Soaring energy bills threaten to eat up 11% of salary

New research by RIFT Tax Refunds reveals that by March 2023 household bills will cost 11% of the average person’s salary.

The cost-of-living crisis continues to have a damaging impact on households across the globe. Many are already struggling to make ends meet as stagnant income and rising energy prices put pressure on homeowners and tenants.

Regulator Ofgem recently announced that the average household energy bill will hit £3,549 a year from October 2022.

The changing cost of energy bills

The tax and accounting specialists have analysed historic and projected changes in the average earnings to understand the impact of these rising prices.

In August 2020, the average salary was £31,646 meaning that annual energy bills totalled 3.3% of income. Today the average salary is £32,390, meaning bills account for 6.1% of income. 

Since the average salary is not expected to increase before the end of 2022, by October, household bills will total 10.4% of salaries. 

Although employers predict that there will be a 3% rise in salaries this year, this is not enough to combat inflation. 

According to RIFT’s findings, the average annual household energy bill was £1,042 in August 2020. Currently,this figure sits at £1,97, which is a £929 increase over the space of 2 years. 

Chief executive officer of RIFT Tax Refunds, Bradley Post, explains: “People are rightly angry about the current situation. Energy prices are soaring while salaries remain stagnant. It means households are having to completely rethink their budgets and make real personal sacrifices in order to pay the energy suppliers. To this end, people are buying less, travelling less, even eating less.”

“To go, in the space of just three years, from household bills costing 3% of income to costing 11% of income is extraordinary and quite frightening. The government is pledging support but, while nobody can yet confirm what this will look like, it’s expected to be a drop in the ocean for most households.”

“And don’t forget, this research is just looking at energy bills, not even accounting for the rising cost of food and fuel, etc, which will eat up even more of our earnings.”

“At times like this, every penny is vital so I would encourage everyone to consider whether they might be eligible for a tax refund. There is a good chance you will be, whether you’re self employed or on PAYE. The average refund is currently £1,500 which doesn’t come close to making up for rising prices, but can definitely make a positive difference at a time when positivity is a rare commodity indeed.”