It’s a big week for UK finances as we learn how the government is trying to keep the economy growing as the cost of living soars.
Chancellor Jeremy Hunt’s fall statement on state tax and spending plans will impact your net income and household budget.
BBC News has experts dedicated to helping audiences navigate the cost of living crisis. We asked how this might affect you.
They usually expect your wages to increase every year.
This increase may cause you to start paying income tax or move you into a higher tax bracket. This means that even if your pay rise didn’t match the level of rising prices, you would pay more in taxes. This is a particular problem in times of high inflation, like now.
The chancellor could use these bands to raise more taxes without actually raising tax rates. This may sound strange, but this is how it works.
You pay income tax, calculated at 20%, on annual income of more than £12,570. You will then pay income tax at 40% on income over £50,270 per annum, then 45% on income over £150,000.
These income levels, known as tax thresholds (which are slightly different in Scotland), are frozen until 2026 under current policy, rather than rising in line with inflation. Speculation suggests the freeze could be extended for another two years.
Whether you end up in a higher tax bracket or not, a larger portion of your income is likely to be taxed.
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The government is currently helping to limit your energy bills.
It has lowered the maximum price you can be charged for each unit of energy you use, and it gives you cash directly to help you pay the bills.
Since October, this has capped a typical household’s bill at £2,500.
This aid is due to end in April and most households are looking forward to another massive bill hike.
The government has already said that the most vulnerable will continue to be protected, but the Chancellor can explain exactly how in this autumn statement.
And for anyone else trying to settle their own budget, it might give a clue as to what to expect after this winter.
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With the cost of living rising at its fastest pace in 40 years, the chancellor is under pressure to deliver on earlier promises and raise all benefits in line with the rising cost of living.
This would increase both Universal Credit payments — for low earners or the unemployed — and the state pension by the September inflation figure of 10.1% from April next year.
Former Prime Minister Liz Truss faced a backlash from some Conservative MPs when she suggested increasing it by median earnings instead, which would be 5.5%.
Whichever option Mr. Hunt chooses, people will still feel that their budgets are tighter.
Rental costs have skyrocketed while housing benefits have been frozen, and low-income households are spending more on essentials like gas, electricity and groceries, which have risen faster than headline inflation.
The number of 16-24 year olds not in education, employment or training is now one in ten.
The government was so concerned about the impact of the coronavirus lockdown on young people’s ability to find employment that it subsidized six-month job placements for more than 150,000 under-25s. But this scheme is now over.
Prime Minister Rishi Sunak has said he wants to prepare young people for tomorrow’s economy and that education is the most powerful way to transform people’s lives.
But with Chancellor Jeremy Hunt warning that spending must be brought under control – how much leeway does the Prime Minister have to invest more in skills and education for young people?
The autumn declaration may feel very far from your life, but Chancellor Jeremy Hunt’s plan will aim to “restore stability” and “reduce inflation”.
The pandemic, the war in Ukraine and some aspects of Brexit mean the economy is slowing down with falling tax revenues, high spending and higher interest payments on debt.
All of this means that the UK’s debt is expected to increase in a few years’ time. This contradicts the self-imposed goals of this government for “responsible” finances.
Putting together a plan to reduce public debt by 2027-28 will require tens of billions of dollars in spending cuts and tax hikes.
It’s that plan, the fall statement, that we’re going to get on Thursday. But if these numbers add up, the chancellor will also be under pressure not to deepen the already long recession.
The challenge is to come up with a set of numbers that add up and a set of policies that will actually get through Parliament.
His aim will be to help ensure that interest rates set by the Bank of England and, for example, mortgage lenders remain lower than they otherwise would be.
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Keep an eye out for plans for companies thriving due to rising oil prices to share some of the pain of people facing mounting bills.
Companies like Shell and BP have reported some of the biggest profits in their history since Russian exports were cut or shunned.
The government has already imposed an additional 25% tax on the profits of UK oil and gas companies, giving a total tax of 65% on all UK profits. Expect this to increase to at least 70% and possibly 75%.
Renewable power generators have also seen profits soar, while solar and wind have remained flat in price. New renewable projects sell their energy at agreed and fixed prices – so there is no windfall for taxation. But older institutions are making more money than they thought, and the chancellor knows it.
If the pain of millions is the gain of some corporations, the political and economic pressure to further increase taxes on companies making record profits as a result of rising energy prices will seem irresistible to the government.
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