RPI or CPI – are we worried?Saturday, October 22nd, 2011
Last week, the Office for National Statistics announced the inflation figures for September 2011. Whilst these are always a guaranteed news item, do we really give the figures the attention that they deserve? For example, the headlines read that the Retail Prices Index (RPI) moved to a 20-year high of 5.6%. However, in the acronym-filled payroll world, it is the Consumer Prices Index (CPI) that we should be looking at, which rose to 5.2%, matching the previous high set in September 2008. Why are we interested? From 2012-13 tax year, it will be CPI rather than the RPI that will be used as the basis for the indexation of some tax and National Insurance thresholds for the employee. The RPI will still be used as the basis for indexation of the Secondary Threshold for National Insurance plus the age-related and blind persons’ tax allowances. Income and non income-related benefits plus State Pensions can also be estimated.
However, although estimated calculations can be made under the current rules, we await Mr Osborne’s Autumn Statement on 29 November to actually confirm any increases. Will the pressure of a 5.2% increase in things like pension and benefits payments make him alter arrangements in light of his budget deficit reduction policies?
On a different note, knowledge of the CPI rate has confirmed that the Annual ISA allowance for 2012/13 will be £11,280.00.