Last updated October 2026.
When prices rise faster than income, a budget that used to balance can start to fall short. The changes are often gradual: a few pounds more on the weekly shop, a higher energy tariff, a rent increase at renewal. This guide explains how to measure what rising prices mean for your household, how to protect the most important bills, and where to check for official support.
What inflation means for your budget
Inflation is the rate at which prices rise over time. The Office for National Statistics publishes monthly figures for consumer price inflation (CPI), and the Bank of England sets interest rates with the aim of keeping CPI inflation at a 2% target. You can find the latest figures in the ONS consumer price inflation release and read about how the target works on the Bank of England inflation target page.
The headline inflation rate is an average across a basket of goods and services. Your own household's inflation depends on what you buy. If a large part of your spending goes on food and energy, and those prices are rising faster than average, your costs may rise faster than the headline figure.
Worked example: measuring your own price rises
Compare your spending on a few key categories now with the same months a year ago. Suppose a household spent £480 a month on food last year and now spends £516 for a similar shop. That is a £36 increase, or 7.5% (£36 ÷ £480). Over a year it adds £432 to the budget. Doing the same for energy, travel and insurance shows which areas are putting the most pressure on your budget.
Step 1: update your budget with current prices
Re-run your budget using the latest bills rather than last year's figures. The budget planner shows the money left after housing, bills, food, debt and saving. If you have not built a full budget before, the household budget guide explains how.
Pay particular attention to:
- Energy: check your current unit rates and standing charges. The Ofgem energy price cap page explains how the cap limits unit rates and standing charges for standard variable tariffs. It does not limit your total bill, which still depends on how much energy you use.
- Council Tax: new bills usually arrive in March for the year from April.
- Rent or mortgage: note when your tenancy or fixed mortgage rate ends, as this is often when the largest single change happens. Mortgage rates are influenced by Bank of England Bank Rate and wider market conditions.
- Contracts with annual price rises: many broadband and mobile contracts include price rises during the contract. Check the terms so the increase is in your budget.
Step 2: protect priority bills
If you cannot pay everything, some bills matter more than others. Rent, mortgage, Council Tax, gas and electricity, court fines, the TV licence and Child Maintenance are generally treated as priority debts because missing them can lead to serious consequences, such as losing your home or enforcement action. The MoneyHelper guide to prioritising debts explains the difference between priority and non-priority debts.
If you are falling behind, contact the company early. Energy suppliers, councils and landlords often have arrangements for people in difficulty, and it is usually easier to agree a plan before arrears build up.
Step 3: check what support you could get
Many people do not claim help they are entitled to. It is worth checking, even if you work. Official places to start include:
- The GOV.UK benefits calculators, which link to independent, free calculators that check which benefits you may be able to claim.
- Council Tax Reduction, run by your local council for people on a low income or receiving benefits. It can reduce a bill by up to 100%, depending on the scheme where you live.
- Child Benefit, if you are responsible for a child. The Child Benefit calculator shows how much you could get and whether the High Income Child Benefit Charge applies.
- The Warm Home Discount, a one-off discount on electricity bills for eligible households.
- Healthy Start, which helps eligible families buy milk, fruit and vegetables.
- Tax-Free Childcare, where the government adds £2 for every £8 you pay in, up to £2,000 a year per child (or £4,000 for a disabled child).
- The GOV.UK cost of living support and GOV.UK help with energy bills pages, which collect the main government schemes in one place.
Step 4: reduce costs without cutting essentials
When money is tight, the first instinct is often to cut everything at once, which is hard to keep up. A better approach is to target regular costs where a single change keeps saving money every month:
- switch tariffs or contracts at the end of a fixed term;
- ask about social tariffs for broadband, phone and water if you receive certain benefits;
- check that your Council Tax band and any discounts are correct;
- cancel subscriptions you rarely use;
- plan meals and compare unit prices when shopping.
Our 50 budgeting tips include more ideas.
Step 5: think about savings and debt
If you have savings, an emergency fund can absorb a large bill without borrowing. If you are borrowing to cover everyday costs, such as using a credit card or overdraft for food or bills, that is a sign to get advice early, before balances grow. The MoneyHelper debt advice locator finds free and confidential debt advice. In England and Wales, a debt adviser may be able to apply for Breathing Space, which can pause most enforcement action and freeze most interest and charges for a period while you get advice; see the government's Breathing Space guidance.
If you have a little room in your budget, building even a small buffer helps. See how much to save each month.
Step 6: review regularly
Prices do not all change at once. Energy prices, rents, Council Tax, insurance renewals and contract price rises all happen at different times of the year. A short monthly check, comparing what you planned with what you spent, helps you spot changes early. Note the dates when your main contracts and tariffs end, so you can compare deals before a price rises.
A note on income
A budget can also be helped from the income side. If your pay has changed, check that your tax code is right and that you are not paying too much tax. If you have more than one job or receive benefits, check your entitlement after any change in circumstances. The take-home pay calculator gives a quick estimate of what a pay rise or extra hours would add after tax and National Insurance.
Frequently asked questions
Why does my cost of living feel higher than the inflation figure?
The headline CPI figure is an average across many goods and services. If more of your budget goes on items whose prices have risen faster, such as food or energy, your own costs may rise faster than the average.
What bills should I pay first if I cannot pay everything?
Priority bills such as rent or mortgage, Council Tax, energy, court fines, the TV licence and Child Maintenance, because missing them has more serious consequences. Free debt advice can help you work through the rest.
Can I get help with Council Tax?
You may qualify for a discount or Council Tax Reduction, depending on your household and income. Each council runs its own scheme.
Does the energy price cap limit my bill?
No. It limits the unit rate and standing charge a supplier can charge on standard variable tariffs. Your total bill still depends on how much energy you use.
Where can I get free debt advice?
MoneyHelper's debt advice locator lists free, confidential services online, by phone and face to face.
This guide is general information, not financial advice. See our terms and editorial policy.