The Chancellor Rishi Sunak has today announced an increased level of support to help people cope with the rising cost of living.
Many of the measures were already in the news this morning, prior to the actual announcement at lunch time.
There was real emphasis on providing support for the most vulnerable in our society, but also some more universal support provided to help everyone. Apparently almost all of the eight million most vulnerable households across the UK will receive support of at least £1,200 this year, including a new one-off £650 cost of living payment.
A summary of the measures announced include:
1) One-off Cost of Living Payment for those on means tested benefits
There will be a new, one-off £650 payment to more than 8 million low-income households on Universal Credit, Tax Credits, Pension Credit and legacy benefits.
The payment will be made in two lump sums – the first from July, the second in the autumn. Payments from HMRC for those on tax credits only will follow shortly after each to avoid duplicate payments.
This payment made directly to households across the UK will be tax-free, will not count towards the benefit cap, and will not have any impact on existing benefit awards.
2) One-off £300 Pensioner Cost of Living Payment
All pensioner households will get a one-off Pensioner Cost of Living Payment of £300 as a top-up to their annual Winter Fuel Payment in November/December. For most pensioner households, this will be paid by direct debit.
People will be eligible for this payment if they are over State Pension age (aged 66 or above) between 19-25 September 2022.
3) £150 Disability Cost of Living Payment
Around six million people across the UK who receive certain disability benefits will receive a one-off payment of £150 in September to help with a wide range of additional costs, such as specialist equipment, specialist food, and increased transport costs.
For the many disability benefit recipients who receive means tested benefits, this £150 will come on top of the £650 they will receive separately.
These payments will be exempt from tax, will not count towards the benefit cap, and will not have any impact on existing benefit awards.
4) Energy Bills Support Scheme
The energy bills discount due to come in from October is being doubled from £200 to £400, while the requirement to pay it back will be scrapped. This means households will receive a £400 discount on their energy bills from October.
Energy suppliers will deliver this support to households with a domestic electricity meter over six months from October. Direct debit and credit customers will have the money credited to their account, while customers with pre-payment meters will have the money applied to their meter or paid via a voucher.
There will also be an increase and extension to the Household Support Fund administered by Local Authorities to help those most in need.
Energy Profits Levy
Clearly these interventions will cost a significant amount of money and the Government is introducing a new temporary 25% Energy Profits Levy (“Windfall Tax”) on oil and gas firms.
The levy (taking effect from 26 May 2022) will apply to their extraordinary profits that are currently being achieved as a result of global circumstances and it is expected to raise around £5 billion over the next year.
In future years, if oil and gas prices return to historically more normal levels, the Government will phase out the Energy Profits Levy, and also the legislation will include a sunset clause, effective at the end of December 2025. The Levy however does not apply to the electricity generation sector.
New Oil and Gas Investment Allowance
The government has also been clear that it wants to see the oil and gas sector reinvest their profits to support the economy, jobs, the UK’s energy security and to provide an immediate incentive for the oil and gas sector to invest in UK extraction.
The new investment allowance rate is 80% and means the total tax relief on investment nearly doubles and will be available to companies at the point of investment, making it both more immediate and more generous.
Clearly the government had to step in at a time when inflation is skyrocketing and the announcement will be a great relief to many, but bear in mind that tax receipts (VAT in energy and fuel) will naturally be increasing as prices increase which also helps to provide the means to be able to pledge such support.
The measures announced will hopefully help but may not solve all the financial pressures. You may still need advice with your own business and personal tax so you can structure your income efficiently. If you are concerned please call and speak to one of our experts on 01242 776000 or email tax@randall-payne.co.uk.
