Interactive Investor

10 personal finance changes to watch out for in 2022

23rd December 2021 09:39

Katie Binns from interactive investor

There are some things we can be certain will affect your finances in 2022. Katie Binns discusses what’s coming your way and action you can take to mitigate the impact.  

While making predictions during a pandemic is difficult, there are some things we can be certain are on the cards for 2022: buckle up for rising bills and higher taxes. It’s time to curb spending and consider any action, however small, to help your finances.

More tax

A host of tax rises are on the way in April: higher National Insurance (up 1.25%), higher dividend tax (up 1.25%) and council tax rises (up at least 3.6% to cater for current government spending plans, according to the Institute for Fiscal Studies). 

Meanwhile, income tax thresholds remain frozen, meaning 1.3 million workers will be dragged over the 40% higher-rate threshold within five years when they get a pay rise. You can take action here and reduce your tax bill with a bit of financial planning, in particular by using pension contributions and your ISA allowance and scrutinising your expenses. Find out in detail how to avoid fiscal drag and not pay higher-rate tax.

Inflation

UK inflation is at 5.1%, the highest in 10 years, and Bank of England governor Andrew Bailey (picture below) says he expects it to rise further early next year. “In the next two or three months, we think it can get to around 6%," he told the BBC. That means more pressure on your income as you’ll pay more for goods and services.

Energy bills rise

Consumers need to brace themselves for higher energy bills, reflecting much higher wholesale prices and the cost of the industry picking up the pieces after recent energy company failures. This means the energy price cap could rise by as much as £500 when it is reviewed in February and applied in April.

This scenario will take the average annual costs for someone on a default tariff from £1,277 to £1,777. Be aware that this isn’t a fixed cap on the most you can pay, it’s a cap on prices for the average user. So, if you use more energy, or live in a large or energy-inefficient home, you could see your bill rise even further. 

Rail fares rise

Rail fares will rise by 3.8% in March. Commuters using popular routes will feel the pinch. For example, the journey from Tunbridge Wells to London - including a London travelcard - will be £6,033 annually. That’s £220 extra compared to the current price.

Working from home on certain days of the week means you may not need a full season ticket, but if you do, you have January and February to save money by renewing your season card at last year’s price.

Property party ends

The end of the stamp duty holiday and the race for space will likely see a quieter year for the housing market. We may see lockdown buyers return to cities, as it appears that some of them now have buyer’s remorse, according to anecdotal evidence from estate agents. A survey by the insurer Aviva revealed that around half of those who bought a lockdown home admit they ‘regret the price they paid’.

More borrowing on cards and loans 

Consumer credit grew by £706 million in October, including £637 million more on credit cards – the largest amount of card borrowing since July 2020, according to the Bank of England. This follows £600 million of credit card borrowing in September. Unless the UK goes into another lockdown to deal with a dangerous variant of Covid, we can expect the comeback of the credit card.

Guidance appointments for pensioners-to-be

From 1 June, people first accessing their retirement income will be offered an appointment with guidance service Pension Wise. The 45-minute session will take them through the different options on offer and should help them to  decide the best way to take income from their pension.

Financial scams will continue to evolve

Action Fraud, Cifas, and UK Finance together received 822,276 reports of fraud in 2019-20. Experts predict the biggest online scams of 2022 will include some old familiars such as cryptocurrency investment scams and online dating scams, but also new rackets involving NHS vaccines and NHS Covid Passes.

Earlier this year, Action Fraud reported 700 cases of people receiving emails claiming to be from the NHS and offering them a vaccine passport, prompting them to click on a link and input their personal and financial details. Politeness can often get in the way of us saying no to fraudsters - ii has some ideas to help you not be so polite.

End of an era for old £20 and £50 paper notes

The £24 billion worth of old paper £20 and £50 notes still in circulation will be withdrawn as legal tender on 30 September, so dig out any old notes and make sure you spend them or deposit them at your bank or Post Office before this date.

After this deadline, you may be able to deposit them in a branch of a bank where you hold an account, although banks are not legally obliged to accept them. The Post Office may also accept withdrawn notes as payment for goods and services, or as a deposit to an account.

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