The Cost of Living is Increasing

The everyday cost of living is increasing. At the start of the year, the UK government announced plans to increase National Insurance by 1.25%, a change that comes into effect on 1st April 2022. IMI News covered this story recently, but there is more to the price hike than meets the eye.

The annual inflation rate hit 5.5% in January – its highest point in almost 30 years. The inflation of essentials, like food, gas, and oil, has been further compounded by the conflict in Ukraine, which is impacting supply lines throughout Europe. And on top of that, European and International sanctions on Russian product have led economists to predict a further cost of living increase in April.

But there are ways you can mitigate the increasing costs and still afford a lifestyle to enjoy.

Salary Sacrifice (Smart Pay)

Salary sacrifice is one method that can really help to drive down some of your expenses like National Insurance contributions or Income Tax. The IMI pension is a Salary Sacrifice scheme - also known as Smart Pay. This means that your pension contribution will be paid before tax is calculated, so you pay less NI and your take home pay is higher.

The same logic works for payroll giving, although if you choose to donate to charity straight from your salary, it only affects the calculation for Income Tax. Nonetheless, this technique not only strengthens your bank balance in an clever way but provides support to people who desperately need it.

Budgeting Apps

At IMI News, we’ve spoken about budgeting apps quite a lot, and for good reason. They’re often free and offer simple and user-friendly techniques to managing your money. By planning a budget you’ll be able to holistically track and manage your spending, allocating various amounts each day, week or month depending on what you need and can afford. Structuring your finances like that can even lead to a little extra here and there.

We’d recommend dedicated budgeting apps such as Emma, Yolt, Plum or Money Dashboard. You could also try budgeting integrated with banking with Monzo or Starling Bank. Don’t take our word for it, though. Shop around to find what might work best for you and your lifestyle.

We can’t control the cost of living, but we can control our response to it.

Remote working tax allowance

The last two years have seen a worldwide redefinition of the work-life balance. Our homes morphed into our workplaces during the COVID-19 pandemic. As a part of that transition and adaption, people’s utility bills rose. We were spending considerably more time at home, after all.

But there is a government allowance designed to alleviate the added expenses of working from home.

It is possible to claim tax relief on £6 a week from HMRC, and it is also possible to backdate your claim. That means that if you worked from home at any point during the last year, you could be eligible for the tax allowance – even if you’re back working at IMI. It is worth noting that you can only claim tax relief on the parts of the bill that pertain to work.

You may be able to claim tax relief on

• Gas and electricity
• Metered water
• Business phone calls including dial-up internet access.

The Wealth of the Wed

If you’re married or in a civil partnership, there is an allowance that could be worth up to £252 a year. Did you know that Marriage Allowance slips through the cracks of up to 2.4 million couples. As long as one of you is a basic rate taxpayer (paying income tax of 20%), and the other earns less than £12,570, you are eligible for Marriage Allowance.

Like with the working from home tax relief, you can even backdate your claim. So, as the cost of living increases, take steps to ensure that both you and your partner don’t feel too stretched.

Bolster with Benefits

It is estimated that around £15 billion of benefits are left unclaimed by people who didn’t know they were eligible. If you’re finding that the rising cost of living is starting to stretch your wallet, it could be worth checking whether you are claiming any benefits that you may be entitled to.

Services such as https://www.entitledto.co.uk provide government-endorsed benefits calculators and eligibility checkers, creating a hassle-free way to navigate what can be an understandably sensitive topic.

If you’re feeling worried or concerned about the rising cost of living, you needn’t feel alone. The multiple effects of the current political and economic climate on our everyday lives is navigable, especially with astute planning and open discussion.

If you need financial support or advice, check out Money Helper or Unbiased. They will offer anonymous, impartial and free advice, which could make the difference this spring.