Chancellor Rishi Sunak has announced a £21 billion cost of living package to help UK households struggling with rising costs.
In a statement delivered to the House of Commons on Thursday, he outlined a package of targeted measures aimed at the country’s most vulnerable including a windfall tax on energy firm profits and a £400 energy bill discount.
It comes after the announcement of a £22 billion package of financial support earlier this year and ahead of the energy price cap rising to £2,800 in just a few months’ time.
In this article, we’ll outline the key points of the cost of living package.
How we helped Michael
"Professional staff - they were understanding and non-judgmental. Fantastic, quick service too. Would recommend to anyone!"
Michael, Sunderland
A windfall tax on energy firm profits
In a dramatic turn of events after months of opposition, Mr Sunak announced a “temporary targeted profits levy” of 25% with a 81% tax relief for energy firms that invest in oil and gas extraction in the UK.
It is expected to raise £5 billion of revenue to fund the government’s cost of living package with a sunset clause written into the bill that states that it will be rolled out when current prices drop.
He said: “The oil and gas sector is making extraordinary profits not as the result of recent changes to risk-taking, innovation, or efficiency as the result of surging global commodity prices driven in part by Russia’s war. For that reason, I am sympathetic to the argument to tax those profits fairly.”
A welfare support payment
In a bid to provide some much-needed support to people in low-paid jobs, temporarily unemployed, or unemployed due to long-term sickness or disability, eight million of the country’s lowest income households will receive a one-off payment of £650.
There is no need to apply for the payment as DWP and HMRC will automatically send the money to people in receipt of means-tested benefits in two lump sums from July.
A pensioner cost of living payment
With the average energy bill expected to increase by £800 in October, eight million pensioners currently claiming Winter Fuel Payment (WFP) will receive a one-off payment of £300 in November or December.
It was announced as Mr Sunak acknowledged that pensioners are “disproportionally impacted” by higher energy cost as they can’t always supplement their income through work during periods of inflationary pressure.
A disabled cost of living payment
Over six million non-means-tested disability benefit recipients will receive a one-off payment of £150 to cover the cost of rising household bills.
It will be paid to people claiming the following benefits:
- Disability Living Allowance
- Personal Independence Payment
- Attendance Allowance
- Scottish Disability Benefits
- Armed Forced Independence Payment
- Constant Attendance Allowance
- War Pension Mobility Supplement
With a percentage of these recipients also qualifying for the £650 welfare support payment, some households could be eligible for a total of £800 in financial support.
A £400 energy bill discount
In February, it was announced that all UK households would receive a one-off payment of £200 in October to help with rising energy bills with the money repayable in instalments over the next five years.
In his announcement on Thursday, Mr Sunak revealed that this payment would be doubled to £400 and would no longer need to be repaid with households already “being hit hard” by spiralling energy bills.
He said: “Since then, the outlook for energy prices has changed, I’ve heard people’s concerns over the impact of these repayments on future bills, so I’ve decided that those repayments will be cancelled.”
The total cost of living package will cost £21 billion with eight million vulnerable households expected to receive a minimum of £1,200 in financial support.
When will I get my cost of living payment?
The cost of living payments will be paid directly to eligible households with no need to apply but when can you expect to actually receive the money?
In July, the first instalment of the £650 welfare support payment (£325) will be paid with tax credits recipients receiving their payment shortly after to avoid duplicate payments. The second instalment will be paid in autumn, but no official date as been confirmed yet.
The £150 disabled cost of living payment will be paid in September and the £300 pensioner cost of living payment will be paid alongside the Winter Fuel Payment in November or December.
The £400 energy bill discount will be paid to all UK households between October and March with Direct Debit and credit customers seeing the money credited to their accounts and customers with pre-payment meters seeing the money applied to their meters or paid in the form of a voucher.
Photo credit: I T S / Shutterstock.com
Why choose Creditfix?
- Write off unsecured debts over £6,000
- Stop interest and charges soaring
- Reduced payments from £110 per month
