UK Finance Daily: Inflation Hits 2.9% as Energy Bills Surge

It has been a turbulent week for UK household finances. Inflation is rising again, energy bills are heading towards a three-year high, and HMRC is tightening its grip on cryptocurrency investors. Here is what happened yesterday and, more importantly, what it means for your wallet.

Inflation Jumps to 2.9% — and More Rises Could Be Coming

UK inflation climbed to 2.9% in July 2026, up from a 15-month low of 2.6% in June, according to the Office for National Statistics. The main culprit is energy: rising gas and electricity prices, driven by the ongoing conflict in Iran, pushed household bills higher and snapped a run of falling or stable inflation that had lasted since March. Chancellor John Healey acknowledged the war "continues to impact prices here at home".

While 2.9% might sound relatively modest compared with the double-digit peaks of a few years ago, the concern is that this is likely to be the first in a series of rises, not a one-off blip. City economists had forecast this figure, but analysts warn that Prime Minister Andy Burnham's plans to shield households from further pressure risk being overwhelmed by the scale of the energy shock working its way through the economy. For everyday consumers, that means the cost of living squeeze is far from over.

Energy Bills Forecast to Hit a Three-Year High This Winter

If rising inflation was not enough, households face a further blow this autumn. Energy consultancy Cornwall Insight forecasts that Ofgem's quarterly price cap will rise by 4% from October 2026, pushing the equivalent annual bill to £1,729 — the highest level in three years. That October increase builds on a rise already seen in July, meaning energy costs are climbing steadily just as the colder months approach.

Particularly frustrating for many households is that this increase looks set to cancel out Andy Burnham's VAT cut on electricity bills, which was intended to ease the pressure on consumers. In other words, the tax relief that was supposed to put money back in your pocket is at risk of being swallowed whole by higher wholesale energy costs driven by events in the Middle East. Cheaper fuel prices — a knock-on effect of some easing of Middle East hostilities following Donald Trump's June "memorandum of understanding" with Iran — have provided only limited offset.

For those already struggling, the combination of higher energy bills and broader inflation is likely to mean real financial hardship this winter. If you are worried about your ability to meet essential costs, speaking to a regulated financial adviser can help you identify options — from reviewing your protection cover to restructuring debt — before things become critical.

What Surging Inflation Means for Interest Rates and Your Mortgage

The Bank of England sets its base rate with one eye firmly on inflation. When prices rise faster than its 2% target, the Bank faces pressure to keep rates elevated — or even push them higher — to cool the economy. With inflation now at 2.9% and likely to climb further as energy costs feed through, hopes of further base rate cuts in the near term have dimmed considerably. The BBC reports that the Bank's decisions on rates continue to ripple through mortgage, loan, and savings rates for millions of people across the country.

For mortgage holders, the picture is mixed. Those on fixed-rate deals are insulated for now, but anyone coming off a fix in the next six to twelve months needs to plan carefully. Rates on new fixed deals could remain higher than many had hoped just a few months ago. On the other hand, savers may benefit from rates staying elevated for a while longer, making it worth shopping around for competitive easy-access and fixed-term savings accounts before rates eventually do fall.

HMRC Sends 81,000 Warning Letters to Crypto Holders

Cryptocurrency investors are firmly in HMRC's sights. According to a Freedom of Information request, the tax authority sent 81,000 warning letters to crypto holders as part of a major tax crackdown — a figure that has almost tripled since 2024. The letters are designed to prompt people to check whether they owe tax on gains or income from digital assets such as Bitcoin, Ethereum, and other cryptocurrencies.

Many people who bought crypto during the boom years and sold, swapped, or spent it may not realise they have a potential tax liability. In the UK, cryptocurrency is treated as a capital asset, meaning profits above the annual Capital Gains Tax (CGT) allowance — which has been cut significantly in recent years — may be taxable. Receiving one of these letters does not automatically mean you have done something wrong, but ignoring it could lead to penalties.

The Bottom Line: What You Should Do Now

Yesterday's news paints a challenging picture for UK household finances heading into autumn and winter 2026. Here is a practical summary of the steps worth taking right now:

• Review your mortgage: If your fixed rate ends in the next 12 months, start exploring your remortgage options now — rates may not fall as quickly as hoped. See our remortgage guide to get started.
• Check your energy tariff: With bills heading for a three-year high, compare tariffs and consider whether a fixed energy deal makes sense for your circumstances before October's price cap rise.
• Audit your budget: Inflation at 2.9% means your money buys less than it did a year ago. Go through your direct debits and subscriptions and cut anything you no longer need.
• Boost your savings rate: With base rates staying higher for longer, savings rates remain competitive. Make sure your cash is in an account that is actually earning a decent return. See our ISA guide for tax-efficient options.
• Get your crypto tax in order: If you have traded, sold, or spent cryptocurrency, check your CGT position before HMRC contacts you. Proactive disclosure is always better than waiting.
• Talk to a regulated adviser: With so many moving parts — rates, inflation, energy costs, and tax — personalised financial advice has rarely been more valuable. Nesto can match you with an FCA-regulated financial adviser suited to your needs, at no cost to you.