New measures to help with the cost of living crisis

New measures to help with the cost of living crisis

The Chancellor, Rishi Sunak has announced a new £15bn package of support measures in a statement to the House of Commons on 26 May 2022. The measures will be targeted to the most vulnerable members of society to help with the cost of living.

The main measures announced

Energy Bills Support Scheme to be doubled

In April the Chancellor announced the Energy Bills Support Scheme, a one-off £200 grant against domestic energy bills to be made available to all households from October 2022 and which would need to be repaid in future payments. This measure has now been doubled to £400 and the repayment schedule cancelled – meaning it is now a non-repayable grant.

We are still waiting for the full details of this scheme to be released but it is expected that households will not need to apply for the scheme, and that electricity suppliers will apply the reduction automatically to bills from October 2022.

Cost of Living Payment for those on means tested benefits

In addition to the above Energy Support Scheme, a one-off ‘Cost of Living’ payment of £650 will be made this year to the 8 million households in receipt of mean tested benefits. The payment will be made in 2 lump sums, with the first payment in July and the second in the autumn.

It applies to people receiving the following means tested benefits: Universal Credit, Income-based Jobseekers Allowance, Income-related Employment and Support Allowance, Income Support, Working Tax Credit, Child Tax Credit, and Pension Credit.

People need to either already receive these payments or have made a claim for one of these benefits by May 25 to be eligible for the first payment. An eligibility date for the second payment is yet to be announced.

It has been confirmed that the payment will be tax-free, will not count towards the benefit cap, and will not have any impact on existing benefit awards.

Pensioner Cost of Living Payment

Over 8 million pensioner households across the UK who receive the Winter Fuel Payment will also be eligible for a £300 Pensioner Cost of Living Payment, in addition to any other one-off support they’re entitled to. Eligible households currently receive £200-£300, so the £300 one-off payment will double the amount.

Most households will receive this payment via direct debit as top-up to pensioner households annual Winter Fuel Payment in November / December.

£150 Disability Cost of Living Payment

Around 6 million people will receive a non-means tested £150 one-off disability payment in September.

People eligible for this payment include people receiving the following disability benefits: Disability Living Allowance, Personal Independence Payment, Attendance Allowance, Scottish Disability Benefits, Armed Forces Independence Payment, Constant Attendance Allowance, and War Pension Mobility Supplement.

People must have already been receiving or have made a claim by 25 May 2022.

People who receive disability benefits as well as one of the previously mentioned means tested benefits will receive the £150 on top of the £650 payment.

The government will make these payments directly to households.

Many of the recipients of this payment will also receive means tested benefits, therefore this £150 payment will be on top of the £650 payment for those receiving means tested benefits.

Household Support Fund increased and extended

The Chancellor also announced an extra £500 million of local support via the Household Support Fund for vulnerable households that might not receive some of the other support measures.

The Household Support Fund is a discretionary scheme to help those most in need. This could include small grants to meet daily needs such as food, clothing, and utilities. The extra support will see the Fund extended from this October to March 2023.

Energy Profits Levy

There had been much speculation on whether a ‘windfall tax’ would be announced to target the profits of large energy firms.

The Chancellor has now announced that he will launch an Energy Profits Levy to partly fund the cost of these new measures. It is expected to raise around £5 billion over the next year and will be charged at a rate of 25%. The Energy Profits Levy will apply to profits arising on or after 26 May 2022. It will increase the headline rate of tax on oil and gas firm profits from 40% (made up of a 30% Ring Fence Corporation Tax and 10% Supplementary Charge) to 65%.

The Chancellor added that this is to be considered a temporary levy and that if oil and gas prices return to historically more normal levels, it will be phased out. In addition, the legislation will also include a sunset clause, which will remove the tax after 31 December 2025.

To help offset some of the impact that this levy has on these energy firms, the Chancellor also announced the introduction of a new Investment Allowance to encourage firms to invest in oil and gas extraction in the UK. The new Investment Allowance is similar in style to the super-deduction and will nearly double the tax relief available for firms on their investments. The new allowance will mean businesses will receive an overall 91p tax saving for every £1 they invest.

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This information has been produced by Rouse Partners LLP for general interest. No responsibility for loss occasioned to any person acting or refraining from action as a result of this information is accepted by Rouse Partners LLP. In all cases appropriate advice should be sought before making a decision.

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