Inflation hits 10.1% piling more pressure on household budgets – what it means for your money

INFLATION has hit a 40-year high of 10.1%, according to new figures from the Office of National Statistics. 

The consumer price index (CPI) measure of inflation shot up to double figures in the 12 months to July – up from 9.4% in June.

Today’s inflation rate is the highest since 1982, the ONS said. 

Inflation is a measure of how the price of goods and services have changed over the past year. 

When it goes up it means prices on everyday items, essentials, fuel and bills are higher – which means budgets are being squeezed.

The soaring rate reflects the current cost of living crisis, with millions of people grappling with rising energy bills, petrol prices and grocery costs. 

Rising food prices and staples including toilet roll were the main driver behind the latest inflation figures from the Office for National Statistics (ONS). 

ONS chief economist Grant Fitzner said prices of bakery goods, dairy, meat and vegetables and takeaways are notably higher.

He added: “Price rises in other staple items, such as pet food, toilet rolls, toothbrushes and deodorants also pushed up inflation in July.”

The cost of package holidays also rose, driven by higher demand, and air fares increased.

But struggling households are still being warned that the worst is yet to come.

Inflation is expected to fall back a little in August, but it could soar to 13.3% in October when they energy price cap rises again.

There are warnings it could push the UK into a recession, according to the Bank of England.

The rise will come as the energy price cap, which regulates what more than 20 million households will pay for their gas and electricity, rises in October.

It is set to hit around £3,635, according to the latest predictions – an 84% rise from today’s already record high cap of £1,971.

The inflation rate is so-called backward looking measure, which means it shows how prices have changed over the past 12 months – it does not predict the future. 

Rocio Concha, Which? director of policy and advocacy, said the figures underline the scale of the cost of living crisis.

She added: “Millions of people face a dire financial situation in the months ahead.

“With bills set to rise further, it’s clear that the current level of cost-of-living government help will not be sufficient.”

But Chancellor Nadhim Zahawi has said getting inflation under control is his “top priority” as households brace for the worst.

He added: “I understand that times are tough, and people are worried about increases in prices that countries around the world are facing.

“Although there are no easy solutions, we are helping where we can through a £37 billion support package, with further payments for those on the lowest incomes, pensioners and the disabled, and £400 off energy bills for everyone in the coming months.”

What does inflation mean for my finances?

Rising inflation indicates that the cost of goods and services is rising, so your money won’t stretch as far as it once did. 

As inflation hit a fresh 40 year high, it means many households are seeing prices rise faster than in living memory. 

The cost of everything from energy bills to groceries to clothing is going up. 

Food bills have risen by 11.6% – which works out at an annual increase of £533 for the average household.

At the same time, wage increases are failing to keep up with inflation, which is why experts talk about people suffering a “real terms pay cut”, because their salary isn’t keeping up with with the cost of living. 

Usually, experts advise making sure you money is in a high interest savings account when inflation soars, so your balance can grow in line with rising prices.

But although the Bank of England hiked interest rates for a fifth consecutive time, at 1.75% they are still very low by historical standards meaning savings accounts can’t keep up with inflation either.

There is, however, a bit of good news for homebuyers.

The average UK house price increased by 7.8% annually in June, slowing sharply from 12.8% in May, according to official figures.

But inflation will make it harder for first-time buyers to save for a deposit.

What can I do to battle inflation?

If you’re struggling to make ends meet, our Squeeze Team is a panel of experts full of tips and advice to help you cut costs.

Shopping around for insurance, buying own-brand where possible, and using cashback sites are just some of their recent recommendations.

But there is more you can do, we’ve put together a guide on how you can make your cash go further as inflation soars.

Find ways to make extra cash

There are ways to boost your cash without even leaving your home.

The Sun has compiled a list of some 50 ways to earn a bit of extra dosh on the side, from selling your old clothes or becoming a part-time product tester.

Online surveys are a quick and relatively easy way to get hold of extra cash.

There are lots of sites you can use, but these are the easiest to navigate:   and .

 puts together research panels for broadcasters and programme makers so that they can get feedback on TV programmes before they hit the box.

If you are looking at making some extra money on the side, don’t be put off by the thought of paying more tax on the cash you make.

Normally, you’d have to pay tax on any earnings over the personal allowance for basic tax-payers, which is £12,570 for the current tax year running from April 6, 2022 to April 5, 2023.

But rules brought in back in 2017 means you can make some cash on the side tax-free.

There are separate allowances for different money-making ventures, most of which are capped at £1,000.

That means you don’t have to declare your earnings to HMRC unless you earn over this amount.

Set a budget and stick to it

Worrying about money is a daily reality for many people – and even those who were previously managing.

Creating a budget for household income and expenses won’t make anything cheaper, but it can help you feel more in control of your money.

It can give you a clearer picture of where you are overspending.

Budgeting expert Anabelle Williams tried some of the household budgeting tips emerging on Instagram.

Beware of shrinkflation

Shrinkflation most commonly affects food and drink products – and it’s an easy way for the manufacturers to cut costs.

But is a blow to families who are paying more for items that are now a smaller price.

One notable example, was The Sun’s discovery that Cadbury Wispa bars shrunk by 7% – with the price remaining at 80p.

A number of supermarkets are also selling the newer, smaller, pack of Magnums for more than RRP according to data from .

You can compare the prices of products across a range of supermarkets by using sites like  and .

It’s important to remember that prices can change from day to day if new offers come about about if the supermarket raises prices – so take any prices you find online with a pinch of salt.

Check your outgoings

Many families are counting every penny spent, but you can reduce your monthly bills my making a few simple changes.

Savvy mum Emily Harris reduced her monthly bills – excluding rent – form £1,090 to £340.

The care assistant’s top money-saving tips and tricks include yellow sticker shopping, ditching phone contracts, and switching electric providers.

Emily used to pay £160 per month for Sky TV and a landline but now she pays £34 for an Amazon Fire Stick.

She also ditched the house phone and swapped to a sim only card deal for £7.50 per month.

You could also try looking at comparison websites for insurance, utility bills and groceries.

Claim free support

Ex-Chancellor Rishi Sunak announced an emergency package of measures recently including £400 energy bill rebate for every household, an extra £650 for millions on benefits, and a £300 winter payment for older people.

You can also apply for help through your local council’s Household Support Fund.

Some are giving out free cash or supermarket vouchers, while others offer help with housing costs or energy bills – but help on offer varies depending on where you live.

If you’re struggling with soaring energy bills, a number of energy firms have hardship funds which offer grants of up to £750 for those struggling with their bills.

Low income families with young children could be entitled to Healthy start vouchers to help you cover the cost of fresh food and drink for your kids – they’re worth £221 a year per child.

And use a benefits calculator to see you’re entitled to help – there’s an estimated £13billion in unclaimed benefits you may be missing out on.

Reduce your payments

More people may be finding it harder to keep on top of bills and debt.

But there is help on hand if you’re struggling to make debt repayments.

You can speak to your creditors, who might be able to change your plan.

If you don’t know how to approach your creditors, then charities such as  can help you make a plan.

If you’re looking for targeted debt support, the government’s Debt Respite Scheme, also known as Breathing Space, is one option.

Launched last year, it’s free to use and someone in debt the right to legal protections from their creditors.

You can find out if you are eligible here.

The Sun spoke to expert Andy Shaw from debt charity StepChange who revealed his five tips for helping to reduce payments.