The rate of Consumer Prices Index (CPI) inflation in the UK rose to 5.2% from 4.5% in September 2011. Meanwhile the Retail Prices Index (RPI) reached 5.6% which is the highest RPI annual inflation rate for over 20 years.
High inflation does however mean that ISA limits will increase to £11,280 from next April, the Treasury has announced, up to half of which can be saved in cash ISA’s.
The CPI will also be used to set the amount by which the State Pension and Job Seekers Allowance will be increased in April 2012. It will be the first time that benefits have increased by CPI and not RPI.
Other rates set by the September inflation figure include allowances and indexation for Income Tax, National Insurance, Inheritance Tax and Capital Gains Tax.
A large number of economists believe that the September rise should represent a peak and predict that inflation should start to fall, possibly as low as 2% by the end of 2012 but this is dependent on what happens to oil price movements.
Watch this space…