The Salary Calculator

The rising cost of living, loans and borrowing

by Madaline Dunn

Research shows that as the cost of living continues to rise, so too is borrowing – whether that’s via credit cards, or payday loans. While it can be tempting to opt for a loan in financially trying times, it’s important to keep your wits about you, and not rush into a decision without thoroughly researching.

At The Salary Calculator, we know how challenging it can be navigating the world of borrowing and loans, so below, we’ve outlined some top tips to bear in mind to keep yourself safe. This article will explore:

• Why the cost of living is getting more expensive
• How more people are borrowing than ever
• How to protect yourself when borrowing

How is the cost of living getting more expensive?

The cost of living has reached crisis levels, leaving many in UK faced with their worst financial situation in decades. Fuel, housing, and food are all getting more expensive. According to the ONS, in February, Inflation hit a new 30-year high of 6.2%, and housing costs and services increased by 7.2% within the last year, too. Moreover, rental prices went up 2.3% and homeowners saw a hike of 2.5%.

Within the same time frame, transport costs have seen an increase of 11.5%, with petrol and diesel prices rising and even hitting record levels in February. Meanwhile, food and drink prices have soared by 5.1% – according to statistics, prices for bottled water, soft drinks, juices, meat, sugar, jam, syrups, chocolate and sweets increased the most.

Looking ahead, as the Russia-Ukraine war continues, with Russia and Ukraine being responsible for 30% of global wheat exports, food prices are only set to rise further.

It’s not just food, fuel and housing that’s seen a hike, either. Clothing and footwear have taken a hit, too, rising by 8.9%. Likewise, furniture, household equipment and maintenance saw a similar increase, rising by 9.2% in the past year.

Alongside the price rises, wages across the UK are now falling at their fastest rate since 2014. This is, again, because inflation is spiralling out of control.

More people borrowing than ever before

People across the UK are feeling the pinch as prices continue to soar and are turning to borrowing to help them cope with increasing financial hardship. According to figures published by the Bank of England (BoE), people borrowed a net £1.5 billion on credit cards in February, which is reportedly the highest since records began. This is even up from 2020, which saw nearly 9 million of the UK’s poorest significantly increase their borrowing amounts.

Joanna Elson, the chief executive of the Money Advice Trust, which runs the National Debtline and Business Debtline, said these borrowing statistics are “an indicator of the underlying challenges households face in meeting the growing cost of living” as she called on the chancellor to provide more targeted help for hard-pressed households.” Adding: “Our concern is that more people will be pushed to credit to cover rising bills, which could be storing up problems further down the line when repayments are due.”

Of course, credit card borrowing is not the only kind of borrowing, payday loans are lurking out there, too and according to reports, interest in these kinds of loans has been ballooning in recent months as living costs surge. Research from Raisin UK has found that in the last 12 months, internet searches for these kinds of loans shot up by 350%.

Experts, however, warn that payday loans, while sometimes attractive, are an easy route into a slippery path of debt. Kevin Mountford, Co-founder of Raisin UK, outlined: “It is easy to fall into a cycle of debt with these schemes if you continually require them to cover shortfalls. With rising interest rates, payday loans will most likely leave you struggling financially, even more as you will owe these companies a continually growing amount of money.”

Adverts for this kind of predatory loan are on the rise and appearing on Google, too. A recent report found that those who searched terms like “quick money now” and “need money help”​ were directed by Google to sites offering high-interest loans to those in financial difficulty. One site advertised when individuals searched for the above terms was Tendo Loan, which offered “Cash in 10 minutes guaranteed. 3-36 months. No credit check!” The site went on to say that those looking to find a loan could have it “delivered faster than pizza!”

How to protect yourself when borrowing

It’s undeniable that millions of people in the UK are facing increasing financial hardship, and predictions are that it is only going to get worse. By 2023, it’s said that as many as 16 million people could be officially classed as living in poverty. So, it’s understandable that some may be faced with no other option than to borrow. That said, when borrowing, regardless of who you’re borrowing from, it’s important you safeguard yourself. Below, we’ve highlighted some top tips.

Research, research, research

When financially desperate, it’s easy to get caught up in signing a loan that you know little about. So, it’s important to make sure you research. Research into the company, make sure that they’re reputable and trustworthy, and get all the facts about the loan, including and especially the small print.

Don’t get conned into borrowing more than you asked for

Lenders may try and talk you into borrowing more than you were looking for or encourage you to opt for a different kind of loan. Make sure whatever decision you make is informed, and not pressured. Take your time, and stick to your guns.

Don’t overcommit, and make sure you can pay back whatever you borrow

Make sure you review your finances before committing yourself to a loan. Entering an agreement with high-interest rates may lead you down a debt hole that’s hard to get out of, and leave you in a worse position than when you started.

Tags: borrowing, interest rates, living costs, Loans

The new tax year: Changes and preparations for April 2022

by Madaline Dunn

The new tax year is almost upon us, and a number of changes are coming into effect in April 2022. These changes could hit you in the pocket, so there may be some preparations you may need to make to ensure you’re ready.

From council tax, car tax, pensions and tax codes, make sure you’ve got your finger on the pulse this April. At The Salary Calculator, we’ll walk you through:

• What is staying the same
• Incoming changes to council tax
• The new changes coming in for car tax
• What’s happening with pensions
• What to check before 5th April
• How to work out any changes to your taxes

What will stay the same in the new tax year?

Although the new tax year often brings in changes to the amount of tax people pay, as per Chancellor Rishi Sunak’s budget, there will be a number of freezes rather than cuts.

Income tax is frozen for this year and will remain that way until 2026. So, the threshold of £12,570 will stay the same, as well as the basic rate tax of 20%, which you will pay on any earnings over that amount up to £50,270. While this may sound positive at first, according to the Centre for Economics and Business Research (CEBR), over nine million workers will pay more as a result.

However, the situation in Scotland is different, as a devolved nation, there are different rates and thresholds when it comes to income tax. Any changes can be viewed here on the Scottish government website.

Capital gains tax which people pay when they make a profit on assets such as a buy to let property, and the allowance on this tax, which is set at £12,300 is also being frozen until 2026.

What changes are coming for council tax?

In February, Chancellor Rishi Sunak announced that roughly 20 million households in council tax bands A to D in England will be impacted by a £3bn council tax rebate. According to the government, this includes 95% of rented properties and the rebate does not have to be repaid.

The same kind of scheme is going ahead in both Scotland and Wales, with the former offering a £150 council tax rebate.

According to the Local Government Association (LGA), those eligible should set up a direct debit to speed up the process. Cllr Shaun Davies, LGA’s Resources Board chairman, outlined that without taking that step, it could “take longer.” This is because the local council will have to reach out first and then individuals will have to make a claim themselves.

While those living in bands E to H in England and Scotland won’t be eligible, you can check your eligibility by visiting the government website.

What changes will come into effect for car tax?

Car tax, otherwise known as Vehicle Excise Duty (VED), is increasing in April, and the amount you pay will depend on a few factors, including how old your vehicle is and the amount of emissions it produces.

To work out how your vehicle will be affected by the new changes, head over here, where you’ll be able to work out if you’ll encounter any increases.

What’s ahead for pensions

When it comes to the changes in store for pensions, there has been a suspension of the triple lock and instead, a new double lock is being temporarily introduced.

As per the triple lock, the state pension rises in line with the highest of the following three measures every year:

• A flat 2.5% rise
• Average earnings growth
• Inflation

It also applied to both the basic state pension and the new state pension. That said, the new double lock means that for 2022-23, the state pension will either rise by 2.5% or the inflation rate, which will, according to the government, last until 2023-24.

What to look out for this April

As the new tax year approaches, experts warn that people should lookout for a number of things.

The first thing to check is your tax code. While the most common tax code for the tax year 2021/22 and 2022/23 is 1257L, which will not change until 2026, it’s your responsibility to check that you’re not using the wrong one. Through checking if your tax code is correct, you’ll also be able to review whether you are owed money from HMRC or owe money.

As recently covered by The Salary Calculator, NI contributions will go up in April, too, so make sure you’re up-to-date with how the upcoming NI contribution changes will affect you.

Likewise, it has been advised that those who had to work from home during the 2020 lockdown or during the 2021/22 financial year to claim should review their entitlement to tax relief. This can be worth up to £125 from HMRC, and people are being encouraged to check what they’re owed before April 5, which could see the introduction of a rule change on claiming to work from home tax allowance.

How to work out any changes to your taxes

It’s always best to prepare for what’s in store, and if you want to check out how your finances will be affected by the upcoming changes in April, head over to The Salary Calculator, where you’ll be able to work out your take-home pay.

Tags: 2022, car tax, income tax, New tax year, Pensions, taxes

The rising rent issue

by Madaline Dunn

Rent prices in the UK ​​are rising at the fastest rate in five years, further hiking up the cost of living as millions of people feel the squeeze. As the ‘cost of living crisis’ continues, politicians have commented that it’s a “very difficult time” but are failing to take meaningful action.

As more and more low-income tenants are forced to make ‘heat, eat or pay rent’ choices, many argue there has never been a better time to reintroduce rent controls to help address the crisis.

The latest news is undeniably distressing, but at The Salary Calculator, we’ll make sure you’re up-to-date with the latest on personal finance. In this article, we’ll walk you through:

• Why rent prices are rising
• What the experts are saying about the situation
• Whether calls for rent controls are being taken seriously

What’s going on with rent prices?

In the UK, rent prices are on the rise, with statistics from ONS showing that this rise is at the fastest rate in five years. Research shows that the average annual UK rental growth has also reached a 13 year high, with rents increasing by 8.3 % by the end of last year. Unfortunately, there is further bad news, with Rightmove predicting that rent will increase by another 5% in the year ahead. Reports have revealed Wales and the northwest of England saw the largest increase in asking rents. There, rent prices increased by 12%, while in the southwest of England, rent rose by 11%.

Of course, this pinch is pushing many to the brink. Back in 2021, Citizens Advice revealed that half a million private renters in the UK were behind on their rent, with an estimated £360 million owed UK-wide, and within the last year, the situation has not improved. Together, housing charity Crisis and Heriot-Watt University have forecast that over 66,000 more people will be homeless by 2024. Likewise, a survey of 155 English councils found nine in ten town halls expect to see a surge of evictions from private rented homes in 2022.

So, exactly why are rent prices so high? Well, right now, there’s a high demand for renting and a low number of rental properties available, which is in part due to Covid-19’s disruption to the housing market. Propertymark, the membership body for property agents in the UK, has even warned that the situation is likely to worsen, with more landlords planning to exit the market due to “increasing regulation and taxation.”

Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown, calls this predicament a “dual problem” for renters, whereby rents rise while there are fewer properties on the market to choose from. Speaking to i News, she said: “No wonder we’re hearing so many stories of renters getting dragged into bidding wars, where they’re forced to pay more than the advertised rent in order to have somewhere to live.”

What are the experts advising?

When faced with rent hikes, often it feels like landlords hold all the cards, and there is nothing you can do as a renter to fight back, however as a renter, there are a few things you can do.

Renters are well within their rights to question why their landlord is increasing their rent. Likewise, it’s important to remember that landlords can’t just increase their rent prices by how much they want or whenever they want.

Once you’ve found out why your landlord is hiking your rent, you can also try to negotiate on the price. When negotiating, Citizens Advice recommends that tenants look at similar properties in the area and use those rent prices as “evidence” to show why the hike shouldn’t go ahead or that it should go ahead at a lower rate. The organisation suggests that often landlords will prefer to negotiate rather than lose their tenants.

That said, negotiation isn’t always possible, and in situations where tenants feel like they’re running out of options, they can appeal to a tribunal for rent complaints.

Unfortunately, if you’ve exhausted all your options, you may have to look into downsizing, becoming a lodger, sharing a house with other tenants, or moving into a cheaper area. Speaking about the terrible ultimatum renters are being faced with, Coles said: “Those hoping to stay in their home for another year are facing huge rental hikes. If they can’t afford it, they face the horrible expense and upheaval of a move – as well as the prospect of trading down to something smaller or in a less expensive area.”

Calls for rental controls

It is undeniable that the housing market is out of control in the UK, and to combat this; some are calling for rental controls to be reintroduced back into the UK. Rental controls are regulations that ensure the affordability of housing, and place a cap on the amount a landlord can charge tenants when leasing a new property or renewing a lease. These controls were essentially removed back in the 1980s during the Thatcher era, with the Housing Act 1988.

Now, Sadiq Khan, Mayor of London, is leading the call for change in London, and in the past has said that introducing rent controls in London could act as a “blueprint” for other cities with out of control rent prices.

Elsewhere, in Bristol, local housing chief, Tom Renhard, is lobbying Ministers to access rent control powers and wants to involve other core cities with this plan. The cabinet member for housing and communities argues that while there are “some good landlords”, there are also “a lot of terrible ones.” Adding: “Some [landlords] aren’t doing the repairs even now when rents are going up. If you can’t afford to upkeep a home, then why are you renting it out? People deserve to live in a home that’s fit for human habitation.” Bristol City Council is subsequently held a “Renting Summit” on 2 March 2022 to explore this.

Tags: housing market, Personal finance, rent

The National Insurance hike: What, How and Why

by Madaline Dunn

In another financial blow to many, the government has announced that the National Insurance (NI) hike will, in fact, go ahead. This comes at the same time as energy bills skyrocket, food costs rise, and interest increases, leaving many concerned about what it will mean for them and the general cost of living. 

At The Salary Calculator, we’ll help you get to grips with the upcoming changes and explain:

• What the National Insurance hike is all about 
• How much more money you can expect to pay
• Who will be affected most by the hike

The National Insurance hike 

On 28 January, Chris Philip, Minister for Technology and the Digital Economy, announced that the planned National Insurance increase would indeed go ahead in April, much to the dismay of millions in the UK. 

This move goes against the Conservative Party’s 2019 election manifesto, and according to the government, is expected to raise £36 billion over a three year period. The hike is reportedly in response to Covid and the pressure it placed on the NHS. A portion will also be dedicated to reforming the social care system.

Defending the hike, in The Sunday Times, Prime Minister Boris Johnson and Chancellor Rishi Sunak called the policy “progressive,” adding: “We must clear the Covid backlogs, with our plan for health and social care – and now is the time to stick to that plan. We must go ahead with the health and care levy. It is the right plan.”

How much money you can expect to pay

The changes to National Insurance will come into effect on 6 April 2022 and according to reports for many across the country this hike is the equivalent of a 10% increase in deductions from pay packets. The rate of dividend tax will also increase by 1.25 percentage points. 

Those earning £9,880 a year, or £823 a month, won’t have to pay National Insurance, but those earning £12,875  or more will see their NIC increase. For example, basic-rate taxpayers will see their NIC jump from 12% to 13.25%. So, those earning £24,100, will say goodbye to an additional £180 a year which translates to £3.46 a week, or £13.84 a month. Meanwhile, those on £50,000 will pay £505 more a year. 

Those who are higher-rate taxpayers and on a salary of £67,100 will pay £715. While those on £100,000, will pay £1,130 more.

Who will be affected the most by the hike?

Although the tax will be progressive, with those who earn more paying more, those on £100,000 a year will pay just 7% of their overall salary in NIC, which is the same proportion as those on just £20,000 a year. Moreover, the NI hike means that someone on £50,000 a year will pay £5,086, around 10% of their gross salary.

With so many families already struggling to make ends meet, many argue that the NI increase should be postponed. Commenting on this, Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “Now is not the time for a tax hike: the National Insurance rise in April needs to be shelved.”

This is something echoed by Laura Suter, head of personal finance at investment platform AJ Bell, who said poorer families will be hit the hardest: “For a much bigger proportion of low-income families, monthly costs go on things like energy bills and food bills, who tend not to have the same ability to cut back as wealthier families.”

Tags: Economy, living costs, national insurance, salary

Energy prices on the rise

by Madaline Dunn

News of rising energy prices will come as another financial knock to many people across the UK after what has been a turbulent two years. The cost of living is set to increase once again following a worldwide squeeze on gas and energy supplies.

In October, around 15 million homes saw their bills up 12%. Unfortunately, the situation is only likely to worsen, with industry leaders calling for government intervention to help tackle the “national crisis”.

At The Salary Calculator, we’ll walk you through:

• How much you can expect costs to rise by
• The causes of the price hike
• Whether there’s anything you can do to navigate this

How much will costs rise?

In the UK, the trade body Energy UK has released some bleak forecasts regarding energy bills, outlining that they could rise by 50% by springtime, which will ultimately hit low-income households and small businesses the hardest.

As a result, reports say that the energy bill for the average household could increase by £600 by April – and looking forward, next year, bills could reach £2,200-a-year on average.

Of course, with other rising living costs, this is concerning news for many. Alex Belsham-Harris, of Citizens Advice, says that already people are feeling the pinch. He added: “With major hikes to energy bills from April and other costs of living rising, the quickest and easiest way for the government to provide direct support for those hardest hit will be through the benefits system.”

What’s causing the hike?

Energy costs are on the rise for a number of reasons. Wholesale energy prices have surged as economies emerge from the pandemic, with demand increasing and fewer exports. Last year’s cold winter in Europe also played a part. So, there has been a range of technical and geopolitical issues at play. Since 2020, energy prices have risen by 250%, and in August, they rose further by a staggering 70%. This has led to more than 20 domestic suppliers going bust as the price cap prevented companies from charging consumers more to deal with this.

Although Ofgem’s price cap has limited energy suppliers in regards to how much they charge, this is to move in April and could reach £1,995-a-year per household.

What can you do?

It can be stressful thinking about the prospect of rising energy prices, and it’s understandable to have concerns and questions.

Some important information to remember is that if you’re struggling to keep up with payments, don’t put your head in the sand. Reach out to your supplier as soon as possible. Suppliers can help set up an affordable payment plan if you feel things are spiralling – they may even pass on the details of charities that can help you with your financial burden.

That said, if you feel as though the situation has advanced beyond that, it may be time to reach out to a debt adviser to help you navigate missed payments and the like.

Likewise, it’s worth noting that if your provider is one of the unlucky ones caught up in the crisis and goes bust, and you have credit on your account, it won’t be lost. Instead, your balance will be transferred to your new energy supplier – the same goes for any debt on your account; it will be passed on.

Of course, there are ways you can use energy more efficiently, too, to keep your bills lower. Simple things like not leaving appliances on standby and switching off lights when they’re not needed can have a big impact. Switching to low energy light bulbs can keep costs lower, too, as can using draft excluders and investing in better insulation and double glazing – although the latter may not be financially viable options for everyone.

Tags: Economy, Energy prices, living costs, Personal finances