Households due £400 bill hike next month - what to do to beat it

From next month, millions of households are preparing for a £400 annual bill increase.

Price hikes in utilities such as energy and water, council tax, broadband, and mobile services are all set to coincide. This is before considering other rising costs, including road tax, which will see some drivers facing a significant increase.

Additionally, TV subscription and stamp prices are due to rise again, while retail price inflation could escalate if retailers decide to pass on their increased expenses. However, some relief may come in the form of a rise in the minimum wage and benefits.

The upcoming increases in energy, water, and council tax alone will add an extra £342 to the average household's expenses, pushing the combined cost of these three bills to over £4,700 annually. If the same household also has broadband, two mobile phone contracts, and a TV licence, they will need to budget for an additional £400 per year overall.

However, this comes at a time when debt experts are warning about the financial strain many households are already experiencing. Charity StepChange disclosed that nearly three in 10 people seeking its help spend more on bills each month than they earn, reports the Mirror.

The average monthly deficit is a concerning £532, exacerbating the struggle to stay financially afloat, and marking a 15 per cent increase from two years ago. This is despite a decrease in inflation and a supposed easing of the cost of living crisis.

Richard Lane, the chief client officer at the debt charity StepChange, has sounded an alarm over the financial strain faced by many households. He remarked: "While headlines suggest the cost-of-living crisis is easing, for many households, the financial pressures that pushed them into difficulty haven't gone away. April's bill increases will only make things tougher. Council tax is set to rise by five per cent for most – and even more in some parts of the country.

"Many people will also face increases in their other essentials as the energy price cap rises and water companies increase bills. With housing costs still painfully high, these increases will stretch already strained budgets even further."

He continued, detailing the firsthand observations from StepChange: "At StepChange, we see the impact of this every day. The hardest-hit households are seeing their monthly budget deficits grow. More than a quarter of our clients say the cost-of-living crisis is the reason they've fallen into debt."

Likewise, Grace Brownfield from the Money Advice Trust, which operates National Debtline, highlighted a bleak outlook for those grappling with financial woes: "There is little let-up in sight for many struggling households. We are already seeing the effect that high prices have had. Energy arrears are now the second most common debt we're helping people with at National Debtline, behind only credit cards, and a third of people we help have council tax debt."

The upcoming increases next month will exacerbate the effects of already high essential bills. Officially, inflation has risen to 3%, but many perceive that prices are escalating at a much quicker pace. A survey by the Bank of England revealed that the average person estimated inflation to be closer to 5%, although they anticipated it would decrease in the forthcoming year.

Borrowers are unlikely to receive any relief next week, with the Bank of England predicted to maintain its base rate at 4.75%. Mortgage borrowers nearing the end of their affordable deals are fervently hoping for a reduction to ease the impact.

In the Bank of England's survey, 31% of participants stated a drop in rates would be beneficial for them, while 26% argued they should actually increase. Renters continue to bear the brunt of significant hikes, with average private rents having risen by 8.7% in the 12 months leading up to January.

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Despite rising bills, millions of households will also see an uplift in their income from April. The National Living Wage for workers aged 21 and over will rise by 6.7% to £12.21 per hour.

Benefits and tax credits linked to inflation will increase by 1.7%, and the state pension will go up by 4.1% due to the triple lock. However, a freeze on income tax thresholds will result in more individuals being "dragged" into the tax bracket or paying at a higher rate.

Below are some of the price rises expected in April.

Energy bills - set to increase by £111

From April 1, the price cap set by energy regulator Ofgem will rise by 6.4% - a higher increase than anticipated, pushing the average annual bill up by £111 to £1,849. This change will impact around 22 million customers, including four million on prepayment meters.

The exact amount you'll pay is contingent on your gas and electricity usage. This is because the price cap doesn't limit the total household bill; instead, it sets the maximum charge for unit rates of gas and electricity, as well as standing charges.

While the average annual increase is £111, the cap is reviewed every three months, meaning this figure will fluctuate.

So, what can you do?

There are numerous fixed-rate deals available that are less expensive than the price cap. Some could offer savings of up to £179 per year compared to the April cap. It's important to note that it's the unit rates of energy that are fixed, not the overall bill.

Also, bear in mind that Ofgem's cap could potentially decrease later this year. Wholesale gas prices have recently fallen and could further reduce if a peace agreement is reached in Russia's conflict with Ukraine.

Water bills - increasing by £123 a year

Unlike energy, households don't have a choice over their water service provider, which makes the impending surge in bills next month particularly frustrating. Average bills are set to skyrocket by up to 47%, prompting urgent calls for assistance for customers already under financial strain.

Some suppliers will ramp up prices by as much as £224 annually, marking the most significant wave of increases since privatisation 36 years ago.

The average household water and sewerage bill in England and Wales is expected to surge by 26%, or £123 per annum, reaching £603. Suppliers justify these substantial hikes as necessary to fund long-overdue investment work to address leaks and sewage discharges.

So, what can you do?

A programme known as WaterSure aims to assist certain individuals with their bills. To qualify, you must be receiving benefits and require a large amount of water, either due to medical needs or because your household includes a specific number of school-age children.

You also need to have a water meter installed or be awaiting its installation.

Council tax - set to rise by approximately £108

Most local authorities in England responsible for delivering social care are anticipated to hike council tax by the maximum 4.99% starting next month.

Recent analysis by the PA news agency of 139 councils that have proposed or confirmed increases revealed that 85% plan to enforce the upper limit. Six councils facing severe financial stress will be permitted to raise the tax by more than 5%, including Bradford which can increase it by 10%.

Some cities with mayors also have the option to impose a separate levy to fund other services.

Last April, the average council tax in England saw an increase of £106, bringing it to £2,171 annually. The government has not yet released the average for this year.

However, as a rough estimate, a 4.99% increase would push the average Band D property up by another £108 to £2,279.

What can you do?

If your income is low or if you're receiving certain benefits, you may be eligible for assistance from your local council with your council tax bill – this is referred to as Council Tax Reduction or Council Tax Support.

TV licence - up £5 a year

From April 1, the cost of a colour licence will rise from £169.50 to £174.50 per annum. For those who possess one, a black and white TV licence will also see an increase from £57 to £58.50 a year.

A TV licence is required to watch live TV or any programmes on BBC iPlayer. If you are caught watching live TV without a TV licence, you could face a fine of up to £1,000.

Blind or severely sight-impaired individuals can still apply for a 50% concession. This means a colour licence will cost £87.25.

There are other concessions and arrangements available, including for people residing in certain types of residential care and for over 75s receiving Pension Credit.

What can you do?

The Simple Payment Plan is designed for those experiencing financial hardship. Eligible customers can opt for either a fortnightly or monthly payment plan to spread the cost of a licence over 12 months.

Broadband and mobile prices - up an average £54 a year

Numerous individuals with mobile or home broadband contracts can anticipate a price increase starting from March 31.

Historically, these prices were tied to inflation, resulting in substantial hikes in previous years. However, recent modifications now mandate that those entering new contracts be informed in "pounds and pence" of the annual price increment.

In contrast, those with older contracts may still face increases exceeding inflation.

According to BT, customers who signed contracts before April 10 of the previous year will experience a 6.4% price rise starting from March 31. Uswitch, a price comparison website, reports that broadband prices will generally increase by an average of £21.99 annually for those on inflation-linked contracts and £15.90 annually for a typical mobile customer.

This could translate to an almost £54 annual increase for households with broadband and two mobile contracts. Additionally, households with TV subscriptions will face even higher costs due to price hikes by Sky and Virgin Media.

What options are available?

Uswitch estimates that over nine million Brits have expired broadband contracts, and 33 million are out of contract on their mobile plans. The company calculated that switching to a new broadband deal could result in a £181 annual savings for households.

Mobile users can also determine their contract status and any associated early exit fees by texting 'INFO' to 85075.

Car tax - varies significantly by vehicle

Starting from April 1, millions of car drivers will face increased car tax, with some instances seeing considerable rises. One significant change will affect electric cars, which were previously exempt from vehicle excise duty.

Now, electric and zero- or low-emission cars registered as of April will incur a first-year tax of £10, increasing to £195 annually (based on current rates) for the next five years. Vehicles registered between April 2017 and the present will be subject to a £195 tax, whereas those registered before April 2017 but after March 2001 will have a reduced annual tax of £20.

The tax structure becomes even more complex, with new electric vehicles priced at £40,000 or higher incurring a "luxury car tax" or expensive car supplement of £425 annually from the second to sixth year of ownership.

Furthermore, tax increases will also apply to owners of other car types, including petrol and diesel vehicles. The tax bands for these vehicles are determined by their CO2 emissions and year of manufacture.

For instance, cars emitting between 1g and 50g of CO2 per kilometre will experience a first-year tax hike from £10 to £110. In contrast, brand-new high-pollution vehicles emitting more than 255g/km will see their tax doubled from £2,475 to £5,490.

Starting from the second year, and for cars registered after April 2017, the tax will increase by £5 to £195 annually. Additionally, tax rates will rise for cars registered prior to 2017.

So, what options are available to you?

If you're considering purchasing an electric car, now is an opportune time. Vehicles registered before April 1 will be exempt from the costly car supplement. To manage the expense, you can establish a direct debit with the DVLA online, enabling you to distribute the cost over six months.

Stamp prices are set to increase depending on usage

The price of a first-class stamp will rise by another 5p to £1.70 from April 7, marking the sixth price increase in three years.

Meanwhile, second-class stamps will cost 87p, a 2p increase. Royal Mail attributes these hikes to a combination of fewer letters being sent and an increase in the number of households it delivers to, which escalates costs.

What can you do?

If you frequently use stamps, consider buying in bulk ahead of time. As long as the stamp doesn't display the price but only the class, it will remain valid.

Stamp duty

From next month, home buyers in England and Northern Ireland will begin paying stamp duty on properties valued over £125,000, compared to the current threshold of £250,000.

First-time buyers currently pay no stamp duty on homes up to £425,000, but this will decrease to £300,000.

Shop prices

Inflation is already on the rise, and there are fears that it could be further fuelled by businesses transferring the increase in employers' national insurance from April onto consumers. This overhaul, unveiled by Chancellor Rachel Reeves in her Autumn Budget, is projected to cost firms around £25 billion annually.

Business lobby groups suggest that some companies, including retailers, may attempt to offset this through price hikes, although it's too early to determine the extent of this.

Planning application fees

Although impacting fewer individuals, households submitting planning applications for certain home improvements and renovations in England will experience a surge in fees, which could double in some instances. Scotland is anticipated to implement similar changes later this year.

For homeowners submitting a standard application for an extension, the fee will jump from £258 to £528. The rationale behind this is to provide local authorities with additional resources to expedite the planning process.

HMRC interest rates

Another less-publicised change could have significant financial implications for self-assessment taxpayers, businesses, and others who are already finding it challenging to pay their tax bill. The interest rate charged on late tax payments has been 1.5% above the Bank of England's base rate, but this will leap to 4% above.

Rail fares

The upcoming increases in April follow a wave of price hikes that impacted millions of train passengers at the beginning of March, affecting rail cards and season tickets nationwide. As part of the yearly price adjustments, regulated fares in England are set to rise by an inflation-exceeding 4.6%.

Furthermore, most rail cards will see their first increase in 12 years, with some rising nearly 17% from £30 annually to £35. Just last month, the fare cap on bus travel in England saw a significant leap of 50%, moving from £2 to £3.