HOUSEHOLDS are set to be walloped in 2025 with a perfect storm of rising prices, higher taxes and sinking interest rates all upping the pressure on budgets.
combined with brutal policy changes could curb your spending power and leave you with less cash in your pocket.
However, there are simple steps you can make to help protect your finances in the face of looming shocks.
Here's what you need to know…
Rising cost of living
Higher costs of goods and services ramp up the pressure on household budgets, especially if wages and other forms of income don't keep up.
is the official measure of the and the target for policymakers is to keep it at the 2% mark.
Yet the Consumer Prices Index jumped to a 10-month high of 3% in January before but still above target, according to the latest stats.
The cost of living is forecast to shoot up even higher to 3.7% later this year, thanks to expected food and price rises, according to the Office for Budget Responsibility (OBR).
Experts also now fear that trade tariffs recently announced by US president and any tariffs added in response by the UK could push up inflation even higher.
Sarah Coles, head of personal finance at savings platform Hargreaves Lansdown said: “One potential impact of the tariffs is that the value of the dollar could rise against the pound, making anything we import more expensive.
“This includes everything from food to the components for manufacturing.”
The best way to tackle inflation rises is through an audit of your household .
The rising price of food is painful, but you can a recent study found.
And then check whether you can switch to a to keep major bills in check.
Tariff turmoil
Aside from the potential impact on inflation, the trade tariffs from the US also spell bad for wider household budgets.
Many worry the fallout from the trade war could spell an economic downturn for the UK.
Following the tariff announcements, the warned that risks to the stability of the world’s financial system have increased and global economic growth could suffer.
The OBR has already this year downgraded growth forecasts for the UK down from 2% to 1%.
In the long term, this could put pressure on companies to cut costs by pausing hiring and wage increases, and even make redundancies.
Experts have suggested a 25% tariff on foreign imported to the US could put 25,000 UK at risk.
In the short term, stock markets have tumbled which has an immediate impact on household investments and .
However, experts say that investors should remain calm, especially if retirement is some years off.
Ed Monk, associate director at investment firm Fidelity International, said: “While the recent market volatility is unnerving, it’s important to remember that markets rise and fall, and this is a natural part of .
“The key is not to let short-term uncertainty derail your long-term goals.
“It may sound counterintuitive but staying invested throughout times of volatility is the best strategy.”
He added: “For those concerned about market conditions, combining investments with options like cash funds or making regular contributions can offer reassuring middle ground.
“The important thing is to stay focused on your personal financial goals and take steps that feel right for your situation.”;
It's a good idea for savers close to retirement to seek advice before making any quick decisions.
And anyone living off income drawdown pensions should try not to sell of underlying investments to top up income, according to Helen Morrissey, head of retirement analysis at Hargreaves Lansdown.
She added: “We recommend a natural yield approach whereby you only take the income yielded by your investments. This means income can fluctuate.
“We recommend people keep one to three years of essential expenses in an easy access account to supplement their income during these times and avoiding them eating into their capital.”
Falling savings rates
When inflation increases, the Bank of England typically increases rates which will usually spell good news for savers who can make more off interest from cash pots.
However, the underlying market turmoil from the trade tariffs is driving expectations that the Bank of England will in fact cut rates to help cushion the economy through the turmoil.
Laith Khalaf, head of investment analysis at platform AJ Bell, said: “Interest rate expectations are falling as markets price in the potential economic damage from US tariffs, and the likelihood the Bank of England will respond with interest rate cuts.
“The market had been pricing in two interest rate cuts this year, but in short order that has now been ratcheted up to three, which would take the base rate to 3.75% by the end of 2025.”
Savers could help ease the pain of falling returns from interest later in the year by locking into fixed rate accounts.
Just remember that it's always a good idea to keep at least three-months worth of income in an easy access account that you can tap into in case of an emergency.
Rachel Springall, financioal expert from data site Moneyfactscompare.co.uk, said: “Fixed rate bonds provide a guaranteed return, so they continue to be a haven for savers’ cash, weathering the storm of fluctuating interest rates.
“One-year bonds remain more abundant than their longer-term rivals, and challenger banks typically offer the best returns.
“However, as interest rates remain unpredictable, a longer-term bond could become a more popular choice in the months ahead.”
Tax hikes
The blow to the economy from the tariffs could push chancellor into raising taxes when she lays out the nation's finances in her autumn Budget, according to experts.
Higher taxes will strip out more money from the pockets of households, heaping more pressure on budgets.
Jason Hollands, managing director at wealth management firm Evelyn Partners said: “It’s difficult to imagine a scenario where the chancellor can approach the Autumn Budget with the same set of growth and fiscal assumptions that she held when she set out her Spring Statement in March.
“Even if growth and tax receipts are not hit immediately, the medium and long-term outlook will probably be downgraded and that could force the Chancellor to come back for more tax rises or public spending cuts.”
Tax allowances and thresholds are already frozen until 2028. Experts say Reeves could now freeze them for even longer which means people end up paying more as wages rise.
For example, the personal allowance – the cash workers get to keep before they start paying any tax – had risen from £11,000 in 2016/17 to £12,570 in 2021 helping people on low income to avoid tax
But this now isn't set to change until 2028 or longer.
It's also feared the chancellor could cut cash ISA limits down from £20,000 to £4,000 or raise capital gains tax
Putting more money inyour pensionis one way to reduce your income tax burden if you can afford it.
Through ‘salary sacrifice,' employers can reduce an employees’ salary and pay the equivalent amount as pension contributions which get tax relief.
If you're worried about cash ISA limits being reduced come the autumn, now is the time to get saving as the £20,000 limit has just refreshed for the start of the tax year on April 5.
And don't forget, married couples and civil partner can transfer investments between each other without triggering a tax event or transfer unused personal allowance.
These switches are known as ‘interspousal transfers’ and are easy to do.
Jason Hollands said: “Switching cash savings or investments to your spouse is a simple piece of financial planning which can greatly reduce family tax exposure by providing access to two sets of ISA allowances, two capital gains exemptions, potentially two personal savings allowances and two dividend allowances.”;
Pensions raid
It's also feared the chancellor could cut down on financial perks for saving into a pension.
Experts say options include cutting the annual allowance, which is the amount that savers can put away and still benefit from tax relief on contributions.
The allowance is currently capped at £60,000 but could be trimmed down to as little as £40,000.
It has also been suggested Reeves could merge tax relief for basic rate payers, currently 20%, with higher rate tax payers, currently 40%, to a flat rate of 25%.
Tom Selby, director of public policy at AJ Bell, said rumours around pensions prompt savers to make early retirement decisions.
He added: “Making long-term financial decisions based on fear is clearly not a good outcome and each time these rumours raise their ugly head, damage is done to people’s trust in pensions.
“Rather than waiting for that to happen, the chancellor should commit to a Pensions Tax Lock, ruling out changes to tax-free cash or tax relief for at least the rest of this .”
Anyone worried about their retirement options should speak to an adviser.
Welfare cuts
In the Spring budget, the chancellor announced benefit cuts worth a mammoth £5billion to help plug a hole in public finances and encourage more people back into work.
The changes include making it harder to qualify for (PIP), as well as changes to the incapacity payment on .
In Autumn's budget, Reeves could potentially go further hitting those reliant on welfare harder.
Make sure you are currently claiming all you are currently entitled to.
You can check which benefits you currently qualify for through a calculator offered by sites such as turn2us.
Flying Eze also has a that can indicate what you may be entitled to.
