The Salary Calculator

A guide from inflation to stagflation

by Madaline Dunn

The world of economics can sometimes appear inaccessible and confusing; that said, some particular terms are important to understand. Inflation, deflation, hyperinflation and stagflation all affect the cost of living, impacting the price of food, transport and electricity, as well as savings accounts and investments.

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

• What inflation and deflation mean
• What stagflation means
• Examples of hyperinflation through the ages
• How to guard yourself against the impacts of inflation

What are inflation and deflation?

Inflation can be defined as the rate at which prices rise and generally applies to goods and services. It can increase depending on various factors, including an increase in production cost or a surge in demand for a product. Each month the Office of National Statistics (ONS) releases its measure of inflation through the Consumer Price Index (CPI).

An example of how inflation works is as follows: If an avocado costs £1 initially and the following year its price increases to £1.03, this means inflation has increased its price by 3%.

Britain’s inflation rate recently jumped to 2.5%, up from 2.1% in June 2021, which is the highest in nearly three years. Unfortunately, the Bank of England expects that it could reach 3% by the end of the year.

Deflation, meanwhile, refers to when the rate of inflation becomes negative. While this may appear to be a good thing, in the world of economics, it’s usually considered to be problematic. Common causes of deflation include:

• Technological advancements
• Lower production costs
• Decreased confidence in the economy
• An increase in unemployment

What is stagflation?

This term is pretty self-explanatory and refers to an economic situation whereby levels of unemployment are high, economic growth stagnates, and interest rates are also high. The UK was hit hard by stagflation back in the 1970s, caused in part by the OPEC oil crisis. That said, it is a rare occurrence economically.

Hyperinflation through the ages

While inflation can significantly impact the economy and make life a lot more expensive, hyperinflation takes this to the next level. It occurs when prices rise at a rate over 50% a month.

While also rare, hyperinflation has occurred numerous times throughout history. The worst example of hyperinflation occurred in Hungary in 1946, where prices doubled every 15.6 hours. Meanwhile, hyperinflation in Weimar Germany reached rates of over 30,000% per month. Elsewhere, in January 1994, Yugoslavia’s inflation reached 313 million percent. During this time, prices doubled every 34 hours!

Guarding yourself against inflation

Understandably, talk about inflation can prick people’s ears and cause concern. However, there are methods that you can use to protect yourself against the effects of inflation.

When faced with inflation, it’s a good idea to use the savings you have to reduce your debt, whether that’s credit card debt or an overdraft. Of course, you shouldn’t deplete all of your savings in this way; it’s always wise to have an emergency fund.

That being said, if you notice you have an excess of savings, it can be beneficial to invest a portion of your surplus. Here, investment in equities is a good move.

Equally, ensuring that you maximise your tax efficiency is an effective way to guard yourself against inflation. ISAs are great here and allow you to save and grow investments free of tax.

Tags: Deflation, economics, Economy, Hyperinflation, inflation, savings

The best credit card deals out there in 2021

by Madaline Dunn

When it comes to the world of credit cards, there are lots of benefits. A credit card helps boost your credit rating, offers you protection and freebies, and gives you some financial wriggle room.

That said, it can be hard to know where to start, and often people have lots of burning questions that need answering. It’s also important to stay informed about charges and fees.

At The Salary Calculator, we’ll make sure that you’re up-to-date with all the latest credit card deals out there in 2021. Keep reading to find out more.

Reasons you could benefit from a credit card

To some, credit cards can seem intimidating, and many believe it only leads to debt, but they can be helpful in some circumstances. Credit cards can help you with your finances and assist you with building a good credit report. If your credit is in the red, and you’re looking to make a big investment like a house or car, a credit card can push it into the green.

Some credit cards also enable free borrowing and purchase protection, as well as offering reward deals so that you can earn free money too.

That said, it’s important to be aware that you shouldn’t rely on credit cards to borrow money, especially if you don’t have the funds for repayments. Plus, when the interest-free period ends, you can be faced with some pretty significant charges. Credit cards also have varying levels of APR, which refers to the rate at which you’ll be charged for borrowing. So, make sure you don’t get caught out by the small print!

Santander All in One Credit Card

Arguably, the biggest plus of this credit card offer is that cardholders can benefit from 26 months interest-free on balance transfers. Other benefits include a 0.5% cashback on all purchases and no foreign transaction fees.

However, it’s not all sunshine and rainbows, and the card does have a £3 monthly charge, which works out to £36 a year. Another disadvantage of this card is that you will also be charged transaction fees if you withdraw money – interest applies here too. Moreover, it has an APR of 23.7%.

To be eligible for this card, you must have an income of at least £7,500 a year and be 18 or over.

Aqua Advance Credit Card

This card is excellent for people who are looking to build credit and requires no credit rating. It has an initial APR of 34.9%, but customers who stick with this card will be rewarded through staggered APR reduction. After 12 months, if you keep up with payments and stay within your limit, your rate could be reduced by 5% each year. This means that the APR can go as low as 19.9%.

This card also offers access to the Aqua Credit Checker, allowing you to view your credit rating and its improvement.

Other benefits include credit limits of between £250-£1,200 and no extra charges for purchasing abroad.

To be eligible for this card, you must fulfil a specific criterion. Applicants must be over 18 with a permanent address. Additionally, you must have a current UK bank or building society account and must not have been registered as bankrupt in the last 18 months. Equally, you cannot have any ongoing bankruptcy proceedings against you.

Finally, eligibility also depends on not receiving a County Court Judgement (CCJ) in the past 12 months. You also cannot already have an Aqua card or have an Aqua, marbles, opus, Fluid card taken out in the last 12 months.

American Express Platinum Cashback Everyday Credit Card 

This is a great card for those looking to get a little more bang for their buck with no annual fee. It offers a 5% cashback on all purchases up to £100 for the first three months. This does, however, decrease over time.

That said, it’s important to note that you need to spend £3000 or more to access cashback offers, and unfortunately, it’s not available for those with a bad credit history. It has an APR of 22.2%,

To be a successful applicant for this card, you must be aged 18 or over and have a clean slate regarding debt. Applicants must also have a permanent UK address and a current UK bank or building society account.

M&S Shopping Plus Credit Card

For those looking for a credit card to spread the cost of large purchases, this is the perfect one for you. With no annual fee, it also boasts a 20-month interest-free period of new purchases. That’s right, no interest at all for 20 months! Accompanying this, the card also offers cardholders an 18-month interest-free period for balance transfers. That said, this only applies within the first 90 days. Also, remember if you opt for this card, you must pay off your balance before the interest-free period ends.

As with everything, there are pros and cons to this card, and the reward points you earn through this card are only available in the form of M&S vouchers. So, this isn’t necessarily a great deal for everyone. It also has an APR of 21.9%.

Eligibility for this card requires that applicants are over the age of 18 and UK residents.

Barclaycard Rewards Credit Card

This is a great travel card for those who want to earn as they spend abroad. With a 0% foreign transaction fee and no annual fee, this is a pretty attractive deal. This card also offers 0.25% cashback on all spending and savings on live events with Barclaycard Entertainment.

However, compared with other credit cards, a 0.25% cashback rate isn’t the best deal and it does not offer a balance transfer option. It also has a 22.9% APR variable.

Applicants must be aged 21 or over, have a personal income of £20,000 or above, and have had a permanent UK address for at least two years. Those looking to get in on this deal must also have at least four years of managing credit, make payments on time and be able to afford repayments.

Lastly, applicants must not have had Individual Voluntary Agreements, CCJs, and must not have declared bankruptcy in the last six years.

Tags: 2021, Credit card, Economy, Personal finances, The Salary Calculator

Furlough extension

by Admin

In September I added the then-newly-announced Job Support Scheme to the calculator, and last month I updated it with the revised employer and government contribution levels – however, just before it was due to start on 1st November, the chancellor announced that the already-running furlough scheme would be extended, first until December and then until the end of March. This is in place of the proposed Job Support Scheme.

It is not yet clear whether the Job Support Scheme will return at the end of March, or if furlough will be extended further, or if some other scheme will be in place. With Covid-19, the future is even harder than usual to predict. For now, I will leave the Job Support Scheme details on the calculator, so you can see what the effects of it might be if it were to be reintroduced. You can of course continue to use the calculator as before to work out the impact of furlough. If it becomes clear that the Job Support Scheme will not be returning, or if it is too confusing for people, I will remove it from the site.

Tags: coronavirus, covid-19, Economy, HMRC, income tax, Jobs, The Salary Calculator

What the SEISS extension means for you

by Admin

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In the early stages of lockdown, the government announced support for sole traders in the form of the Self-Employment Income Support Scheme, or SEISS.

Just a month after its announcement, 2 million claims were made, totalling £6.1 billion in government support. And now, with a second grant opening in August 2020, a number of sole traders are set to benefit from further financial assistance.

We’ve asked Mike Parkes from GoSimpleTax to explain the terms and help you claim.

How does SEISS work?

The scheme is available to all self-employed individuals that have been adversely affected by COVID-19. This is provided that they:

• Earn the majority of their income through self-employment
• Have average annual trading profits of less than £50,000
• Have filed a tax return for the 2018/19 tax year
• Have traded during the 2019/20 tax year and intend to continue trading in 2020/21

To determine whether or not you were affected by COVID-19, any of the following must apply:

• Government orders have meant that your trade or industry had to close or be restricted in such a way that your trade closed – or is otherwise adversely affected
• You cannot organise your work, or your workplace, to allow staff to work safely
• Your staff or customers are no longer able to purchase from you due to restrictions
• Social distancing has meant that you are not able to safely serve customers
• You’ve had contracts cancelled as a result of COVID-19
• You have either had to care for others since lockdown or have been self-isolating
  

The first grant ended on 13th July 2020, and claimants could receive either £7,500 or 80% of their average monthly profits over the 2016/17, 2017/18 and 2018/19 tax years (whichever is the lower amount). Applications for the second grant will open on 17th August 2020, but you must have confirmed by 14th July 2020 that you have been adversely affected by COVID-19.

Why is there a phase two?

While the government set a three-month cap on the support, it has since been agreed that  COVID-19 is still impacting the earnings of some sole traders. As a result, it is necessary for them to receive another grant in order to stay afloat.

It will also help to support those who may not have initially been affected by lockdown (and so did not claim the first grant) but have subsequently suffered a loss of business.

What’s the difference? 

The differences between phase one and two are limited, although the second grant will be worth 70% of your average monthly trading profits. It’ll still be paid out in a single instalment that covers three months’ worth of profits, but will be capped at £6,750 total – almost £1,000 less than the phase one grant.

Additionally, you can only claim the second grant if your business was adversely affected on or after 14th July.

Can I continue working and still claim? 

Yes, you can continue to work as long as you intend to continue trading in 2020/21 in the self-employed role you’re claiming for. You can even take up other employment if necessary, provided that the SEISS payments still cover the majority of your income. HMRC will not penalise you for topping up your income with a little additional earnings to sustain your household.

Phase two will have a deadline of 19th October 2020. You can find out more about it on the GOV.UK site. If you are still losing out on income or opportunities to earn, we massively recommend you claim the second grant. This is unprecedented levels of government support and could make the difference between staying afloat or falling behind.

About GoSimpleTax

Right now, you can’t afford to be careless with your Self Assessment tax return. And with GoSimpleTax’s free trial, you don’t need to be. Their cloud-based software enables you to take stock of your earnings in real time, meaning you can get a complete overview of your tax obligations for the year. Once you’re certain all your affairs are in order, upgrade your account for just £46 and file your tax return with complete confidence.

Tags: coronavirus, covid-19, Economy, Employed and Self Employed, income tax, Jobs, self employed

Plans for re-starting the economy

by Admin

It has been a turbulent few months for many of us, with jobs being cut, furloughing schemes, working from home and closure of many businesses (small and large). Last week, Chancellor Rishi Sunak announced a number of measures which are designed to help us along the road to recovery. It is going to take several months (or even longer) and things may never quite be the same – but here are a few of the measures which have been announced:

A cut in VAT on hospitality – restaurants and hotels will see the VAT on their goods reduced from 20% to 5%. For consumers, it is possible that this will mean lower prices but businesses are under no obligation to pass this saving on. They may keep their prices the same and use the VAT saving to try to repair some of the damage caused by their enforced closure over the last few months, or to try to allow for fewer customers as social distancing regulations mean that they can’t seat as many people as before.

A temporary removal of stamp duty on house purchases under £500,000 – if you were planning to move house before March 2021, this may well save you a significant amount of money. Previously, any house sold for more than £125,000 attracted stamp duty (often thousands or tens of thousands of pounds) which the buyer had to pay on top of the purchase price. Until March of next year, the threshold has been increased to £500,000, in an attempt to encourage people to buy and re-energise the housing market.

A bonus paid to employers who retain furloughed employees – if an employer keeps an employee who was furloughed on the payroll until the end of January 2021, they will be eligible for a one-off £1000 bonus. This is to encourage employers to keep people on and prevent unemployment, even if business doesn’t pick up immediately now that lockdown has been loosened.

There were several schemes announced which are intended to encourage employers to employ 16-24 year olds.

A full run-down of the measures announced is available from the BBC.

Tags: budget, coronavirus, covid-19, Economy, house prices, houses, Jobs, recession, recovery, VAT