The Salary Calculator

With the new school year commencing, millions of students across the country will be mulling their university choices — and how they’ll fund their education.

But while record numbers are being accepted into universities and colleges this year, research shows that students are concerned about costs.

At the same time, recent data from the Higher Education Policy Institute (HEPI) shows that misconceptions about student loans abound.

To clear up the confusion, this week at The Salary Calculator, we’ll answer:

• How have loans, fees and thresholds changed?
• How much can students borrow?
• Is student finance enough to cover costs?
• How can students financially prepare for university?

How have loans, fees, and thresholds changed?

Over the last two decades, a lot has changed across student fees, finance, and funding. With tuition fees hitting £9,535 this year, the days of the £1,000-a-year courses seem but a distant memory.

Meanwhile, maintenance grants, which previously offered students up to £3,387 a year, were scrapped back in 2017 and replaced with maintenance loans for living costs.

And interest rates? That depends on your plan. Currently, it’s:

• 3.2% if you’re on Plan 1 (you started your course before 1 September 2012)
• 3.2% to 6.2% based on annual income if you’re on Plan 2 (you started your course between 1 September 2012 and 31 July 2023)
• 3.2% if you’re on Plan 5 (you started your course after 1 August 2023)
• 6.2% if you’re on a Postgraduate Loan plan

That said, you’re charged interest from the day your first payment is made, regardless of your plan.

Your plan will also determine the salary threshold at which you’ll start repaying your loan.

For Plan 1, you’ll start paying back your loan at £26,065. With Plan 2, this is £28,470, and for Plan 5 it’s £25,000.

For Plans 1, 2 and 5, you’ll pay 9% of your income.

For postgraduate loans, the threshold is £21,000, at which point you pay 6% of your income over the threshold.

If you would like to see how much this will take off your pay each month, use The Salary Calculator‘s Student Loan options to get an illustration.

For those commencing university in 2025, loans will be wiped after 40 years — up from 30. However, many students will never pay back their loans in full. For full-time undergraduates starting their courses in 2024/25, government forecasts are that this figure stands at just 56%.

How much can a student borrow?

While tuition loans cover your course fees and are paid directly to your university, maintenance loans are means-tested. When you apply, your household income and where you live and study will be factored into how much you’ll receive.

For those from households with an income of £25,000 or below and living at home, you’ll be entitled to £8,877. This rises to £10,544 if you live away from home outside London.

Earlier this year, figures from the Student Loans Company (SLC), the organisation which administers loans and grants to students in colleges and universities, revealed that in 2024-25 the amount of debt students graduated with was up nearly 10% from the year prior, reaching an average of £53,000.

Indeed, this echoes numbers obtained by the BBC last year, which found that 1.8 million people owe at least £50,000 in student loans, and an additional 61,000 have “balances of above £100,000.”

Despite this data, a recent report from King’s College London found that people “underestimate” the true level of debt students take on by £10,000, with average student debt exceeding the US by “nearly £6,000 more than the equivalent figure in the US.”

Is student finance enough to cover costs?

But while student debt is increasing, research suggests that students are still struggling. According to the Centre for Research in Social Policy (CRSP) at Loughborough University, the maximum maintenance loan covers “only half of what is needed for a minimum socially acceptable standard of living.”

“The financial landscape facing current students is among the trickiest ever”

Findings from the study, conducted with HEPI and TechnologyOne, revealed that for a three-year course, students would need £61,000, increasing to around £77,000 in London.

“The financial landscape facing current students is among the trickiest ever. Our long-running Student Money Survey has routinely found that Maintenance Loans are not enough to live on, but in recent years, the situation has become significantly worse,” said Tom Allingham, student finance expert at the money website Save the Student.

Allingham shared that Save the Student’s latest survey found that funding now falls short of living costs by an average of £504/month. This, he said, is over double the shortfall the organisation discovered in 2020 (£223).

“As a result, students are having to cut spending on even the most basic of necessities, with 9% telling us they’d used a food bank in the past year, and 67% saying they skip meals at least some of the time,” added Allingham.

Leacsaidh Macdonald-Marlow, student voice assistant at Student Minds, echoed this, noting that the current financial landscape, in particular the cost of living crisis, is putting “immense pressure on students.”

“A majority of students now do part-time or full-time work alongside their studies in order to afford necessities like rent, and this affects overall student wellbeing, time management, energy, and subsequently academic stress and performance,” noted Macdonald-Marlow, who said that maintenance loans fail to provide students with “any real sense of financial security,” across almost all socioeconomic backgrounds.

“Students also have a lot of worries surrounding debt”

Indeed, earlier this year, a survey published by Advance HE and the Higher Education Policy Institute (HEPI) found that over the last few years, there’s been, what they called a “dramatic rise” in the number of full-time students working during term time. In 2025, the figure sits at just under 70%, up from 56% the year before and 42% in 2020.

“Students also have a lot of worries surrounding debt, and often feel ashamed or unable to talk to anyone about these anxieties, which only compounds financial stress and a desire to work even longer hours during term-time,” commented Macdonald-Marlow.

Allingham says that a lack of funding underpins this financial struggle. He explained that, in recent years, funding has fallen “drastically short” of inflation, amounting to “huge real-terms cuts” of up to £1,906 in 2024/25, according to the Russell Group.

“We’re urging the government to increase Maintenance Loans above and beyond the rate of inflation, to restore funding to previous levels and prevent students from being condemned to a never-ending cost-of-living crisis,” said Allingham.

Meanwhile, Macdonald-Marlow noted that, as outlined in its Student Mental Health Manifesto, Student Minds recommends the reintroduction of maintenance grants, increased maintenance loans and a fairer repayment scheme.

How can students prepare financially for university?

But, with no current plans to increase the maintenance loan, or indeed reintroduce maintenance grants, how can students best financially prepare for university next year?

“The first thing any student should do to get their finances in order is open the right student bank account,” said Allingham, who explained that instead of being swayed by sign-up freebies, students should prioritise those accounts with interest-free overdrafts instead.

“This is probably the safest and most easily-accessible form of emergency cash at uni, and will be far more useful than any freebie a bank can offer,” added Allingham.

Meanwhile, Leon Ward, CEO of financial education charity Money Ready, recommended that students create a clear picture of their finances. “Work out what you need to spend money on (rent and food, for instance) vs what you’d like to spend money on (such as new trainers) and check that against the money you have coming in.”

Once students understand their financial situation, Ward suggests looking at ways to fill any gaps. “If you need to spend less, check out special student discounts on sites like Student Beans, UniDays or NUS Extra, and get savvy with meal-planning to avoid food waste. By budgeting like this, you’ll enjoy your uni experience without getting into too much debt.”

The money charity provides guidance on this via the hashtag #GetUniReady on its socials and website.

Alongside bank accounts and budgeting tips, Allingham advises that prospective students should also look into bursaries, scholarships and grants to see if they’re eligible for any free cash.

“Despite what many people think, this money isn’t just reserved for those with the highest grades, from the lowest-income backgrounds or who excel in a particular subject,” he explained, adding that there are funds for all kinds of “unusual reasons,” including being a vegetarian or having the surname ‘Graham.’

The Student Minds website similarly offers advice on how students can access additional financial support, such as bursaries or hardship funds.

And, for those already eyeing part-time job opportunities, Macdonald-Marlow recommended looking within your university or Students’ Union, noting that jobs are often advertised via the SU website and/or Unitemps.

“These employment opportunities are built for students, offering hours that fit around your university work, and paying fair wages,” she added.

Buy Now, Pay Later (BNPL) use has surged in recent years. From fridges and fashion to air fryers and furniture, more and more people are choosing BNPL payment plans to foot the bill — including for their summer holidays, according to information and insights company TransUnion.

A recent Loqbox report shared similar findings: among parents, BNPL use for summer travel now sits at 8.4%. This reflects a shift from 2024, it said, when such products were used as “back-up options.”

But consumers aren’t just using BNPL for big-ticket items. Research from the credit-building business revealed that, in the UK, one in 10 are now using BNPL to cover basics like food and fuel. 

And BNPL is not without risk. Unlike other types of credit, BNPL has remained unregulated, with debt charities and consumer experts alike sounding the alarm.

However, regulation to tame this “wild west” is on the horizon. Amidst these upcoming changes, this week at The Salary Calculator, we’ll walk you through: 

• What is Buy Now, Pay Later
• What’s driving BNPL use?
• What risks are associated with BNPL 
• What regulatory changes are incoming? 
• How can consumers protect themselves against unmanageable debt? 

What is Buy Now, Pay Later?

The BNPL market has quadrupled in size since 2020, and in the year to 2024, nearly 11 million people used these kinds of products, up from 8.8 million in 2022.

While BNPL has seen a recent growth in popularity, this kind of short-term financing — which enables shoppers to spread the cost of a purchase across a few weeks or months — has been around for over a decade.

And although BNPL is typically an interest-free form of credit, it’s still a loan.

When consumers use products from companies like Klarna or Clearpay, they’re agreeing to pay back the full cost and any late charges for missed payments. 

What’s Driving BNPL Use? 

For consumers, BNPL products can appear more accessible and convenient than traditional forms of credit. 

Indeed, BNPL offers are increasingly advertised at checkout. There are now over 20,000 merchants offering BNPL — both online and in-person — and that number is only growing. 

Likewise, some of these financial loans only require a soft credit check that’s not visible to other credit providers, which can make BNPL an appealing option for those without a strong credit history. 

And with the cost of living remaining high, the perceived affordability of this kind of credit among consumers is also a key driver in its growth, research shows.

“There is a crossover between BNPL use and people struggling with their finances”

Beyond this, some research has suggested that BNPL’s success is rooted in its “effective” use of artificial intelligence (AI) and algorithms.

So, who’s using these products the most? 

Research from Finder showed that BNPL is now most popular among Millennials, with 60% using such products “at some point,” followed by Gen Z (56%).

A number of factors underpin this trend, from a wariness of traditional credit and credit card approval challenges to a dissatisfaction with traditional banking services.

BNPL use is also high among those living in the most deprived areas of the UK and those with low financial resilience, according to the Financial Conduct Authority’s (FCA) recent Financial Lives report.

“Our research has suggested there is a crossover between BNPL use and people struggling with their finances,” said Simon Trevethick, head of communications at StepChange Debt Charity, adding, “Previous polling found that those who use BNPL are twice as likely as the general population to need to use credit to cover essential bills.”

This is corroborated by findings from the Money and Pensions Service, which revealed that 38% of BNPL users need “full debt advice,” and 35% are “at risk of needing debt advice.”

What risks are associated with BNPL?

While BNPL can appear an attractive option, it’s not “free credit” and carries with it potential risks.

Despite this, research points to a lack of consumer awareness regarding the costs of BNPL.

 “It’s a form of credit—and should be treated with the same caution”

In a study conducted for the Lending Standards Board (LSB) by RFI Global, only 52% of BNPL users reported being aware of late payment fees, while 50% were unaware of potential fees before incurring them.

Similarly, research from the Behavioural Insights Team (BTI) found that, of those surveyed, four in ten were unaware that they could be approved for BNPL “even if they could not afford it.”

“Consumers often fall into the trap of treating BNPL like an extension of their disposable income,” said Matt Dronfield, the managing director of Debt Free Advice. “In reality, it’s a form of credit—and should be treated with the same caution.”

Debt Free Advice added that BNPL can make things “seem affordable when they’re not,” encouraging impulse buying and overspending.

Indeed, one piece of research found that BNPL users spend 6.42% more than those who do not. Meanwhile, data from the BIT showed that 38% of those surveyed had “spent more than they planned because BNPL was available.”

Debt Free Advice also noted that because BNPL companies all work differently, it’s easy to lose track of what is owed, and consumers can end up borrowing more than they can afford.

In 2024, Finder’s survey found that in the last 12 months, 53% of those who had used BNPL had been charged late fees. 

And because companies often take payments straight from the consumer’s card, if the first try fails, they can try again. This can bring people into their overdrafts or result in insufficient funds for essential bills, said Debt Free Advice.

What regulatory changes are incoming? 

Efforts to regulate BNPL have been in the works for some time, and in July, it was announced that from July 2026, BNPL will be subject to the same protections as other forms of credit. 

Debt Free Advice explained that the new rules will require BNPL firms to review whether consumers can afford payments, while also clearly explaining their terms.

The regulations mean that customers will have faster access to refunds and the right to complain to the Financial Ombudsman to ensure complaints are dealt with fairly. 

“Regulation will help make these services safer and more transparent”

The changes will also reduce what Trevethick called “excessive” marketing at checkout and provide consumers with “additional protections at a time when they are most needed, as cost of living pressures remain.”

Indeed, Debt Free Advice noted that linking BNPL to credit agencies can help “stop people from borrowing too much or harming their credit score without realising.”

That said, it shared concerns about how strong the new rules will be during the changeover, adding that lenders should do more, including by pointing people to free debt help early, before “problems get worse.”

“We’ve seen a sharp increase in clients coming to us with BNPL-related debt. Regulation will help make these services safer and more transparent—but education is still key,” said Dronfield.

How can consumers protect themselves against unmanageable debt? 

With a year until the BNPL regulations come into place, debt charities warn that users need to ensure that they’re using products safely and sustainably. This includes changing the way that consumers approach this kind of credit.

“If you wouldn’t use a credit card for the purchase, reconsider BNPL,” said Debt Free Advice. 

Likewise, it’s important to assess whether BNPL is an affordable option.

“While it’s an interest-free product, if you miss a payment then you can still get struck with late fees, so it is essential to make sure that any BNPL repayments will be affordable before using the product,” said Trevethick. 

Once taking on BNPL, Debt Free Advice said it’s key to track, budget, and plan. This means keeping careful watch of all your BNPL commitments, how much you owe and the due dates for each to “avoid accumulating debt.” 

Keeping to one provider can also help users avoid stacking multiple purchases, the charity said. 

Trevethick echoed this: “At StepChange, we have seen clients with multiple BNPL debts across different providers.”

Debt Free Advice also warned against relying on BNPL for necessities: “It’s a sign you may need debt advice.” 

And, if you’re struggling with repayments, contact a free, impartial debt advice service:

• Debt Free Advice
• StepChange 
• Citizens Advice 
• National Debtline 

Leaseholds now account for almost 20% of the UK’s housing stock, and while their numbers have plateaued in recent years, complaints about them have not.

According to figures from the Property Ombudsman (TPO), it received 6,649 complaints about residential leaseholds last year — a 67% year-on-year increase.

Against this backdrop is a wave of reforms, which the government says will “improve the lives of millions of existing leaseholders.” However, the outlook for their implementation remains unclear.

Amidst these upcoming changes, this week at The Salary Calculator, we’ll help break down:

• What is a leasehold?
• How do leasehold charges work?
• What is the Leasehold and Freehold Reform Act 2024?
• What role will a judicial review play in the Act’s implementation?
• What other reforms are ahead?

What is a leasehold?

England’s leasehold system finds its roots in the Middle Ages. Back then, landowners would grant peasants permission to live and work on their land in return for their services or rents. This centuries-old system has evolved over the years, with the Law of Property Act 1925 establishing the foundations of the modern leasehold.

But while many other countries have moved away from this system, leaseholds are now the most common form of flat ownership in England and Wales. London, in particular, has become a hub for this type of ownership structure, with leaseholds accounting for over a third of all homes in the city.

When purchasing a leasehold flat, a tenant enters into a lease agreement with the freeholder to use the property for a fixed term.

Unlike freeholders, leaseholders do not own the building they live in or the land on which it is built.

Occupants are also required to comply with the restrictions detailed in their lease agreement.

Leasehold terms vary, but typically span either 99, 125 or 999 years.

When selling a property, the lease does not reset; instead, it is passed on to the next buyer, with the lease length reducing each year. If the lease ends without an extension, the land and property return to the freeholder.

Shared ownership is a type of leasehold involving the purchase of a share in a home. The shared owner pays the mortgage on their share and rent on the remainder, with the option to increase the share they own over time, a process known as staircasing.

There are around 250,000 shared ownership properties in England, according to the BBC. 

How do leasehold charges work?

One of the fees associated with leaseholds is an annual service charge, which is paid to the freeholder. These fees are intended to cover communal repairs and maintenance, whether that’s the lighting in communal areas or fixing a lift.

Ground rent, on the other hand, is a fee paid to the freeholder for the right to occupy the land on which the property is built. The freeholder does not provide a service in return for this fee.

As of 30 June 2022, ground rents on new residential leases were effectively banned — although this doesn’t apply to those with existing leases.

In recent years, controversies surrounding these charges have hit the headlines, with reports of leaseholders facing spiralling service charges and ground rents.

“Service charges keep rising whilst services disappear — and in some cases, have never appeared at all”

According to an analysis by estate agent Hamptons, last year saw record annual increases for service charges in England. In fact, the average annual service charge exceeded £2,000 in every region for the first time. The analysis also showed that for more than half of leaseholders, service charges outstripped their council tax payments.

Elsewhere, The Property Institute’s (TPI) 2024 Service Charge Index found that since 2019, service charges were up 41%, compared with a cumulative inflation rate of 23% over the same period.

Ben Jenkins, a housing campaigner with a shared ownership property, has experienced these rising costs firsthand.

“It was sold to us as a route to stability, but the reality has been very different,” explained Jenkins, who said that it has become “unaffordable, unjust, and unsafe.”

“Service charges keep rising whilst services disappear — and in some cases, have never appeared at all. Our building falls into disrepair, and many are too afraid to withhold payment because of the very real threat of eviction. That’s not ownership. That’s tenancy in disguise,” added Jenkins.

For Jenkins, who described the current system as “fundamentally broken,” the most important change he wants to see is “proper oversight.”

“When things go wrong, there’s no meaningful way to hold landlords accountable. That has to change,” added Jenkins.

Indeed, in a recent report, the London Assembly Housing Committee found that in the capital city, affordability and transparency are key issues within shared ownership and leaseholds more broadly.

The survey revealed respondents paid a median average of £3,912 per year on service charges.

For one in 10, this shot up to over £7,000 a year.

Sem Moema AM, former Chair of the London Assembly Housing Committee, said that often Londoners have “no clear idea of what they are receiving in return for their money.”

What is the Leasehold and Freehold Reform Act 2024?

The government framed the Leasehold and Freehold Reform Act 2024 as a tool to address these affordability and transparency issues.

Receiving Royal Assent in May 2024, the Act outlined various changes, including plans to make it “cheaper and easier” for leaseholders to extend their lease or purchase their freehold, as well as increased transparency around service charges, with the right to request information about them.

“The intention is to swing the pendulum of power away from freeholders”

The Act also removes the ownership condition, making leaseholders immediately eligible to extend their leases.

“The overall intention of it is clearly to swing the pendulum of power away from freeholders and take it more to leaseholders,” said Jill Carey, partner at Freeths, who explained that one of the biggest financial implications of the legislation is the removal of marriage value.

Marriage value refers to the increase in a property’s market value when a leaseholder extends their lease. Under the current legislation, when extending a lease shorter than 80 years, half of this must be paid to the freeholder.

“For leaseholders whose leases are already below 80 years, the impact will be to make extensions cheaper, as it will be removing a third of the calculation of the sum that they have to pay,” Carey said.

However, for leaseholders whose leases have more than 80 years left to run, it’s not so clear-cut, and could even increase the cost, she explained.

According to the government’s Leasehold Advisory Service (LAS), the reforms will be implemented in stages, requiring further consultation and, in some places, secondary legislation.

The government has now launched its consultation on the legislation, which will run until 26 September 2025.

But, leaseholders eyeing the lease extension reforms could be waiting until 2026 to see the changes rolled out, the LAS said.

For those navigating leasehold extensions within the current system, Carey said: “The most important thing is to stay informed and to take expert advice to ensure that you keep yourself in the best position, as it is a changing area.”

Carey noted that, in particular, tenants should be aware of their ground rent charges, as the new statute will cap this at 0.1% of property value.

“This could affect decision-making for anyone who is calculating the cost of extending their lease or buying their freehold,” she said.

“Leaseholders of flats may also want to consider consulting with their fellow tenants on issues such as enfranchisement. However, there are some parts of the law that are yet to be refined, and there is an ongoing [judicial review] by a group of large landlords, and so it may be that some things change before implementation,” added Carey.

What role will a judicial review play in the Act’s implementation?

Indeed, a group of seven freeholders — among them the Grosvenor and Cadogan Estates — were granted permission for a judicial review back in January. In their legal challenge, the freeholders argue that the Act is incompatible with the right to ‘peaceful enjoyment’ of property under the Human Rights Act 1988.

Freeths’ Carey explained that while the court doesn’t have the power to overturn the Act, the aim is to put pressure on the government to “undo it”

“We’ve just seen this happen with that on private school fees,” said Carey. “There, the challenge was lost, but had it gone through, had they won it, the government would then have found itself in a situation where it had a declaration from the court that its law was incompatible with human rights, and that’s what they’re going for here.”

“This could be a very protracted process”

Linz Darlington, the director of leasehold extension specialists Homehold, explained that even if the freeholders lose at the High Court, there are various avenues through which they can appeal.

Further, Darlington highlighted what he called an “intersection” between the legislation’s complexity and contentiousness, whereby each time issues are resolved within the legislation, fresh legal challenges could arise from the freehold community.

“This could be a very protracted process,” he added.

The freeholders’ judicial review will be heard from 15-18 July.

What other reforms are ahead?

While the Leasehold and Freehold Reform Act moves forward slowly, the government is simultaneously working on additional legislation in the form of the Leasehold and Commonhold Reform Bill.

Commonhold is a type of ownership in which homeowners own their property outright without a lease. Homeowners and other unit owners in a building all own and are responsible for the shared parts of the property. The directors of the association also have the option to appoint an external managing agent to manage the commonhold.

Commonholds afford homeowners more control, with zero ground rent, greater service charge transparency and no risk of forfeiture.

This type of ownership was introduced back in 2004 through the Commonhold and Leasehold Reform Act. But, since then, uptake has been low. There are only around 20 commonhold developments across England and Wales today.

In March, the government published its Commonhold White Paper, the first step in its plan to make commonhold the “default tenure.”

The proposed “ban” on leaseholds would only apply to new flats.

“In theory, this is a great idea,” said Darlington, who explained that the ownership model allows homeowners to buy into a democracy.

However, it’s not without its challenges.

Darlington explained that while the commonhold reforms are likely to apply to new blocks, making them less contentious, it will require different parties — including managing agents, conveyancers, and mortgage companies — to learn and adapt.

“None of this is insurmountable, but it is quite complex,” said Darlington.

Meanwhile, on the homeowner side of things, Carey said challenges can arise in getting everyone within a shared freehold engaged and in agreement.

And while some housing campaign organisations have welcomed the white paper, issues have been raised, including the risk that the legislation could create a two-tier system that leaves existing leaseholders behind.

Katie Kendrick, founder of the National Leasehold Campaign (NLC), argues that commonhold conversion mechanisms are “essential to offer an escape route for those trapped.”

In a statement back in November 2024, Matthew Pennycook, Minister of State for Housing and Planning, said that the government intended to publish a new Draft Leasehold and Commonhold Reform Bill in the second half of 2025.

New data from the Financial Conduct Authority (FCA) paints a troubling picture of UK finances.

According to a recent survey from the UK’s financial regulatory body, one in 10 have no cash savings, and a further 21% have less than £1,000.

As purse strings tighten and money worries mount, this week at The Salary Calculator, we’ll look at:

• What the findings reveal about the UK’s financial challenges 
• What’s driving these challenges
• Tips for navigating financial crisis
• The role employers play in supporting financial difficulties
• Proposed changes to provide support

What do the findings reveal about the UK’s financial challenges?

The FCA first started collecting data on the UK’s financial circumstances back in 2017, with its latest report presenting the body’s fourth snapshot. 

Having gathered responses from nearly 18,000 people, the survey provides a comprehensive profile of UK finances.

First, the good news.

Digital exclusion is down to 2% from 14% in 2017, and the number of people using debt advice is up (3.2% in 2024 versus 2.7% in 2022), with many finding their debts more manageable after seeking advice (61%). 

However, when it comes to financial resilience, one in four (13.1 million) are struggling, facing low savings, missed bills and heavy debt burdens. 

A total of 4.6 million people are without a financial buffer and say they would be unable to cover their living expenses for up to one week if their main household income source were lost. 

These stats are echoed by data from YouGov in March, which revealed that 56% of Britons said they’d been affected by cost-of-living pressures, with 22% unable to make ends meet and afford essential costs. 

“On the frontline of debt advice, we see every day how a lack of financial resilience pushes people into financial difficulty. Without rainy day savings or access to affordable credit, it can be harder to cope with life events and shocks, like falling ill, splitting up with your partner or losing your job,” commented Grace Brownfield, head of influencing and communications at National Debtline.

And without a parachute, borrowing is on the rise. The use of high-cost credit was up in 2024 (6.4%) from 2022 (5.3%), while 2.8 million (5%) said they had persistent credit card debt. 

The survey also found that more people are using Deferred payment credit (DPC), otherwise known as unregulated Buy Now, Pay Later (BNPL).

In 2024, 20 per cent of adults were found to have used DPC in the last 12 months, and 17% of all DPC users used it frequently. Among the most frequent users were lone parents (40%) and women aged 25-34 (35%).

What’s driving these challenges?

These figures come against a backdrop of rising rent, food prices and energy bills.

Indeed, in April, ONS data found that cost of living ranked as the most important issue facing the UK today. 

The same survey revealed that 72% had seen their cost of living increase in the last month — up from 66% in March — with 92% putting this down to their food shop becoming more expensive and 80% attributing this to higher energy bills. 

And amidst a number of new benefit changes, organisations have raised the alarm that, for some, tougher times could be ahead. 

In April this year, a nationwide freeze on housing benefits came into effect. At the time, national homelessness charity Crisis said the freeze represented a real-terms cut and warned it would push more people “out of the private rented sector and into homelessness.” 

Now, a new poll commissioned by The Salvation Army has revealed that, in the shadow of the freeze, 48% of those surveyed were worried an extra £100 expense would leave them unable to pay their rent or mortgage. 

Tips for navigating financial crisis

These mounting financial struggles are having a knock-on effect on people’s mental health and wellbeing, too. 

According to the FCA data, twenty-two per cent of adults disclosed that they felt overwhelmed and stressed when dealing with financial matters, a statistic which has remained unchanged since 2022. Meanwhile, 40% of those with credit or loans said that they suffer from either anxiety or stress as a result of their financial situation.

Of those suffering from poor mental health — around 9 million adults — 25% said they put off dealing with financial matters, and 18% had fallen into debt as a result of not wanting to deal with their financial situations. 

Alongside this, research from the Money and Mental Health Policy Institute shows that people with problem debt are “significantly more likely to experience mental health problems,” with 46% of those in debt also suffering from a mental health problem. 

“If you’re struggling with your finances, the best thing to do is seek debt advice”

“Financial challenges can deeply affect mental health, often leading to anxiety and depression,” said Norma Cassius, a money management consultant and psychotherapist. 

Cassius advised that support from organisations like StepChange and MoneyHelper can provide guidance and a “safe space to share struggles,” while highlighting the importance of creating a realistic budget, which she said is “easily done” with free budgeting tools in banking apps.

“If you’re struggling with your finances, the best thing to do is seek debt advice,” Brownfield said. “Nine in ten people we helped at National Debtline last year saw their debts reduce or stabilise, while three in four reported a positive impact on their emotional or mental health.”

But despite the benefits, the FCA survey found that embarrassment can be a barrier to accessing help. 

“It’s crucial to break the stigma around seeking debt advice, especially during the current cost-of-living crisis affecting us all. By fostering open conversations and sharing recovery stories, we can inspire hope and encourage others to seek the help they need,” said Cassius. 

What role do employers play in supporting financial wellbeing? 

According to experts, employers also play a central role in supporting financial wellbeing. 

“As the main income provider, they’re uniquely placed to offer practical financial wellbeing support, from access to affordable loans and guidance to helping people build confidence through simple steps like creating a spending plan or managing debt,” said Abby Birch, financial wellbeing and money expert at My Money Explained. 

Adding: “Without action, the risks are real: stress, lost productivity, and higher turnover. Supporting financial wellbeing isn’t just a nice-to-have; it’s essential.”

Indeed, the Chartered Institute of Personnel and Development’s (CIPD) 2025 Good Work Index (GWI) revealed the extent to which financial wellbeing and work performance are linked.

“Supporting financial wellbeing isn’t just a nice-to-have; it’s essential”

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A survey of 5,000 employees revealed that: 

• For 31%, money worries had negatively affected their work performance
• Nineteen per cent had lost sleep due to worrying 
• Fifteen per cent said financial concerns had caused health problems like stress
• Thirteen per cent said their worries made it hard to concentrate or make decisions at work. 

The CIPD outlined that employers can support workers through this by ensuring that pay outcomes and processes are fair, paying workers as much as is affordable, becoming an accredited Living Wage Employer, and creating support mechanisms to reduce the risk of employees falling into financial difficulties. 

Meanwhile, Conor D’Arcy, Head of Research and Policy at the Money and Mental Health Policy Institute, shared with Mind that providing mental health training to line managers can be a helpful tool for recognising when employees are struggling.

Flexible working can also be beneficial, D’Arcy explained: “It means they might have time to access external help, such as visiting a financial advisor. It also might allow parents or those with caring responsibilities to better manage their time to avoid some of the additional costs these responsibilities can bring.”

What proposed changes could help provide support? 

The FCA has also outlined a number of measures aimed at supporting consumers. According to the body, this includes setting “high standards” through the implementation of the Consumer Duty, supporting the government to develop a national plan for financial inclusion, and its InvestSmart campaign, geared towards helping consumers make “better-informed investment decisions.”

“We need to do more at a national level to prevent financial difficulty occurring”

Meanwhile, from a policy perspective, new rules are coming into effect next year to bring BNPL in line with other types of credit. According to Emma Reynolds, Economic Secretary to the Treasury, these new rules will protect shoppers from debt traps.

Brownfield told The Salary Calculator that the government’s Help to Save scheme can be useful for building up a small safety net for those who are eligible, but added that more action should be taken at a national level. 

“We need to do more at a national level to prevent financial difficulty occurring. Government must ensure the welfare system provides adequate and effective support when people experience life shocks and make building financial resilience a new national mission,” added Brownfield.

This was echoed by Richard Lane, Chief Client Officer at StepChange Debt Charity, who called for the government to expand the Help to Save scheme and work with employers to expand workplace savings schemes.

“We also want to see the Government invest in safe options for those who can’t afford to save to cope with unexpected costs, including a permanent national crisis support scheme, building on the Household Support Fund and a national no-interest loan scheme, and by working with the financial services industry to expand affordable, low-cost credit.”

Elsewhere, Helen Undy, Chief Executive of the Money and Mental Health Policy Institute, outlined that banks need to make their services accessible and offer people more tools and support to “stay in control of their finances and savings,” from spending controls to carers’ cards. 

Undy added that the organisation also wanted to see the FCA “go further” in making sure firms act on their obligations under the Consumer Duty to deliver better outcomes for customers.

Whether it’s selling vintage shoes or taking on tutoring clients, so-called side hustles have exploded in recent years. In fact, last year, Sage research found that almost half of Brits now have a second income stream.

But, as more people enter the online entrepreneurial pipeline, it’s important to have a clear picture of compliance to keep the taxman from knocking. This week at The Salary Calculator, we’ll explain:

• What’s driving the rise in people selling goods & services online?
• What’s the difference between a side hustle and reselling?
• What are HMRC’s new digital platform reporting requirements?
• What’s happening to the Income Tax Self Assessment (ITSA) reporting threshold?
• Will the allowance threshold increase?
• How will Making Tax Digital affect side hustles?
• Tips and tools to help you stay compliant

What’s driving the rise in side hustles?

Side hustles bounced into the spotlight during the COVID-19 pandemic as the world shifted online and companies cut back on jobs and furloughed staff. And amidst an ongoing cost of living crisis, employment insecurity and a looming recession, the side hustle trend has continued as workers eye new avenues to supplement their income — with varying degrees of success.

According to a 2024 Adobe Express poll of 1,500 Brits, 73% make up to £500 each month from their side hustle, while 20% make over £1,000.

But money isn’t the only driving force behind this rising trend. The research found that 22% of those seeking side hustles are doing so in pursuit of greater flexibility in their work schedule.

The growth of the second-hand market has buoyed growth, too. Nearly 30 million UK adults shopped online for pre-loved items in 2024. Accommodating this demand, 23.8 million Brits turned to online second-hand selling platforms last year, earning an average of £146 a month.

“There’s been a big increase in the secondary selling of technology”

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The second-hand tech market, in particular, is booming.

“What we’ve seen is that — certainly around smart tech — there’s been a big increase in the secondary selling of technology,” said Scott Butler, executive director of the non-profit group Material Focus. Butler explained that consumer attitudes are changing, with more emphasis placed on affordability over upgrades.

Indeed, in 2023, technology retailer Currys found that one in three Brits were likely to buy second-hand tech, with pre-used electronics exceeding pre-loved clothes in popularity.

But alongside a growing appetite for affordable goods, environmental concerns are also a key driver of this trend. Currys’ research found that 75% of those polled were worried about e-waste — one of the fastest-growing waste streams in the world.

And with the average household hiding around 30 unused electrical items in so-called “drawers of doom,” there’s plenty of money to be made. In fact, Material Focus found that households could cash in between £1,304 and £6,331 by selling unwanted items through reselling platforms.

What’s the difference between a side hustle and reselling?

But with more Brits looking to make a little cash on the side and pursue their passions, it’s important to understand how this work is categorised in the eyes of HMRC — because there are potential tax implications.

And with misleading “side hustle tax” headlines floating around, there’s been a fair amount of confusion.

Luckily, HMRC has released guidance to clarify who needs to pay what and how.

It all boils down to whether or not you’re trading. If you’ve got an old pair of shoes that never quite fit kicking about in the back of your wardrobe and you’re looking to shift them, this isn’t trading. So, you don’t need to register for self-assessment or pay tax (unless an item exceeds £6,000, in which case you’ll need to pay capital gains tax).

However, regularly making necklaces to sell online, buying vintage items to resell for a higher price, or upcycling items for resale would be considered trading. This also applies to dog-walking, content creation, gardening and similar activities.

If you earn £1,000 or less from these activities, you won’t need to declare or pay tax, but if you exceed this amount, you’ll have to set up as a sole trader and pay tax via Self-Assessment. 

What are HMRC’s new digital platform reporting requirements?

So, what was all the “side hustle tax” hullabaloo, I hear you ask? Well, the confusion came from HMRC’s announcement that from January 2025, online platforms like eBay, Vinted, and Airbnb would have to share data on platform sellers, including income data.

As the Low Incomes Tax Reform Group outlined, this means that if online sellers have failed to pay what they owe, HMRC is “more likely to find out about it,” and platforms may ask more questions when users sign up to ensure that they’re HMRC-aligned.

However, it’s worth noting that if you make fewer than 30 sales of goods in a year and receive less than 2,000 euros (roughly £1,700), a platform won’t report your details.

If a platform fails to follow the new rules, however, there are various financial penalties.

What’s happening to the Income Tax Self Assessment (ITSA) reporting threshold?

One change that will eventually affect sellers more directly is the recently announced plan to increase the Income Tax Self Assessment (ITSA) reporting threshold.

Under the new plans — set to come into effect within this parliament — the Income Tax Self Assessment (ITSA) reporting threshold for trading income will increase from £1,000 to £3,000.

According to HMRC, this will benefit “around 300,000 taxpayers,” with an estimated 90,000 no longer needing to pay tax, with no reason to report their trading income to HMRC. Those who do will pay their tax through a new online service — although further details about this service are yet to be announced.

Helen Christopher, chartered accountant and founder of Beansprout, said for many, this is good news, reducing the compliance burden and saving both time and money for those running very small businesses or hobbyist activities.

“From an HMRC perspective, this change frees up resources to focus on larger or higher-risk cases and aligns with their longer-term ambition to simplify tax reporting and roll out more digital services under Making Tax Digital,” added Christopher.

Will the allowance threshold change? 

Although there have been some reports that the allowance threshold is increasing to £3,000, this isn’t the case. However, some argue that it should be.

One joint study from Simply Business and The Federation of Small Businesses recommended that the tax-free trading allowance be doubled to £2,000 and rebranded as the “Side Hustle Allowance” to encourage entrepreneurship in the UK.

More broadly, with the government’s renewed focus on the circular economy, some wonder whether tax policy could be used to encourage progress in this area.

Indeed, Butler highlighted the school of thought that questions whether second-hand goods should be taxed again after a series of taxes have already been paid by producers, retailers and consumers the first time around.

“If you look at it from an environmental perspective and a resource use perspective, that is a potential lever that you could use to promote a more circular economy through making it less burdensome,” commented Butler.

He added that there are also those who advocate for VAT exemptions for repair services to make them more affordable and encourage uptake. This kind of reduced taxation has already been implemented for repairs for different products across Sweden, Austria, and the Netherlands.

How will Making Tax Digital affect online sellers? 

Another incoming tax administration strategy set to affect online sellers and side hustlers is Making Tax Digital.

From April 2026, sole traders and landlords earning £50,000 will be required to keep digital records, use MTD-compatible software and submit quarterly summaries of their income and expenses to HMRC.

By April 2027, this will apply to those with qualifying income above £30,000, and from April 2028, those with £20,000 in qualifying income will enter the compliance bracket.

“The changes will inevitably feel daunting, overwhelming, and costly for many online sellers and small business owners”

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Christopher described the Making Tax Digital strategy as a “fundamental shift towards a real-time, digital-first tax system, designed to modernise the UK’s tax processes and increase transparency.”

The impact that these changes will have remains to be seen, but some have doubts about their effectiveness.

“Until MTD ITSA fully hits in 2026, I don’t think we can completely foresee how it’s going to go, but I struggle to see how forcing people onto software that struggle with technology makes anything simpler,” commented Beth Jackson, Owner of 2 Sisters Accounting, adding: “I do hope much like when RTI was initially introduced, any penalty schemes will be incredibly lenient while people get to grips with the system.”

Christopher shared a similar sentiment. “While the intention is to streamline processes and improve tax compliance, the changes will inevitably feel daunting, overwhelming, and costly for many online sellers and small business owners — especially those who manage their finances informally or who have only recently started side businesses.”

That said, Christopher added that it also serves as an opportunity to “take greater control of your business finances,” creating more clarity around income and expenses, better forecasting of tax bills throughout the year and fewer year-end surprises.

Tips and tools for keeping compliant 

As with any business, big, small, or just starting out, there are always moving parts, so it’s key to keep on top of things and establish good habits.

“Building strong financial habits now can make the difference between a hobby and a thriving, scalable business in the future,” Christopher explained.

This includes careful record-keeping of income and expenses, whether through accounting apps or spreadsheets.

“The key thing for all businesses is to make sure you are saving your tax as you earn the money to avoid spending HMRC’s money, especially if you’re VAT registered,” added Jackson. “As an online seller, using tools like Linkmybooks to connect with Xero or Freeagent to track your profit levels and make sure you have the appropriate tax saved can make the world of difference in remaining profitable!”

It’s also important to understand different tax terms, for example, gross income vs net profit, as well as HMRC’s other rules and regulations.

“Always check your total financial position,” Christopher noted, adding that if you have employment income, pensions, rental income, dividends, or other sources, you may still need to complete a tax return, even if your side business earns under the reporting threshold.

And, when things feel confusing, professional advice can help clear things up.

“Tax rules can be complex, and everyone’s situation is different. Speaking to an accountant or adviser early can save money, reduce stress, and help you get it right from the start,” said Christopher.