April 16, 2025 – Today’s inflation figures in the UK offer a momentary sigh of relief for households, but experts warn that rising costs from recent policy changes and price hikes in essential services could soon drive inflation higher. Let’s break down the current numbers, explore the underlying pressures, and examine why the road ahead might be bumpier than it seems.
Today’s Inflation Figures: A Snapshot
The latest data from the Office for National Statistics (ONS) reveals that the UK’s Consumer Prices Index (CPI) inflation rate stood at 2.6% in March 2025, down slightly from 2.8% in January, as reported by the House of Commons Library. This marks a continued easing from the 41-year high of 11.1% recorded in October 2022. The largest downward contribution to the CPI came from falling clothing prices, providing some respite for consumers.
While these figures are encouraging—hovering close to the Bank of England’s 2% target—they mask a brewing storm of cost pressures that are already beginning to impact household budgets. Forecasts suggest inflation is unlikely to remain this low for long.
Why Inflation Is Set to Rise
Despite the current dip, several factors are poised to push inflation higher in the coming months, driven by recent policy changes and price increases in essential services. Here’s a closer look at the key contributors:
1. National Insurance Contribution (NIC) Increases
The Autumn Budget 2024 brought significant changes to National Insurance, particularly for employers. Starting this month, April 2025, employer NIC rates have risen from 13.8% to 15%, and the threshold at which employers start paying NICs has been lowered from £9,100 to £5,000. According to NerdWallet UK, this adjustment drags more part-time and lower-income workers into the taxable bracket, increasing costs for businesses.
For consumers, this translates into higher prices as companies pass on these costs. Sectors like hospitality, heavily reliant on labour, are particularly vulnerable. Businesses may also scale back hiring or limit wage increases, further squeezing household incomes at a time when inflation is already a concern. The ripple effect of these changes could add upward pressure on consumer prices, as goods and services become more expensive to produce.
2. Council Tax Rises
Council tax bills across England, Scotland, and Wales rose on April 1, 2025, adding to household financial burdens. According to BBC News, the average increase for a Band D property in England was £106 in 2024, bringing the average bill to £2,171, with some areas like Bradford seeing a 10% hike in 2025. In Scotland, where rates had been frozen or limited since 2007, bills increased by at least 10% in 13 areas, while Wales saw rises between 5% and 9.2%.
Local authorities are grappling with inflation, higher energy costs, and increases in the National Living Wage, alongside a £515 million allocation from the government to offset the NIC hike. However, the Local Government Association warns that council finances remain "extremely challenging," potentially leading to service cuts or further tax increases. For households, these rises directly increase the cost of living, contributing to inflationary pressures.
3. Water Bill Increases
Water bills in England and Wales are set to rise significantly, with Ofwat approving a 36% increase over the next five years, starting this month. The Guardian reports that average bills will increase by £31 annually, totalling £157 by 2030, reaching £597. The increases are front-loaded, meaning households will see an £86 jump this year alone. Southern Water customers face the steepest rise, with bills increasing by 53% to £642 by 2030.
Consumer groups have criticised the hikes, arguing that they stem from years of underinvestment by water companies in infrastructure, leaving households to foot the bill for leaky pipes and pollution cleanup. These increases, layered on top of inflation adjustments, will further erode purchasing power, driving up the cost of living and contributing to broader price pressures.
4. Global Trade Tensions and Tariffs
Adding to domestic pressures, global trade dynamics are also at play. Today’s X posts highlight escalating trade tensions between the U.S. and China, with the White House imposing 245% tariffs on Chinese imports as of April 16, 2025. While the UK is not directly targeted, its economy is intertwined with global markets. The BBC notes that the UK exported £58 billion in goods to the U.S. in 2024, and new U.S. tariffs, including a 10% levy on goods from most nations, could disrupt supply chains and increase costs for imported goods. This, in turn, could push up prices for UK consumers, particularly for electronics and manufacturing inputs.
5. Inflation Forecasts and Wage Dynamics
Economic forecasts paint a concerning picture. The Bank of England predicts CPI inflation will rise to 3.7% by Q3 2025 before gradually easing to 2.0% by Q4 2027. The Office for Budget Responsibility (OBR) expects inflation to hit 2.7% in Q2 and Q3 2025, while economists surveyed by the Treasury in March 2025 forecast a 3.0% rate by Q4 2025. These projections suggest that today’s relatively low figures are a temporary reprieve.
Moreover, wage growth isn’t keeping pace with these pressures. NerdWallet UK highlights the impact of fiscal drag—frozen income tax and NIC thresholds mean that as wages rise with inflation (projected at 5.8% in March 2025), more income is taxed, reducing real disposable income. For example, someone earning £35,000 could pay £845 more in tax by 2028, despite NIC cuts for employees in 2024.
The Bigger Picture: A Warning for Households
While today’s inflation figures might seem reassuring, they belie a growing set of challenges for UK households. The combination of NIC increases, council tax hikes, water bill rises, and global trade disruptions creates a perfect storm for inflation. These factors will likely drive up the cost of goods and services, eroding the purchasing power of consumers already stretched thin by years of economic turbulence.
For policymakers, the challenge is stark. The Bank of England’s Monetary Policy Committee, which maintained interest rates at 4.5% in its latest meeting, faces a delicate balancing act. Raising rates to curb inflation could further burden households and businesses, while holding steady risks letting inflation spiral. Meanwhile, the government’s promise not to raise taxes for “working people” (as per Labour’s manifesto) is being tested by the indirect effects of employer NIC hikes and other cost increases.
What Can Households Do?
In the face of these rising costs, households may need to take proactive steps:
Budget Carefully: Use tools like the 50/30/20 rule (50% on needs, 30% on wants, 20% on savings) to prioritise spending, as suggested by NerdWallet UK.
Check for Discounts: Look into council tax reductions (e.g., a 25% discount for single occupants) or social tariffs for water bills to ease the burden.
Monitor Price Trends: Keep an eye on inflation-sensitive items like energy and food, and adjust spending habits accordingly.
Conclusion
Today’s inflation figures of 2.6% may offer a brief moment of stability, but the UK is on the cusp of a new wave of price pressures. National Insurance hikes, council tax increases, water bill rises, and global trade tensions are all set to drive inflation higher in the coming months, potentially reaching 3.7% by Q3 2025, as forecasted by the Bank of England. For households, this means tighter budgets and tougher choices ahead. Policymakers and consumers alike must brace for a challenging economic landscape, where the current calm is merely the eye of the storm.
