Inflation ahoy – here’s how you can beat it

An increase in VAT seems to be on the cards, and that leads to pretty much the same increase in inflation, less a little to allow for the fact that food isn’t subject to VAT in the UK.

Tax-free Index-linked National Savings Certificates look like one way to try and claw this back from the Government, I am toying with throwing in the towel on my Cash ISA, which I struggle to get 2.5-3% variable on. RPI scans back a year on prices to get the interest rate. The VAT rise will probably be announced on June 22nd so buying certificates on the last day in May would capture the entire inflation boost from the rise in VAT on maturation in 3 years, plus of course the inflation boost from the earlier printing money like drunken sailors quantitative easing.

Since the purpose of an emergency fund is to buy stuff, probably VAT rated, doing nothing is letting George steal 2.5% from the value of my fund next month. True, if the emergency happens in the first year I am stuffed, as these can be cashed in early but attract no index-linking in the first year.