Martin Lewis explains rules on claiming back tax
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It has been reported that Chancellor Rishi Sunak’s £200 energy bill loan could be doubled as the cost of living crisis worsens. Prime Minister Boris Johnson has reportedly asked the Department for Business to look at giving more help to hard-pressed families. Business secretary Kwasi Kwarteng has also suggested increasing the energy bills rebate from £200 to £400 or delaying the repayment period. However, it is understood the Treasury is reluctant to double the £200 loan, due to the £9billion cost of it and the council tax rebate already.
Mr Sunak’s policy works as follows: all households will receive £200 off their energy bills, and will then pay this “loan” back at a rate of £40 a year over five years from 2023.
One issue with the policy is that the cash won’t arrive until the autumn, when prices could be even higher.
Labour leader Sir Keir Starmer branded Mr Sunak a “loan-shark Chancellor” as he criticised the policy.
Martin Lewis has now also criticised the policy, saying it isn’t a loan at all.
The finance expert explained how a variety of factors could see Britons lose out, and accused Mr Sunak of gambling with people’s money.
He said: “Bills are already sky high, and on April 1 we now know most will rise by a previously unthinkable, and for many unaffordable, 54 percent.
“And sadly, when that ends in October, it currently looks possible the price cap will rise by another 20 percent. That will leave most people paying double what they were a year ago.
“[Mr Sunak] is following the market’s view that rates will finally start falling later this year, meaning the price cap will fall in April 2023 and he hopes the impact of this scheme will mean lower bills now and in the future as the extra costs then will be covered by the drop in bills.
“That is far from certain, especially with the escalating conflict between Russia and Ukraine.
“And crucially, if rates don’t drop, or don’t drop a lot, people will be left in a lose-lose situation, with far higher bills than now and an additional levy on top.
“With this scheme, the Chancellor is effectively taking a worrying gamble with people’s finances.”
However, Mr Sunak has defended his policy, and recently said: “It’s a significant amount of money that will make a big difference to the vast majority of households, and I think people, I hope actually, will be reassured by us stepping in.”
The cost of living crisis looks set to worsen, as the Bank of England warns of inflation as high as seven percent later this year.
Mr Lewis offered his advice yesterday on how consumers can lessen the blow when energy prices rise.
From April 1, the energy price cap – the maximum amount a utility company can charge – will rise from £1,277 to £1,971 for a household on average usage, a rise of £693 per year.
Experts have predicted the price cap will rise by around £1,000 to more than £2,900 in October when it is next changed.
However, the rise could come sooner if the industry regulator, Ofgem, decides the market cannot handle the pressure.
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Mr Lewis advised that customers using a traditional prepayment meter should check if they are able to build up a stockpile of energy by purchasing as much as they can afford now at the lower rate.
He added: “If you max out your top-up in March before the rate goes up, that’s what you’ll get, even if you then use that energy in April.”
For those paying by direct debit, he suggested taking a meter reading now and again the day before the price cap increases to ensure that as much energy as possible can be charged at the lower rate.
Mr Lewis added that people should be aware of how to claim a £150 council tax rebate from April for every home in council tax bands A, B, C or D in England, Wales and Scotland.
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