Money blog: Big rise in UK inflation - here's what it means for mortgages, prices, fuel and interest rates (2025)

More than one million pensioners are paying income tax at rates of 40% or more, figures from HM Revenue & Customs show.

Since 2021-22, the number of people of state pension age or older falling into the tax bracket has doubled from 494,000 to 1,028,000.

In all around 8.8 million pensioners are paying income tax, up from 6.7 million in 2021-22.

Part of the reason for the jump is frozen tax thresholds. As pensions increase, more people are pulled into higher tax brackets, meaning they have to pay more - a process known as fiscal drag.

Sir Steve Webb, former pensions minister and partner at consultancy firm LCP, said being a higher-rate taxpayer could increase costs elsewhere.

For example, basic rate taxpayers can receive up to £1,000 of interest on savings and not have to pay tax on it, higher-rate taxpayers have a £500 personal savings allowance and for additional rate taxpayers it is zero.

"Not only does this mean more tax on things like income from state and company pensions, it also means these pensioners are paying more tax on their savings, as their personal savings allowance is cut, and a higher rate of capital gains tax - a triple whammy," he said.

"The higher rate threshold has become a real cliff-edge over which growing numbers of pensioners are falling."

An advert for nutrition brand Zoe has been banned for claiming that a supplement didn't contain any ultra-processed ingredients.

The Advertising Standards Authority found the company's Daily30+ contained at least two ingredients - chicory root inulin and nutritional yeast flakes - that had been through more than a minimal level of processing.

It said a Facebook ad, which featured a quote from Dragons' Den star and Zoe investor Steven Bartlett, was therefore likely to mislead consumers.

Zoe strongly refuted the ruling and has said it is appealing against it.

Zoe co-founder Professor Tim Spector said: "We categorically reject the idea that this advert is misleading, or that Daily30+ - or any of its ingredients - could be classed as ultra-processed.

"To go after a product that is designed to improve health while doing very little about the harmful marketing and advertising of unhealthy junk food to children and vulnerable individuals is nothing short of disgraceful."

There are some interesting lines in the Joseph Rowntree Foundation's reaction to the rise in inflation.

The charity, which fights against poverty, called the price hikes in April "alarming" - and pointed to figures released todayshowing 2.9 million emergency food parcels were provided across the UK in 2024-25, up more than 50% in the past five years.

JRF economist Maudie Johnson Hunter said:"The government needs to take action to ensure their commitment to improving living standards moves from rhetoric into reality for households.

"Our research shows real incomes are currently projected to be lower in 2029 than they are today, which would be a damning legacy for a government who came to power promising to end the need for food banks."

ByJames Sillars, business and economics reporter

A pretty nasty morning for shares in two of our biggest retailers.

Shares in JD Sports Fashion have fallen by more than 8% after it warned of hits to demand and prices from US tariffs.

The company revealed a 2% fall in sales during its first quarter.

JD was the biggest faller on the FTSE 100.

Then, M&S. Its stock was 3.5% down on the back of an update to its outlook following the cyberattack it declared a month ago.

M&S said it was facing down a £300m hit to trading profits but it was looking to significantly reduce that number by the end of its financial year in March.

It warned it could be a couple of weeks yet before any kind of website sales resume and that the disruption to its operations was likely to last into July.

Read the full story on that here...

The FTSE 100 was 0.2% down at 8,765.

The pound was trading 0.2% up versus the dollar, at $1.34, on the back of those higher inflation figures. It briefly hit a three-year-high.

What the inflation data did was slightly hit market expectations for UK interest rate cuts this year, as we've been reporting.

Higher interest rates tend to be supportive of a domestic currency's value.

We'll continue to bring you reaction to April's inflation data through the day - but we'll now also start posting our usual consumer and personal finance news.

A little later this morning, we'll have our weekly Savings Guide which exposes how bad easy access savings rates are among the top banks - and outlines where you could put your money for a better rate.

There is one thing to feel positive about in the inflation data - the price of petrol and diesel has come down.

The average price of petrol dropped by 3p per litre in April, taking it to 134.5p, the Office for National Statistics data showed. That's down from 148.1p per litre last April.

The fall was slightly larger for diesel prices, with drivers paying an average of 3.1p less per litre last month. It cost around 141.7p, down from 157.1p in April 2024.

Oil prices dropped to a four-year low in April, due to increased supply, less demand and concerns over a global economic downturn.

Mortgage rates will "edge upwards" in the next few weeks due to the higher-than-expected rise in inflation, brokers have warned.

With hopes of an interest rate cut in June almost non-existent after this morning's inflation data (see 8.10 post), borrowers have been told to "buckle up" for future mortgage rate rises.

"This increase is certainly going to stall the recent mortgage rate improvements, and with inflation due to stay above 3% for the rest of the year it may be too much to expect further base rate cuts in 2025. And that's why mortgage rates will edge upwards in the next few weeks," Justin Moy, managing director at EHF Mortgages, said in comments carried by Newspage.

Swap rates determine how much banks are charged to borrow in order to lend, and many are expecting them to rise in response to the 3.5% inflation figure.

"This will hit mortgage borrowers hard, especially those coming off fixed rates or looking to buy," said Craig Fish, director at Lodestone Mortgages and Protection.

One interesting - and concerning - note in today's inflation data dump from the Office for National Statistics is on water bills.

The cost ofwater and sewerage rose by 26.1%in April, the ONS said.

Official figures show this is the steepest rise since February 1988 - the year before the water industry was privatised by Margaret Thatcher.

The UK now has one of the highest rates of inflation in the G7.

Canada, the US, France, Italy and Germany all recorded inflation rates lower than 3.5% in April.

We are still waiting for Japan's April data, which is why it's not included in the table below. Last month, it saw prices rise at a rate of 3.6%.

We've also included the inflation rate in the Eurozone - the countries that use the Euro - for comparison.

It recorded inflation at 2.2% in April.

Analysts say this morning's news on inflation damages hopes of another base rate cut in June.

Paul Dales, chief UK economist at Capital Economics, said the higher-than-expected 3.5% figure for April "may suggest that the persistence of inflation is a bit stronger and/or businesses are passing on more of the recent rises in taxes".

"Either way, it casts a little doubt on expectations that interest rates will continue to be cut gradually."

Interest rates are kept high to control inflation. Higher rates squeeze people's spending power and encourage saving - these things tend to slow price rises.

After this morning's figures, financial markets continued to fully price in two further interest rate reductions this year, but the chances of the Bank of England making no changes at the next rate-setting meeting in mid-June rose slightly to 90%.

Worrying data

The "most worrying" element of the data, Dales said, was rises in core inflation (from 3.3% to 3.8%, significantly higher than expected) and services inflation (from 4.7% to 5.3%, when the Bank of England had forecast 5%).

Core inflation strips out volatile elements and services inflation is largely made up of wages - meaning the Bank of England keeps a close eye on both when setting interest rates.

One spot of hope is that Easter fell in April rather than March this year, inflating the April figure because airline prices go up during holiday periods.

"It may be reversed in May," said Dales.

In conclusion, he said: "These figures will make the Bank more alert to the possibility that this rebound in inflation will be bigger and last longer than it had been thinking."