It is hard to ignore news stories and discussions about inflation right now and this is because it is a major issue in the UK affecting everyone. For those that are not familiar, rising inflation means that the purchasing power of currency is decreasing, which means that consumer goods, services and property all increase in price. So, what does this mean for day-to-day life for UK families?
Property
Inflation is not always a negative thing, especially if you are a property owner. When the purchasing power of currency falls, property value is stronger and this is why property is such a valuable asset to own. While owning property during inflation may not be a bad thing and could benefit those planning to sell, you might find that there are obstacles if you are inheriting a property.
Inheritance Tax
Inflation can create inheritance tax issues as you could face a larger bill with property values being higher than what was expected. An executors loan can provide financial relief and so that an application can be made for a Grant of Probate. The loan can then be paid back from the funds following probate, which means that there are no monthly repayments to worry about or any financial risk.
Household Incomes
Inflation also means that real household incomes will fall, which can put a strain on household budgets and make the cost of living harder to fall. Experts predict that household incomes will fall by 1.5% in 2022 and 2.25% in 2023 before rising slightly in 2024. Obviously, this is a major cause for concern, especially for those already struggling, so it is important that people do what they can to manage in this time. This could involve cutting back on spending and/or finding ways to increase household income.
Rising Costs
Following this, the prices of goods are rising sharply with inflation at its highest rate since the early 1980s. This is seen in everything from the cost of a loaf of bread through to the cost of a new car, so everyone will notice the effects of inflation. This has been amplified by the energy crisis and fuel crisis, which has created a “perfect storm” resulting in a cost of living crisis that is predicted to get worse in the winter months.
It is clear that inflation is a major issue right now and everyone will be feeling the squeeze. It is not clear what action will be taken to address the cost of living crisis right now, so households need to do what they can to manage by reassessing their household budget, cutting costs where possible and potentially looking at ways to increase income whether this is changing jobs or finding a way to supplement our income.
