At the 2022 Spring Budget, the UK saw Chancellor Rishi Sunak address the nation on ways that the government plan to rebuild livelihoods following the pandemic. However, amongst a 1.25% rise to national insurance (NI) and 54% increase in the energy price cap, it’s clear that the government’s main driver is to boost economic growth across the UK in the months ahead.
Whilst the government claim they are doing everything that they can to support UK households at risk; there is a concern that over the coming months, the rising costs will make basic living standards unachievable for many.
We’ve created a short list of ways that you can help to lessen the squeeze over the challenging and uncertain months ahead.
1. Check your tax code
If you have recently switched employer or had a change in salary or taxable state benefits, you should check that your tax code is up-to date and correct to avoid paying more tax than necessary.
If you have overpaid in tax, you may be entitled to pay less over the coming months or receive a rebate for previous overpayments.
Find out more on understanding your tax code here.
2. Pay into a pension scheme
If you work as an employed individual, are over 22 years old, earn at least £10,000 per year and work or normally work in the UK, you will be automatically enrolled into a workplace pension scheme. This means that you will be eligible for a government-based tax relief to be paid into your pension fund without any deduction.
On the other hand, if you work as self-employed, you are not entitled to be enrolled in a workplace pension however, there are many pension providers available who specialise in pensions for freelancers and the self-employed which can help boost your funds for the future.
The Pensions Advisory Service is a great example of a provider.
3. File your Self Assessment tax return early to avoid a fine
As a self-employed individual, sole trader, or partner in a business ownership, it’s important that you submit a Self Assessment tax return by the required annual deadline.
By submitting your tax return early, you can ensure that your business steers clear of any substantial penalties whilst gaining a better understanding of your finances ahead of the future.
Find out more about Self Assessment tax returns and the required deadlines here.
4. Claim tax-free childcare
If you are a parent, you may be able to claim back 25% of your childcare costs to help cover the charges of approved childcare such as childminders, nurseries, after school clubs and other play schemes. You can claim up to £500 every 3 months for each child or £1000 every 3 months for a disabled child.
You are required to set up an online account which can be used to manage your payments to the childcare provider. For every £8 paid into the account, you will receive £2 to go towards paying your childcare provider.
Your eligibility will depend on several factors such as employment status, income, your child’s age and circumstances and your immigration status. To find out if you are eligible to claim you can visit the GOV.UK website.
5. Maximise your personal savings allowance
Personal savings allowance determines the amount of interest you can earn on your savings each year without paying tax.
As a basic-rate taxpayer, you can earn up to £1,000 of interest savings tax-free, meaning that you’ll only pay tax on savings income that exceeds this threshold.
If you’re a higher-rate taxpayer, you can earn up to £500 per year however, if you are on the additional rate, you will not be eligible to claim personal savings allowance.
There is no action required to claim this type of allowance - the interest will be paid straight into your account with no tax taken off.