pensions tax to the cost of fuel and your monthly bills, here’s all the changes happening next month.
Bills, bills and more bills
Your council tax bill is very likely to increase. Councils now have the freedom to raise tax by 3 per cent, plus another 2 per cent for social care, without holding a referendum, and the government expects about 95 per cent to do so. It means Band D council tax could rise from an average of £1,966 to £2,064 a year.
If you live in London your increase could be nearly 15 per cent, as Mayor Sadiq Khan announced plans to raise his precept (which is on top of the per cent council tax increase) by just under 10 per cent.
Council tax bands are based on how much a property was worth on 1 April, 1991, for properties in England and Scotland and 1 April, 2003, for Wales. They range from A, which includes houses worth up to £40,000 in 1991, and to H, which were homes worth £320,000 and above.
Your utilities are also likely to cost more. Water bills will rise an average of £31 or 7.5 per cent in England and Wales. The amount you pay varies substantially depending on where you live, but the rise means that the average bill will reach £448 a year. In Scotland, bills will rise an average of 19 per cent.
And get ready for mid-contract hikes on your broadband, TV and mobile phone bills, which are typically linked to inflation (plus about 4 percentage points). This means that they could rise by more than 17 per cent.
Virgin Media has already announced that its prices will increase by 13.8 per cent on average, while EE, Vodafone and Three will increase by up to 14.4 per cent. BT Sport’s flexible monthly pass has already jumped from £25 to £29.99 a month.
“We’re heading for another awful April, as rising bills and tax hikes leave us nursing a serious blow to the wallet,” said Sarah Coles from the investment platform Hargreaves Lansdown.
“Millions of people have already had their financial resilience laid low after a year of runaway prices, so the extra cost of April’s changes is going to come as another blow when we can least manage it.”
Prescriptions to go up
Prescription charges are increasing by 3.21 per cent, adding 30p to the cost of a single item and taking the cost of each one to £9.65.
The three-month pre-payment certificate — which is like a subscription for those who have a lot of prescriptions — will increase by £1, from £30.25 to £31.25, and the 12-month version is increasing by £3.50, from £108.10 to £111.60.
If you get a lot of prescriptions, it is worth opting for the 12-month certificate, which can be paid in installments. If you get one a week, it costs £2.15 per go.
There are a number of changes to pensions coming into place in April, several of which were announced in the Budget. Firstly, as of next month, there will be no limit on the size of your pension pot.
The lifetime allowance — a cap on the pension pot you can build up without facing a tax charge — was set at £1.073million, but will be scrapped from April in a bid to encourage older workers (primarily senior NHS staff) back to work.
Today, if you breach the lifetime allowance you will pay a lifetime allowance charge on the excess, which will be 25 per cent if the excess is taken as income and 55 per cent if taken as a lump sum.
The tax-free cash element has been frozen at £268,275 (25 per cent of the current lifetime allowance).
The annual allowance, which is a limit on how much can be saved into your pension each year without incurring a tax charge, is also increasing from £40,000 to £60,000. If you pay in more than this, you will pay a tax-charge to counteract any tax relief you received on the amount above the allowance.
Your annual allowance is usually reduced when you access your pension. For example, if you used part of your pot to buy an annuity, your allowance would currently reduce from £40,000 to £4,000, known as the money purchase annual allowance (MPAA).
From April this limit is also increasing, from £4,000 to £10,000.
It’s not just bills that are going up, many will see their benefits going down too.
Your capital gains tax allowance — the amount of tax-free profit you can make from selling items that have increased in value — will drop from £12,300 today to £6,000 from April. It will reduce further in April 2024.
You pay CGT at 10 per cent on profits above this allowance if you are a basic-rate taxpayer (18 per cent on property). Higher-rate taxpayers pay 20 per cent, or 28 per cent on property. The changes mean you will pay up to £630 more in tax if you are a basic-rate taxpayer selling an asset that’s not a property, or £1,134 if you are selling a property.
Your dividend allowance — the amount of tax-free income you can receive from shares in companies — is also reducing from £2,000 to £1,000 from April, and will be cut again next year.
Meanwhile, the threshold at which workers begin to pay additional rate tax of 45 per cent is reducing from £150,000 to £125,140, and the rate of corporation tax paid by larger businesses with profits of more than £250,000 will increase from 19 to 25 per cent.
If you had been preparing for your energy bill to head skyward from April, there’s some good news. In his budget last Wednesday, the chancellor Jeremy Hunt announced that the government’s Energy Price Guarantee would remain at its current level of £2,500 for a further three months.
The guarantee was due to rise to £3,000 a year from April. The cap is a limit on how much an energy company can charge you for each kWh of energy you use, rather than an overall limit, so how much you pay will depend on your own situation.