Rising Cost of Living in the UK

28 October 2021 - The cost of living in the UK could rise at the fastest rate in 30 years next year, with middle-income families being hit the hardest amid increasing income tax and inflation. Resolution Foundation Think Tank's overnight analysis of the autumn budget suggests the cost of living will increase by 4% next year, with the budget also reflecting a rising inflation rate of 4%.  

These latest increases mean that households will pay £3000 more tax next year, with millions on universal credit likely to lose £800. Overall, middle-income households will see a 2% reduction in income, and the most affluent fifth will see a 3.1% reduction by 2025. 

The report also highlights the fall in wages after inflation will mean the 2010s will have seen the weakest pay growth since the 1930s. They are reporting that by 2024 wages will have grown by just 2.4% since 2008 compared with a 38% real wage increase between 1992 and 2008. 

Highlights in the budget for workers 

The budget, which Chancellor of the Exchequer, Rishi Sunak, published on 27 October 2021, has additional impacts on business and workers. WageIndicator has highlighted some of the critical implications below: 

• A significant increase in the minimum wage of 6.6% for 23 and overs brings the group's national living wage to £9.50 an hour. Other minimum wage increases include £8.36 – £9.18 for 21 – 22-year-olds, and the apprentice rate increases from £4.30 to £4.81. 
• Already announced taxation changes in the budget include the 1.25p per pound increase in National insurance for employers, employees and the self-employed. As well as a freeze on the tax thresholds at the April 2021 level for five years, pay rises will push more people into higher tax bands.
• Universal Credit taper rate reduced from 68% to 55%, allowing almost 2 million claimants to keep a more significant portion of their payments. 

Find out more about the cost of living with our survey

Find out more about the Minimum Wage 

Sources 

https://www.bbc.co.uk/news/business-59074026 

https://www.bbc.co.uk/news/business-59054358

https://www.bbc.co.uk/news/uk-politics-59063816