- According to research, households could lose £107 per month due to high food and energy costs and the return of universal debt regeneration
- For some there will be further reduction in income as the furlough expires and some will lose their jobs or see working hours shrink
- Hospitality businesses can increase prices for customers when VAT deduction ends
Many Britons could face the biggest pressure on their finances in years next month as the government cuts support introduced at the start of the pandemic, while bills and household costs rise.
October marks the end of the furlough scheme, a £20 per week universal credit raise, stamp duty leave and VAT leave for businesses.
Meanwhile, the energy price cap approaching October 1 is going to raise energy bills by an average of £140, just as a supply chain crisis is sending food prices higher.
Financial concerns: October marks the end of government aid, such as the furlough scheme
According to new research from insurer Royal London, households could be spoiled by £107 every month due to high food and energy costs and the return of universal debt uplift.
We look at the effects of these impending changes, how they will hurt your wallet, and what you can do to limit the damage.
Vacation plan – ends 30 September
Some households are likely to become redundant or reduce their working hours when the holiday ends on September 30.
While the number of people on furlough has gradually decreased since the height of the pandemic, some 1.6 million people were still receiving support at the end of July, the latest government figures show.
At the same time, there is strong demand for workers in some industries – such as for lorry drivers – with the nationwide stock of job vacancies soaring to more than 1 million in August, surpassing the previous record in July, the Bank of England said last week. said.
Kate Smith, head of pensions at Aegon, said: “It is not yet clear whether the reopening of the economy will mean that people who are still on leave will have jobs they can take back, or their Whether the roles are now in danger of redundancy.” .
‘We have heard a lot about labor shortages in some sectors, but this does not mean that people who are out of work will take part in roles they do not want or that may be unsuitable.’
The expected rise in post-holiday unemployment is set to test long-term savings, while those who lose their jobs will also be deprived of future workplace pension benefits.
“Any large increase in unemployment following the termination of the furlough plan could put the brakes on the significant progress of auto-enrollment and workplace pension participation rates,” Smith said.
‘Individuals who lose their jobs not only suffer a loss of income but will no longer contribute to their workplace pensions, and will benefit from ‘free’ money from their employer.
‘The gap in pension savings will only widen the gap in the financial health of those whose jobs have remained unaffected during the pandemic and who have faced hardships.’
Universal Credit – £20 raise ends on 6 October
The government introduced a temporary £20 increase in universal loan payments in response to the pandemic in April last year, but the scheme is officially set to expire on 6 October.
About six million people currently claim universal credit, nearly double the three million before the pandemic, of whom about 40 percent are classified as employed.
Thanks to the boost, a person aged 25 or over has gone from earning £317.82 to £409.89 per month, £23 per week or £1,104.84 per year.
In that case, the £23 per week increase was more than a fifth of the amount they paid.
Citizens Advice warns that a third of people on Universal Credit will go into debt when the upfront is removed, with the average reduction being around £50 a month.
Research by another charity, Turn2US, has found that when the cuts take effect, more than half of people on Universal Credit will struggle to pay their bills, while one in four will struggle to afford their rent or mortgage payments. will be unable to.
‘Just as Universal Credit has shrunk as earnings increase, it’s not just a matter of people working an extra two hours to help fill the gap, instead they have to make tough decisions about whether What to pay and what to deduct from household expenses, says Laura Suter, head of personal finance at AJ Bell.
‘Anyone who will be hit by the deduction should check that they are getting all the benefits they are also entitled to – Citizen Advice is a good first port of call to help navigate the system.’
Turn2US chief executive Thomas Lawson said: ‘The £20 per week cut in Universal Credit was already leaving many families struggling to keep up with the cost of living.
‘This, now coupled with a sudden jump in energy prices, could lead to disaster and plunge thousands of people into financial insecurity or even poverty; Especially those of us whose financial resilience has been taken away by the pandemic.’
Stamp Duty Holiday – Ends on 30th September
The full stamp duty holiday has already expired, with the zero-rate band – the part of buyers buying a property – not required to pay stamp duty from £500,000 to £250,000 at the end of June.
The tax break, which had until then saved buyers up to £15,000 on their home purchases, was cut back, with the maximum savings currently limited at £2,500.
But from 1 October, that too will be gone, as the zero-rate band will return to the usual £125,000.
Stamp duty has been blamed for the rise in the prices of homes over the past year, with many experts anticipating a fall in demand, and hence its end in prices.
And demand really fell off a cliff between June and July,…