‘Awful April’ risks swamping millions as household bills and tax climb by £1,000: Sarah Coles

Energy bills

This is perhaps the best-known bill hike on the way, with the energy price guarantee rising from £2,500 to £3,000 in April. At the same time, we’ll also lose the monthly instalments from the £400 rebate the government has been funding over the winter. Taken together, three months at this level, plus the loss of the universal payments will leave us over £500 worse off. Given that around half of people already find it difficult to pay their energy bills, and one in 20 are behind on them, there’s every chance a rise could cause huge problems.

If you’ve already cut back as much as humanly possible, and things are still particularly tight, it’s worth checking if you can get any help. The last of this winter’s warm home discounts will be paid in March. There are also more cost-of-living payments on the way – eventually – including £301 for people on low-income benefits in the spring, £150 for those on disability benefits in the summer, and £300 for pensioners next winter. For those in a really tight spot, you may qualify for a non-repayable grant from your supplier or for the Household Support scheme run by your local council.

There’s also some hope, because the wholesale price of energy is falling. This isn’t going to cut what you pay, because we’re not paying anything like the current wholesale cost. However, it has made the energy price guarantee less expensive for the government, and offers an opportunity for them to consider offering more help in the Budget next week.

Council tax

At the start of April, we get the annual hike, and this year councils have the freedom to raise tax by 3 per cent - plus another 2 per cent for social care – without holding a referendum. Somewhere between 75 per cent and 95 per cent of them will do, which means band D council tax could rise from an average of £1,966 to as much as £2,064. This will hit even harder, because while those in bands A-D got £150 support with their council tax in the last tax year, we’re not expecting anything similar this year. Taken together, higher bills and loss of the rebate means roughly £250 more in costs.

There’s little you can do about this, but you can check if you’re eligible for a discount. If you live alone, you can get the single person discount of 25 per cent. Some people are ‘disregarded’, and others are entitled to a discount, so it’s worth checking the Government website to see whether you could save.

You might also be paying too much because you’re in the wrong council tax band. Because so many properties were valued simultaneously, some corners were cut, and if they valued your property too highly, you could get a refund and lower bills. However, challenges don’t always work, and in the worst case, they can mean your valuation is raised, so your bill ends up even higher. It means you need to do some legwork first.

Other bills

Mid-contract hikes are on the way for the customers of a number of broadband and mobile companies. When you signed up, the small print would have said if the company reserves the right to hike the price mid-contract, and by how much. Most of those that do link to inflation in December or January, plus around 4 percentage points. They then hike the price in March or April. It means you could be facing a rise of anything up to 17 per cent. This could cost an extra £100, so if you’re out of contract, it’s worth shopping around using a comparison site, in order to find your cheapest option.

Your water bill will also rise by an average of £31. If you’re trying to cut costs, it’s worth considering a water meter. As a rough rule of thumb, a normal user with more bedrooms than people in the house – or the same number – could be better off with a meter – so they only pay for the water they use. It also gives you the opportunity to cut your water use and save money.

Tax on investments

There are two tax changes that investors need to be on top of. The dividend tax allowance falls in April from £2,000 to £1,000 – and will halve again the following April. This will hit anyone earning dividends on investments held outside of tax wrappers – as soon as they exceed the new smaller allowance. It will also affect anyone who owns their own company and pays themselves in dividends.

The capital gains tax allowance is falling too. This is paid on any profits you make on investments - including stock market investments outside a tax wrapper, and second properties. The annual allowance is slashed from £12,300 to £6,000 in April – before being halved to £3,000 the following April. The cost will depend on how much you have invested outside tax wrappers, and how much profit you need to take, but could run to hundreds or even thousands of pounds.

Investors can protect themselves from both by selling assets and making gains within their capital gains tax allowance this year (£12,300), and then using the bed and ISA process to move up to £20,000 into an ISA. After the end of the tax year on 6th April, they can do the same again, although they’ll need to stay within the lower capital gains tax allowance. Married couples can share assets and both use their allowances.

April is truly going to be an awful month for our finances, but there is one small sliver of good news. This is the month when pensions and benefits finally rise 10.1 per cent to catch up with runaway inflation. So while your costs will rise, for older people and lower earners, at least your income will get a bit of a boost too.

The deadline for topping up your pension has been postponed

People who want to top up their state pension will have until July 31 – after problems with the DWP helpline persuaded the government to move the deadline from 5 April.

The top up window came about because of the rules put in place when we moved from the old state pension system to a new flat rate scheme in 2016. This required 35 years of NI contributions rather than 30, so it also introduced a window during which you could buy more extra years.

Until the end of July, you can fill the gap for any year you didn’t pay enough NI to qualify - going back to 2006. After that, you’ll only be able fill gaps going back for six years.

You should check if you’re on for a full state pension, then see if this is because you have missing NI years. Then you need to contact the government’s Future Pension Centre go through your specific circumstances and do the calculations. The rules are fiendishly complicated, so you need to speak to someone to check it’s right for you.

It’s this helpline that has faced all sorts of problems, with long queue times, and people getting cut off, so it’ll be a relief to an awful lot of people that the deadline has been extended. However, it’s still worth acting sooner rather than later, so you don’t end up joining the rush for the new deadline instead.

Sarah Coles is head of personal finance at Hargreaves Lansdown and Podcast Host for Switch Your Money On.