Days of discussions are over and now the country is entering relatively unknown waters and the challenges of a coalition government. But one thing seems certain – cuts are coming and tax hikes are on the cards, so how can you beat them?
We may not yet know exactly where the country’s austerity measures are going to hit us personally, but it seems certain that the new coalition government will need to squeeze the country if it is going to bring down the deficit.
Dribs and drabs of rumour as well as the occasional policy agreement are filtering out of Conservative and Liberal Democrats talks, and we’re likely to see some key policy agreements from the two parties over the coming days and weeks.
So far, the coalition has agreed to scrap Tory plans to raise the inheritance tax threshold and to ‘work towards’ implementing the Lib Dem policy of raising the level at which income tax becomes payable to £10,000 (up from £6,475 at the moment). That should benefit those on low incomes.
It also seems likely that Capital Gains Tax is going to rise to be more in line with income tax, meaning the top rate could be as much as 50%.
Meanwhile, although the threshold for a hike in National Insurance payments will be raised for employers, employees are still going to hit by a hike when that rise comes into play April next year.
So, for the vast majority of us, there’s going to be less money in our pockets over the next few years, as the country continues to recover from the recession and rein back spending.
What can you do to shield your household?
Clearly, many of us are going to have to cut back on our own spending in response to government cuts. By following these 10 steps, you can reign in all unnecessary spending in your own home and save more than £2,000 a year.
It’s exactly what the government is aiming to do – trim waste rather than the services we really value. Paying more than you need for financial products means you risk making cuts to the things that really matter.
It’s staggering, but the average UK home can save up to £325 a year by switching to the cheapest energy provider. In fact, if you’re on a standard tariff, you could save as almost £270 on average just by moving to your supplier’s best tariff, let alone the leading deal.
The cheapest option is to switch to an online tariff and pay by monthly direct debit. Identifying the best deal for you and switching on to it is easy. You just need to input details of your existing gas and electricity provider and your postcode into our energy comparison tool in order to see which tariff is best depending on your usage and where you live. You can then apply online.
Do you have credit card debt or an expensive loan? You could take advantage of a card offering a 0% period on balance transfers and save hundreds of pounds in interest a year. It could even help you repay the debt more quickly.
So, if you maintain a balance of £2,000 on your credit card and pay the average interest rate of 18.5%, you’re paying £370 a year in interest alone. Move your money to a 0% balance transfer card and that money could go towards repaying the debt instead.
The market-leading card just now is from Gold Mastercard from Yorkshire and Clydesdale banks. For a 3% fee, you get 16 months 0% interest on balance transfers, after which you’ll pay 11.34% on transferred debt and 16.9% typical APR.
Bear in mind however, that you will only qualify for the leading 0% credit cards if you have a good credit history.
It’s not usually a good idea to cut the amount of cover you have protecting your building and contents insurance, however, most of us could cut what we pay for this cover.
By comparing home insurance providers and switching to the best deal, the average moneysupermarket.com visitor saves £133 a year. One in ten customers save as much as £236.50 a year.
It’s not just building and contents cover where you can make great savings, car insurance is another prime contender.
Again, it’s important not to sacrifice insurance that you need, instead, you should aim to find the right cover at the best price possible.
By using our site to search and compare car insurers, you can save an average of £224.02 a year. Again, some people can save even more, with 10% of searchers able to save as much as £460.76.
Take advantage of incentives. A good example is with current accounts. Both the First Direct first account and the Alliance & Leicester Premier current account are offering £100 cash incentives if you switch to them.
You’ll need to pay in at least £500 a month to qualify for the A&L Premier account, while the first account requires a minimum credit of £1,500 a month, or you could be hit with a £10 monthly fee.
Alternatively, the Halifax Reward Current Account pays you a £5 reward every month you pay in £1,000 - which adds up to £60 a year.
If you’re on your mortgage provider’s standard variable rate (SVR) then you’re probably enjoying low interest rates but it’s worth giving some thought to whether or not it’s time to fix.
Two-year fixed rate mortgages are at their lowest since April 2007, to a current low of 4.62% on average. With inflation continuing to rise, there’s a good chance the base rate will rise sooner rather than later, so you may want to consider fixing on a higher rate just to have some security over the next couple of years.
Of course, it’s a gamble – if the Bank of England keeps base rate at its historic low for the long term then you’re most likely better off remaining on a low cost variable rate. If you’re confused about which mortgage to go for, request a call from a qualified adviser.
Are your savings working as hard as possible? A staggering number of savings accounts pay even less than base rate, which combined with high inflation, means your money could actually be worth less by the time you come to withdraw it!
But there are decent returns out there. If you want an easy access savings account, the best rate available is 3.00% from the Coventry Building Society 1st Class Postal (5). There’s a minimum balance of £1,000 and you should consider moving after the first year when the 12 month 1% bonus ends.
Also, bear in mind that withdrawals have to be done by post, so it isn’t the quickest account. The minimum withdrawal is £1,000 and if you want to add to the account, you can only do so with payments of at least £1,000. You can make four withdrawals a year, after which you’ll lose 50 days’ interest on the amount withdrawn.
If you want a more straightforward account with easier instant access to your cash and a lower minimum balance, the AA Internet Extra (Issue 3) pays 2.80% and must be managed entirely online. Again, consider switching after 12 months, when the bonus ends and the rate falls by 2.30%.
Alternatively, the ING Savings Account pays 2.75%, is instantly accessible by phone or internet. The rate isn’t variable, either, meaning it’s guaranteed for a full year.
By bundling your broadband, TV and phone, you could save an impressive £186 a year.
Using just one company to provide these three services can result in some considerable discounts. It’s also worth haggling to get the best deals – sometimes telling your provider you want to leave motivates them to offer you a bargain.
Thanks to the recession, far more of us hunt down discounts and bargains than before. In fact, the UK population redeems more than 2.4million discount vouchers every single day.
The average voucher user saves almost £55 every month – that’s £660 a year! If you start to feel the squeeze then using discounts helps you enjoy luxuries like eating out or family trips for much less money.
For example, our vouchers page currently has 50% off at the Alton Towers Water Park and two-for-one meals at Pizza Hut.
If you tend to repay your credit card balance in full every month then you could potentially make money on your spending using a cashback card.
For example, the American Express Platinum Cashback card pays you 5% of what you spend in the first three months, up a maximum spend of £2,000. That means you could earn up to £100 just for doing your shopping with your card.
After that you earn up to 1.25%, depending on how much you spend. The typical APR is 19.9%, however, so make sure you clear the card each month, otherwise the interest will soon cancel out the cashback.
One last thing to mention is that, if you’re struggling with unmanageable debt then now is the time to act. You want to take control of your finances before the looming squeeze makes it even harder to cope.
If you need help then you should try to speak to a debt management charity such as Citizens Advice, as they will give you free assistance. However, if the waiting list is long then you may be better off approaching a debt management company for assistance.
You can see our list of debt management companies, all of which belong to the Debt Managers Standards Association, which is approved by the Office of Fair Trading.
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