April is the cruellest month, begins TS Eliot’s modern masterpiece, The Waste Land. The poem was published 100 years ago, but the sentiment could well apply today.

UK consumers are facing a perfect storm of rising taxes and bigger bills from next month, which means that financially speaking, April is going to be the start of a tougher period for British households.

1. Energy bills to soar

The rising cost of energy will be a huge concern for many of us. From April, the rise in the energy price cap means the average bill will increase by £693 to £1,971 a year.

More than 22 million households will have to fork out that extra £693 a year on average from April, meaning that collectively, the nation’s energy bills will rise by more than £15 billion.

Higher bills will especially affect older people, who spend a larger proportion of their income on energy, with 40% of pensioner households now expected to be in fuel poverty because of the hike, according to the Resolution Foundation.

One of the knock-on effects of the Ukraine crisis is that energy prices have leapt upwards again, which means the UK may well face even higher bills when Ofgem announces the next price cap in October.

2. You might pay more tax

If that wasn’t enough, many households are also going to be paying more income tax from April onwards if their salaries have gone up. That’s because the personal tax-free allowance will be frozen at £12,570, and the higher rate income tax threshold will be frozen at £50,270 until 2026.

Normally these thresholds would be expected to increase broadly in line with inflation to offer some protection to taxpayers.

The Treasury forecasts that freezing these allowances will cost taxpayers £1.6 billion in the coming financial year, and a total of £19.2 billion by 2026.

Frozen rates in the new tax year (2022/23)

– Personal tax-free allowance is frozen at £12,570

– The higher rate income tax threshold is frozen at £50,270

– Capital gains tax allowance is frozen at £12,300 until 2026

– Inheritance tax threshold and main-residence nil-rate band are frozen at £325,000 and £175,000 respectively

– Pensions lifetime allowance is frozen at £1,037,100

3. National Insurance is going up

The spring tax crunch doesn’t stop there either. To fund extra health and social care spending, the Government is increasing National Insurance by 1.25 percentage points for employees in April, and the same for employers too.

4. Watch out for dividend tax changes

The new tax year will also see a 1.25 percentage point increase in the tax on dividends. Everyone gets an annual tax-free dividend allowance of £2,000, but anything above that is taxable, unless it’s held in a tax shelter such as an ISA or a SIPP.

From April the dividend tax rates will be going up to 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers, and 39.35% for additional rate taxpayers.

5. A sting in the tail for pensioners

The Government chose to suspend the pension triple lock last year, which in theory would have seen the state pension increase by around 8%, in line with earnings. The state pension will instead rise by 3.1%, in line with September’s CPI figure.

As a result, the basic state pension will increase from £137.60 per week to £141.85 per week in April, and the new state pension will increase from £179.60 per week to £185.15 per week.

While an increase in the value of the state pension is better than nothing, with inflation running hot, this is going to mean pensioners feeling the pinch.

If inflation hits 7% in April, this means the increase in the new state pension from £179.60 to £185.15 will feel like a cut to £173.04 when adjusted for inflation.

The higher level of inflation we’re now seeing should eventually find its way into the state pension increase in April 2023, but that still leaves a tough year ahead for pensioners, many of whom will be facing higher energy bills in the here and now.

There’s no getting away from the fact that the next year is going to be a tough one for UK consumers, though the crisis in Ukraine clearly lends some perspective to the financial hardships that will be suffered on these shores.

UK savers and investors are not without defences against tax rises either. While household budgets are going to come under pressure, those who are still able to put some money away from the future should make the best use of ISAs, pensions and judicious tax planning, to provide some much-needed shelter from the coming tax storm.

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