If you have taken time off work to have children, it’s important to check how many National Insurance Contributions (NICs) you have made. 

National Insurance is a tax you pay on money you earn through employment. It is calculated as a percentage of your earnings. Both employees and self-employed workers pay National Insurance once their earnings go over certain minimum levels. 

You pay NICs in order to qualify for certain benefits (such as Jobseekers’ Allowance) and the State Pension. But you need to have a certain number of National Insurance ‘qualifying years’ in order to be eligible for the full amount. If you haven’t made enough contributions, this will impact how much State Pension you receive and you could miss out on thousands of pounds. 

MoneySavingExpert founder Martin Lewis recently issued an urgent warning for parents to check their NICs by 5 April 2023, but don't worry if you didn't have chance to check. The deadline has been extended until the end of July (more on that below).

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “Under the new flat rate State Pension, you usually need 35 years’ worth of qualifying National Insurance Credits to claim a full State Pension. If you have gaps in your employment record, you may end up with a lower State Pension - or none at all."

How do I check my National Insurance Contributions? 

Your NICs are tracked using your unique National Insurance number. You will have received a National Insurance card with your specific number on it, or you can find it on your payslip. Here’s how to check your National Insurance contributions:

• Go to Check your National Insurance record on the Gov.uk website
• Click ‘start now’
• Sign in using Government Gateway
• Click ‘check your National Insurance contributions’

The government website can tell you:

• what you’ve paid, up to the start of the current tax year (6 April 2023)
• any National Insurance credits you’ve received
• if gaps in contributions or credits mean some years do not count towards your State Pension
• if you can pay voluntary contributions to fill any gaps and how much this will cost.

It’s not just mums that need to check their NICs. You should also check your contributions if you’ve taken time out of the workplace to travel, live abroad, or care for an elderly relative. Self-employed workers should also check they have made sufficient contributions.

Personal finance analyst Sarah Coles adds: “If you have gaps, it’s worth checking with Department of Work and Pensions as you may be able to claim benefits for these time periods that come with a voluntary National Insurance credit.

“Otherwise, if you can afford it, you can also buy credits – a full year costs around £800 and for each year bought you get 1/35th of a year’s State Pension – around £275. This means you effectively earn your money back in around three years, so it can prove good value.”

National Insurance credits are a way of maintaining your National Insurance record when you’re not making National Insurance contributions. You will be entitled to NI credits in certain circumstances such as if you are claiming benefits due to ill health or unemployment, you’re on maternity or paternity leave, or you’re looking after a child under 12.

What are the new rules about voluntary NICs?

When it comes to voluntary contributions, you can normally only go back six tax years to fill gaps in your NI record.

But, as part of transitional arrangements to the new State Pension, the government has been allowing people to plug any incomplete years between April 2006 and April 2016. The original deadline to make voluntary NICs under this arrangement was 5 April 2023, but the government has extended the deadline to 31 July 2023.

Dean Butler, managing director for customer retail success at Standard Life, says: “Based on the 2022/23 rates, buying a full National Insurance year could boost your State Pension by £275.08 a year.

“If you start claiming at 66 and live for another 20 years, you’ll have topped up your State Pension by around £5,500. This could make a massive difference to your future.”

Why do I need to check my NICs?  

The State Pension is available only to people who have paid, or been credited with, enough NICs. So, if you haven’t paid enough NICs, you won’t get the full State Pension. If you have made between 10 and 35 years of qualifying contributions or credits, you’ll receive a proportionate amount of State Pension.

It’s especially important for mums to check if they have paid enough NICs if they have taken time out of the workplace to bring up children.

Standard Life's Dean Butler, says: “Checking your National Insurance record should only take a few minutes but could be the most profitable few minutes you’ll ever spend this year. Unfortunately, many people automatically assume they’ll get a full State Pension but without enough qualifying years. 

“Qualifying years are those in which you paid National Insurance while working, received an NI credit or made a voluntary contribution. Falling short of the full 35 years could leave you on course for a nasty surprise in retirement. So, if you’ve taken time out of the workplace to have a family, care for relatives, or just not been working you potentially could receive a lower State Pension if you don’t have a credit for those periods.”

How can I get my national insurance number if I can’t find it? 

If you don’t know your National Insurance number, you’ll be able to find it the following ways: 

• on your payslip
• on a P60 form (which you should receive at around the end of each tax year) or a P45 form which you get when you leave a job
• any letters about tax, pensions or benefits that you might have received from HMRC
• through your personal tax account with HMRC
• by asking HMRC.

When it comes to looking after children, in many cases, parents have to rely on help from their own parents. The cost of raising a child is on the rise, thanks largely to an increase in average childcare costs. While some might currently qualify for 30 hours free childcare, there are those with children aged two and under who don’t and find it incredibly difficult to find affordable childcare. 

While the government has recently announced changes to make free childcare available to more people, those changes will take a while to come into effect. September 2025 is the deadline for the new scheme to be up and running. This means that more parents will be forced to rely on family members for help in the meantime.

But while some grandparents may qualify for an often overlooked benefit that could add thousands to their state pension, many believe that grandparents providing childcare should receive more from the government.

Should the government pay grandparents who provide childcare?  

The government doesn’t currently pay grandparents who provide childcare, although many people think it’s a good idea. MPs were told at House of Commons Treasury Committee on 21 March 2023, that they should consider paying grandparents who provide childcare, in order to help make up for a labour shortage in the childcare industry. 

Co-director of the Bennett Institute for Public Policy at the University of Cambridge, Professor Diane Coyle, told MPs that payments to grandparents were worth considering. She said: "One of the issues is the labour supply in the care sector, so perhaps thinking about a modest payment to grandparents instead would be a good alternative."

According to the Childcare and early years survey of parents, conducted by the government, just over two in five (22%) children aged 0-14 used informal childcare, such as grandparents, in 2021. Of those children, 17% were most likely to receive informal childcare from grandparents. That percentage is higher when looking at pre-school children who were cared for by grandparents at 24%. 

But while grandparents don't get paid by the government, there is a little known benefit for grandparents who look after their grandchildren while the parents work, which money saving expert Martin Lewis is trying to bring to light.

If you are a working parent with a child under 12 years old, and your parent provides childcare, you can apply for Specified Adult Childcare Credit. 

Specified Adult Childcare credits mean you can transfer the national insurance credit attached to your Child Benefit to a family member who is providing care for your child. This can add £1,000s to a state pension.

Eligibility criteria

According to the government website, you can apply for Specified Adult Childcare credits if:

• you are a grandparent, or other family member caring for a child under 12
• you were over 16, and under state pension age when you cared for the child
• you are ordinarily resident in the United Kingdom, meaning England, Scotland, Wales and Northern Ireland, but not the Channel Islands or the Isle of Man
• the child’s parent (or main carer) is entitled to Child Benefit and has a qualifying year for National Insurance without needing the parent’s class 3 NI credits which they receive automatically from Child Benefit (they can check their National Insurance record online to see if they have any gaps in contributions)
• the child’s parent (or main carer) agrees to your application by countersigning the form to confirm that:
  • you cared for their child for the period stated
  • you can have the Class 3 NI credit for the period stated.

Specified Adult Childcare credits can be backdated to 6 April 2011 at the earliest. But you can’t apply for the credits for a particular tax year, which runs from 6 April one year until 5 April the next, until the following October. This is so the government has time to run adequate checks. 

So if you want to apply for Specified Adult Childcare credits for the 2022-23 tax year, which ends on 5 April 2023, the earliest you can apply is October 2023. 

“We had to turn to my mum for childcare help” 

We spoke to some mums who rely on their own parents or in-laws to provide childcare and asked them to share their experiences.

Charlotte, mum-of-two, pays her mum to look after her two daughters. She says: “We had to turn to my mum for childcare help otherwise it wouldn’t have been worth me going back to work as all of my wages would have gone on childcare. There were no nurseries in my local area that seemed to provide a suitable solution for shift workers, so I would have had to pay for the girls to be in the nursery full time, even if I didn’t need it. I worked it out that, with my shift pattern, I actually only needed childcare help for about six days a month. But my mum was more than happy to help out. 

“I pay her £25 a day if she has both girls all day, and £15 a day if she does if she has them part of the day. I feel like that that covers fuel and any activities that they might do and it evens out over the course of the month. 

“I feel a responsibility to pay her, even though other members of my family don’t, as I don’t want her to feel taken advantage of - especially when official childcare is so much more expensive.”

Grace, mum-of-one, also relies on her mother-in-law to help with childcare: “It was really important to me to go back to work after I had my son, but nursery was really expensive and it would have been too much for him to go there full time. 

“But luckily, my mother-in-law retired just as I went back to work and she was really keen to help us with childcare. She looks after my son twice a week which is really helpful. She won’t let us pay her, but instead we try to treat her to the odd meal out, and when we go on a holiday together in the summer, my husband and I are going to pay for her travel and accommodation to show how much we appreciate her. Even when we tot up the price of that, it’s cheaper than nursery for another couple of days a week.” 

If you've recently had a baby, you might be weighing up returning to work with the cost of childcare to see which is best for your family. 

Given that average childcare costs in the UK are soaring and the cost of raising a child is becoming increasingly expensive, especially bearing in mind the cost of wrap around care once your child starts school, it’s no wonder that many parents feel they cannot afford to return to work.

However, thanks to changes announced in the Spring Budget, the 30 hours free childcare scheme, which is currently only available to qualifying parents of three and four-year-olds, will be extended to all eligible parents with children over nine months old. The downside is that it will be rolled out in stages and won’t be fully in place until September 2025. So, if you are thinking of going back to work before then, how do you work out whether it’s financially viable? And will you be hit by the motherhood penalty in later life?

CEO and co-founder of private pension provider Penfold, Pete Hykin, says: “When considering whether to return to work or pay for childcare, it's important to do a thorough cost-benefit analysis. This should include calculating the actual costs of childcare and comparing it to the parent’s net income after taxes, commuting costs, and other work-related expenses.” 

Return to work versus cost of childcare - how to work it out

To calculate whether it’s worth returning to work, you’ll need to find out exactly how much nursery will cost (or other childcare options) each month and weigh this up against how much you’ll be earning. As part of this calculation, you’ll need to deduct income tax and National Insurance.

Example if you earn £30,000 a year

• £30,000 a year salary before tax
• Works out as £2,035 a month after tax
• Commuting costs of £200, leaves you with take home pay of £1,835 per month
• Nursery costs £1,240 per month
• This will leave you with £595 a month to live on.

As an example, let’s say a full-time nursery place costs £1,240 a month for your one child. You earn £30,000 a year, or £2,500 a month before tax. 

You can use our calculator to work out how much income tax you pay and what your take home pay will be. In this example, your take home pay will be £2,035 a month, once income tax and National Insurance have been deducted. 

If you also commute, you’ll need to factor in these costs too. Let’s say you pay £200 a month to commute. That knocks your monthly take home pay down to £1,835. 

Take off your childcare costs (£1,240) and you’re left with £595 a month. You’ll then need to assess whether this will be enough depending on your overall situation and whether your partner will be able to cover other living costs. 

Example if you earn £20,000 a year

• £20,000 a year salary before tax
• Works out as £1,469 a month after tax
• Commuting costs of £200, leaves you with take home pay of £1,269 per month
• Nursery costs £1,240 per month
• This will leave you with £29 a month to live on.

On the other hand, if your annual salary is £20,000, your take home pay would be £1,469, or £1,269 once commuting costs are factored in. In this example, this would give you just £29 left over each month once childcare costs are deducted, meaning that returning to work is unlikely to be financially worth it. 

Keep in mind that if your child will be two by April 2024, you’ll be able to benefit from 15 hours of free childcare, provided both parents are in work. So if you can make ends meet until this point, this might help with your decision.

The 15 hours of free childcare is being extended to working parents of children aged nine months to three years in September 2024, before the full 30 hours of free childcare kicks in the following September. 

Is it financially worth returning to work after maternity leave? 

Whether it’s financially worth returning to work after maternity leave will ultimately depend on your personal and financial situation. You’ll also need to check whether your employer requires you to repay your maternity pay if you do not return to work. 

Lea Henry, co-founder of childcare agency CocoRio, says: “Statutory maternity pay does not need to be repaid, however many companies offer a top up to their employees in addition to what they are entitled to by the government. Often, employers will ask that this top up is repaid if the employee does not come back to work after their leave or they come back and then leave during a set period (often three months).”

You should be able to find this information in your employment contract or, if not, speak to your HR department.

How many mothers return to work after having a baby?

According to data from the Office for National Statistics, three in four mothers (75.6%) in the UK are currently in work, while a separate study shows around 32% of mothers return to full-time work after maternity leave and 44% return on a part-time basis. 

Part-time work is something that your employer might be willing to discuss with you. This gives you the flexibility of not needing a full-time childcare place and gives you time to spend with your young children. However, it also means getting a pro rata salary so you’ll get less in your pay packet each month. You’ll therefore need to do the sums again to see whether this works out any better for you. 

Real life stories

As well as our Family Editor, Stephanie Lowe sharing her story of how childcare costs have impacted her family life, we also spoke to other parents about their return to work after having kids.

What should you consider when weighing up returning to work and the cost of childcare?

As well as your own salary, you should consider factors such as how much your partner earns (if you have one), how many other children you have that require childcare, and whether you might be able to call on family or friends to help you. 

For example, if a grandparent could cover two to three days of childcare a week, this would help reduce your childcare costs, making the return to work more financially viable. There is also growing conversation around whether the government should pay grandparents who provide childcare, which could help to make this set-up more feasible. Don't forget too that once your child reaches a certain age, you will qualify for 15 hours free childcare (at least).

It’s also worth asking your employer how open they are to flexible working. Thanks to the Covid-19 pandemic and lockdowns, many employers now offer hybrid working, whereby you only need to go into the office a few days a week and can work from home the rest of the time. This can help reduce commuting costs as well as the number of hours of required childcare. 

Childcare expert and community manager at childminder agency tiney, Lisa Holmes, says: “The decision for mothers to return to work at the end of maternity leave is a deeply personal one, but sadly it’s often not as straightforward as doing what you might prefer to do or what you think is best for your family. 

“In not returning to work, women often face the ‘motherhood pay penalty,’ lose a portion of the family’s income, delay their career progression, and miss out on working in a job they might really enjoy. And yet, if they return to work, rising childcare costs might nullify (or exceed) their salary.”

Martin Lewis is a font of financial knowledge, sharing his Money Saving Expert knowledge far and wide, and today is no exception - this time it's pensions.

The Money Saving Expert founder shares a stark warning to anyone aged between 45 and 70 years old that may have taken any time off to work to look after children - check your National Insurance Contributions (NICs).

The pensions deadline is looming and many people are missing years of NICs. This is why it's so urgent. And this warning isn't just for parents, grandparents and carers also need heed this warning and look into it or face losing thousands of pounds they'll never get back. 

Mum-of-One, Lucy tells us that her son's nursery closed during lockdown and she lost a lot of freelance work, but as it was lockdown didn't even think that it may impact on her National Insurance Contributions: "I'll be definitely looking into this today, thanks Martin!"

If you think you may have missing years of NICs, there is a way to rectify those gaps, however the final deadline is April 5, 2023. So here's how to do it today;

How to check if you have any National Insurance Contributions gaps

Martin advises people to check if they are missing any NICs on the government’s website this will have their full record.

If there are gaps in earnings, or weren't earning enough to pay national insurance contributions (NIC) this could impact pensions, meaning people could miss out on thousands of pounds. To get the full pension amount, which is currently £185.15 per week, recipients must have 35 years’ worth of NIC.

Addressing viewers on his ITV1 Martin Lewis Money Show Live during a Pensions Special he explains how to plug the gaps; "if you're missing any... even paying NICs to 'buy back' missing years could actually give you thousands of pounds back when you come to retire."

This as 'an urgent deadline' with Martin warning; "missing it could cost you thousands of pounds you can never, ever get back." According to the 50-yer old anyone between the ages of 45 and 70 can plug gaps as far back as 2006.

He went on to say; "It's about 6 weeks away and that's not a long time to do something that's so complicated. Until that time, you can plug any gaps back to 2006 in your National Insurance years but after that you can only go back six tax years, to 2016, so there are 11 years that you will lose the ability to buy back so I want you to check now if you're missing any."

Anyone eligible for a state pension must ensure they have filled out any gaps in their NICs before the April 5 deadline.

Related features:

• How much is martin Lewis worth?
• This is why Martin Lew is pleading for energy bill hike to be postponed
• How much will energy bills cost

Video of the Week:

While rail workers across the country strike for a better pay deal, members of the public have begun to wonder how much does Mick Lynch earn? The man who many consider the face of the ongoing industrial action.

Months of train strikes have caused havoc on Britain's railways and disrupted many travellers' plans. The reason why rail workers are striking is no secret, as the cost of living crisis has left employees across a range of industries taking to strike action to try and secure a pay rise that's in line with inflation.

Mick Lynch, general secretary of one of the unions staging strikes and one of the faces of the Enough is Enough campaign - which aims to fight the cost of living crisis - has suddenly become a well-known public figure as a result of the ongoing dispute. And just like many wanted to know how much train drivers earn after many in the profession decided to strike, similar questions are now being asked of Mick Lynch's salary.

How much does Mick Lynch earn?

Mick Lynch has been open about his salary in the past, explaining on Talk TV that his salary is £84,000 a year, plus national insurance, tax and pension contributions.

Mr Lynch shared his salary with host Piers Morgan following previous reports that the union leader made £124,000. Morgan repeated the claim several times in the interview, to which the union leader revealed the real figure.

Mick Lynch also set the record straight while in a live interview with Good Morning Britain. GMB presenter Paul Brand asked Lynch: "What support are you giving members? Because you’re on a six-figure salary. I’m not going to demonise you for that this morning, there is many a politician on a six-figure salary."

Lynch was quick to shut down this claim, saying, "I’m not. I’m not on a six-figure salary. That’s completely untrue. Where did you get that from?"

Does Mick Lynch get paid on strike days?

According to the RMT's official Twitter page, "Mick Lynch donates his salary on strike days to the dispute hardship fund".

The RMT's National Dispute Fund makes hardship payments to support striking members taking part in disputes through donations made to the union.

What is Mick Lynch's job?

Mick Lynch is the general secretary of the Rail, Maritime and Transport Union (RMT), a position which he has held since May 2021. The RMT represents members from almost every sector of the transport industry.

The general secretary is essentially the leader of the union, and they attend high profile meetings and negotiations on behalf of the union and its members, and make decisions for the organisation that ensure its members are represented.

Lynch first became a member of the RMT after he started working for Eurostar in 1993, and worked his way up the union. Prior to being elected as general secretary, he served two terms as assistant general secretary.

What is Mick Lynch's background?

Mick Lynch was born is West London in 1962 and grew up near Paddington, though his parents were from Ireland. 

After leaving school at 16, Lynch qualified as an electrician and began working in construction, but when he joined a union he was black listed from the trade (he later received a large settlement from this).

During the ongoing strike action, Lynch has been a prominent figure, participating in many TV and radio interviews.

Video of the Week

In the mini budget, a Universal Credit rule change has been announced which means tens of thousands of people claiming Universal Credit could have their benefits slashed if they don’t work enough hours or try to find more work.

The rule change was announced by Chancellor Kwasi Kwarteng, saying: "These gradual changes focus on getting people back into work and maximising the hours people take on to help grow the economy and raise living standards for all. It's a win-win. It boosts incomes for families and helps businesses get the domestic workers they need, all while supporting economic growth."

But the move hasn’t gone down well with poverty and debt experts who accused the government of making the poor poorer while giving tax cuts to the rich.

The Chancellor also announced that the National Insurance increase will be reversed in November, income tax will be cut from April 2023, as well as changes to stamp duty which come into force straight away. If you missed the statement, here are the five key takeaways you need to know.

What are the current Universal Credit rules about looking for work and how are they changing? 

Currently, people who claim Universal Credit and work nine hours a week or less are expected to meet regularly with their work coach and take “active steps” to boost their pay. But Chancellor Kwasi Kwarteng has now raised the number of hours people have to work before they can stop actively seeking a job.

From 26 September 2022, Universal Credit claimants who earn less than the equivalent of 12 hours a week at National Living Wage will need to take steps to increase their earnings. And from January 2023 the rule will extend to those working 15 hours or less.

This change is expected to move about 120,000 people from the “light touch” scheme into the more “intensive work search” regime. This gives people a set number of hours they have to look for a job each week – those that fail to do so will have their benefits sanctioned. This will mean they get less money.

The Treasury says that certain groups will be exempt from sanctions, including those unable to work due to long-term sickness or a disability.

 What do the new rules mean for me? 

• From January 2023, those on Universal Credit who work 15 hours a week or less at the National Living Wage, will have to take 'active steps' to work more or face benefit cuts.

If you claim Universal Credit, there are certain things you need to do in order to receive your payment. One of these is to “complete work search activities" in line with what you have agreed in your “claimant commitment”. 

Your claimant commitment is a personalised document setting out the responsibilities you have accepted in return for receiving Universal Credit, and the consequences of not meeting them.

How much time you are expected to work, or look for work, will vary depending on whether you have caring responsibilities, such as children.

If you don't stick to your claimant commitment, your Universal Credit payments can be reduced through sanctions. For example, if you are single and over 25, sanctions can reduce your Universal Credit payment by £11 a day. If you are single and under 25, the sanction will be £8.70 a day.

If you think you might need to follow the new rules, you should check with your work coach and also keep an eye on your online Universal Credit account.

You might find that the rule change means having to fork out for more hours of childcare, or taking a job in a sector where you don’t have experience.

 Why are the Universal Credit rules changing? 

The government says the rule change aims to get more people into work, boost people’s incomes and grow the economy. But critics say the changes will make life more difficult for people on low incomes or those with caring commitments.

Dr Dora-Olivia Vicol, CEO of anti-poverty charity the Work Rights Centre, said: “We’re alarmed by the chancellor's pledge to reduce people’s benefits if they don’t fulfil their job search commitments. Britain doesn’t have an unemployment problem, it has a low-wage problem. This is a shocking example of punitive policy, which will only make the poorest poorer."

Michael Clarke, head of information programmes at poverty charity Turn2Us, said: “The introduction of a new punitive policy aimed at part-time workers on benefits will no doubt cause significant distress and impact people’s mental and physical wellbeing during what is already a difficult time. 

“Helping people into stable and secure work which is suitable should be a positive step. However, the government must implement more effective policies, such as affordable and accessible childcare, to remove the barriers that prevent people – disproportionally women and caregivers – from getting back into work full-time.”

Over 50s are also being encouraged to go back to work 

The Chancellor also announced plans to encourage over 50s back to work – thousands stopped working during the pandemic and haven’t returned. He said that rising economic inactivity in the over 50s is contributing to shortages in the jobs market, driving up inflation and limiting growth.

Under changes announced today, jobseekers over the age of 50 will be given extra time with Jobcentre work coaches. 

Becky O’Connor, head of pensions and savings at interactive investor, said: “Efforts to support the over 50s who want to work but can’t find the right jobs are welcome. But the jobs available need to be right for people in this demographic, which means more flexible and part-time work.

“The over 50s were leaving the workforce because work didn’t work for them – unless the jobs on offer improve, efforts to get them back to work are unlikely to be effective.”

Most of us pay it each month without much thought on the specifics, but what is National Insurance, how is it calculated and why do we have to pay it? There has been a lot of change around National Insurance in this current tax year, so it's crucial you understand what National Insurance is and how the multiple changes affect how much you have to pay. 

Back in April 2022, National Insurance went up by 1.25 percentage points in order to provide additional funding for the NHS and for health and social care in England. Then, in July 2022, the threshold at which you start paying National Insurance was increased, which effectively cancelled out, or reduced the impact of, April’s rise for millions of people. 

It has now been confirmed that April's National Insurance increase will be reversed to help families cope with the rising cost of living and to help grow the economy. 

Sarah Pennells, consumer finance specialist with life and pension company Royal London, said: “National Insurance is a tax that was introduced more than 100 years ago to provide a safety net for people who couldn’t work due to illness or unemployment 

“You don’t pay it, if you’re on very low earnings, but otherwise you pay it if you’re an employee or self-employed.”

What is National Insurance in simple terms?

National insurance is a tax you pay on money you earn through paid work - not from anything you earn in the way of interest or profits on savings or investments. You pay NI, both as an employee, or if you’re self-employed, once your earnings go over certain minimum levels. If you’re sixteen or over, you must pay national insurance if you’re an employee who earns over £242 a week, (£12,570 a year), or are self-employed and turn a profit, (after expenses), of £6,725 or more a year.

Before you can start paying NI, you’ll need a National Insurance number. This is your own unique number, with a combination of letters and numbers, which is sent to you by the Department for Work and Pensions. You get one for life, and it makes for an easy way for HMRC to track your tax and NI payments over the years, along with any benefits and state pension entitlement.

How is National Insurance calculated?

National Insurance is calculated as a percentage of what you earn. The rate of NI you pay, and the level at which payments start, will depend on whether you’re employed or work for yourself, as well as how much you earn or make in profits. 

The government has set out four different ‘classes’ of payments:

Class 1 - you pay this if you're employed

If you earn less than £242 a week, (or less than £12,570 a year in the current tax year,  which runs from 6 April 2022 to 5 April 2023), you won’t pay NI.  This is because the threshold at which a person starts paying National Insurance was increased to £12,570 in July 2022. You won’t pay income tax either until you earn more than £12,570 a year. This £12,570 is called your ‘personal allowance’. 

Once you earn more than the personal allowance limit, you will start to pay National Insurance, but how much you pay will depend on how much you earn.

If you earn between £242 to £967 a week (or £1,048 to £4,189 a month), you will pay National Insurance at a rate of 13.25% (this is up 1.25 percentage points from the 12% you would have paid in the previous tax year). For anything you earn over £4,189 per month, you will pay a rate of 3.25% (up 1.25 percentage points from 2% in the previous tax year).  

So, for example, if you earn £1,500 per month, you will pay 13.25% of £1,500 in National Insurance. This works out as £198.75 per month. 

But from 6 November 2022, rates will revert to what they were before the increase came into effect in April 2022. So if you have been paying 13.25% National Insurance, this will reduce to 12%. If you have been paying 3.25%, this will revert to 2%.

Class 2 - paid by anyone who is self-employed with profits of £9,880 a year or less

If you’re self-employed, you’ll pay Class 2 and Class 4 National Insurance, depending on your profits.

If you have profits of less than £6,725 per year, you won’t have to pay any National Insurance. 

For any profits between £6,725-£9,880 you’ll pay Class 2 National Insurance, which is currently £3.15 a week.  For any profits you have over £9,880, Class 4 kicks in, which we explain below. 

Class 3 - paid for voluntary contributions

These are additional payments you can make on a voluntary basis to ‘top up’ any gaps in your National Insurance record. Gaps can occur if, for example, you don’t pay NI because you’re on a low income. Making up any ‘missing’ payments can mean you’ll then qualify for the full state pension, as you need 35 years’ worth of payments to be eligible for this.

Class 4 - paid by anyone who is self-employed with profits of more than £9,880 a year

You’ll pay 10.25% National Insurance on profits between £9,880 and £50,270 and above that you’ll pay a lower rate of 3.25%. 

According to the Treasury, from 6 November company directors and those who are self employed will pay a blended rate of National Insurance, which takes into account the changes in rates throughout the year, when they submit their annual self-assessment.

What does National Insurance pay for?

NI contributions go towards funding a whole raft of payments and benefits. These include the State Pension along with benefits including Jobseeker’s Allowance, Maternity Allowance, Employment and Support Allowance  and the Bereavement Support Payment. NI payments currently raise over £142 billion pounds a year for the Government, according to consumer research company Statista.

In some cases, such as ‘contribution based’ Jobseeker’s Allowance, the amount you can get, (if you’re eligible to claim), can depend on the amount of national insurance you’ve paid.

Senior personal finance analyst from Hargreaves Lansdown, Sarah Coles, warns:  “However, this doesn’t mean your National Insurance payments are actually ringfenced to pay your own pension and benefits.

“It goes into a national insurance fund and is used to pay people who need help today. In the years when it isn’t enough to meet the cost of these benefits, the Treasury makes up the shortfall”.

Do you legally have to pay National Insurance?

Yes, there are no two ways about it - if you earn more than the relevant threshold, you must pay National Insurance. If you’re employed, this will be done automatically through the Pay As You Earn (PAYE) system. This means that both NI and income tax will be taken off your gross salary by your employer, before reaching your bank account.

If you’re self-employed and fill in a self-assessment tax return, then HMRC will work out how much National Insurance and tax you need to pay. As part of the process, they’ll let you know how much you owe, when it’s due and how to pay.

If you’re still working later in life, you won’t have to pay NI if you work beyond state pension age. But you may still be liable for income tax if your earnings and income from other sources top your annual tax-free allowance of £12,570.

If you’re unable to work due to a health condition or disability, you may be able to claim Employment and Support Allowance. This could provide more than £100 a week to put towards soaring living costs, so it’s important to check if you’re eligible.

At a time when prices are rising all around, any opportunity to bring in some extra money should be investigated. While the government is offering a cost of living support package, there may be other financial help out there that you’re entitled to - from the Employment and Support Allowance to the Marriage Allowance, and Child Benefit.  

Anna Stevenson, senior welfare benefits specialist at Turn2Us, says: “People on the lowest incomes will be the hardest hit in the coming months but there are steps we can all take to make sure we’re always checking how to boost our income.

“Running a financial health check every six months is a great step we can all take to ensure we are receiving all the money we are entitled to and to top up our income.”

Here, we explain how to find out if you’re eligible, and how to go about claiming this benefit.

What is the Employment and Support Allowance and how does it work? 

The Employment and Support Allowance (ESA) is a benefit paid to people who are aged between 16 and State Pension age who are unable to work because of a physical or mental illness, or disability. You may claim if you’re temporarily ill with plans to go back to work, or if you’re off work long term.

The ‘old-style’ ESA was paid before the roll-out of Universal Credit (UC), which completed in December 2018. This was made up of both contributory ESA, based on your national insurance contribution record, and income-related means-tested ESA. If you’re already claiming income-related ESA, you’ll be moved to Universal Credit by the end of 2024.

The majority of people can now only claim the ‘new-style’ ESA, which is contributory, meaning it’s based on your national insurance (NI) record. 

Richard Machin, senior lecturer in social work and health at Nottingham Trent University, says: “Beware that once you’ve moved to Universal Credit you can’t return to claiming income-related ESA, and you may be better off staying on the old benefit while you can. But rules are complex so you’d need to seek advice in these circumstances.”

If you’re claiming the new-style ESA, you’ll be placed into one of two groups - the ‘work-related activity’ group, and the ‘support group’. The ESA ‘work-related activity’ group are those people who are capable of taking steps towards moving into work, and will be capable of returning to work. The ESA ‘support group’ are considered to have severe health problems that prevent them from undertaking work or work-related activities, such as courses. 

The group you are placed into will affect both how long you’ll receive payments for and how much you can get.

What is the criteria for claiming ESA? 

To be eligible for the new-style ESA, you must’ve been working and paid enough national insurance contributions (NICs) over the previous two tax years. You’re able to claim ESA if you’re self-employed, too, provided you’ve paid enough NICs. You can easily check your NI record at gov.uk to see where you stand, or call HMRC on 0300 200 3500.

You’re allowed to earn up to £140 a week without this affecting your entitlement to ESA, but only if you’re doing ‘permitted work’ (find out more below). But if you get income from a private pension of more than £85 a week your benefit will be reduced.

You’re able to claim ESA at the same time as other benefits such as Personal Independence Payment (PIP) and Universal Credit.

Ken Butler, welfare rights and policy adviser at charity Disability Rights UK, says: “The cost-of-living crisis means that it’s more important than ever that disabled people and those with long-term health conditions make sure they are receiving all the benefits they are entitled to and at the correct amounts. For example, Personal Independence Payment is a useful benefit to consider as it is paid on top of all others and can be a passport to other forms of help.”

There are useful benefit calculators at Turn2us and Entitledto that can clarify what you’re entitled to claim. You can also find local sources of independent advice organisations across the UK on the Advicelocal website by putting in your postcode, while Disability Rights UK also has  free factsheets and guides on its website. 

How much is the Employment and Support Allowance and how is it paid? 

How much ESA you get will depend on multiple factors including the stage your application is at, your age and whether you are able to return to work. You can get a maximum of £117.60 a week. The exact amount you receive depends on whether you’re in the assessment period, and whether you are in the ‘support group’ or ‘work-related activity group’. The money is paid directly into your account every two weeks.

You’ll spend up to 13 weeks on an ‘assessment rate’ when you apply for ESA. If you’re under age 25, this amounts to £61.05 a week, and if you’re over 25, it’s £77 a week. Your first payment at the assessment rate should be made after two weeks.  If your assessment runs for longer than 13 weeks, you’ll stay on this rate, but any future increase will be backdated to the 14th week of your original claim.

Once your claim is processed, you’ll be put into one of two groups: if you’re unfit for work but able to do some work-related activities such as taking courses (work-related group), you’ll get £77 a week for a year. If you’re unfit for work and unfit for any work-related activity (support group), you’ll get the maximum £117.60 a week. There’s no time limit for how long you receive payments in the support group. 

If you’re assessed as being fit to work you won’t have to repay the money you received on the assessment rate.

How to claim – step-by-step guide

1. Check if you’re eligible to claim ESA at Gov.uk. You’ll need to answer some questions to ensure you’re eligible, and if you are, you’ll complete a form.
2. Apply online using this form, and answer a series of questions. You’ll need your national insurance number and bank details to fill in the application.
3. You’ll receive a letter for an appointment with a work coach to discuss whether you’ll take part in work-related activities, or if you’re not able to continue in work.
4. Once you’ve gone through the assessment stage, you’ll receive a letter telling you whether you’re entitled to ESA, and how much you’ll receive. But initially, you’ll receive payments at the assessment rate.
5. To continue receiving ESA, you’ll need to regularly send ‘fit notes’ – which are printed or digital letters signed by a healthcare professional - and include any details of a change in circumstances, such as getting a new job. You’ll be told during your assessment how often you must send these, depending on your personal situation.
6. You’ll need to complete and send the ESA50 form - also called the ‘capability for work questionnaire’ - around two to three months after you first apply for ESA. This is used to help the Department for Work and Pensions (DWP) decide if you cannot work due to illness or disability.
7. If necessary, at some stage you might receive a letter requesting that you attend a Work Capability Assessment as a further evaluation.
8. Next, you will receive a final decision about how much you’ll get, or whether you need to be assessed again.

Can I work while claiming ESA? 

Yes, you can do some 'permitted' work if you claim ESA, but if you exceed what is allowed you will lose the benefit and will be regarded as fit for work. This can be any type of work provided it’s for 16 hours a week on average, and you don’t earn more than £152 a week.

Permitted work may also include, for example, taking a particular course that’ll build up your skills and experience to return to full-time employment, or voluntary work. You’ll need to complete a permitted work form and submit this to your local Jobcentre.

Can I claim Employment and Support Allowance if I’m receiving sick pay? 

You can’t get ESA at the same time as statutory sick pay, maternity pay or Jobseeker’s Allowance.

If you’re employed but unable to work, you’ll typically get Statutory Sick Pay (SSP) from your employer for 28 weeks. However, you can start your ESA claim up to three months before your SSP ends. It’s important to claim ESA early to ensure your benefit payments start as soon as possible.

What should I do if my circumstances change? 

If you’re claiming ESA, you’ll need to report changes in your circumstances such as starting work, moving house, and any changes to your medical condition or disability. You can do this by calling your Jobcentre Plus, or writing to the office that pays your ESA, which should be on any letters you receive. 

Understanding what child benefit is and whether you can claim it has never been more important, especially as living costs remain high. And now that the rates have gone up, it's vital to know how much child benefit you are entitled to. 

If you are worried about how much it costs to raise a child or the fact that average childcare costs are spiralling, it’s vital that you’re claiming all the benefits you’re entitled to. And child benefit payments can give your family budget a much-needed boost. You could also see if you are eligible for 30-hours free childcare or the tax-free childcare allowance. 

Child benefit is not paid automatically so you do need to claim it. If you don’t, you could be missing out on £1,331 a year – more if you have multiple kids.

Goodto.com's Money Editor Sarah Handley says: “Life is really expensive at the moment and you might feel that there are no more costs that you can cut. But benefits – including child benefit – can make a huge difference, so it’s important you make sure you’re claiming everything you’re entitled to.”

What is child benefit? 

Child benefit is a payment from the Government to help parents with the cost of raising a family. It was first introduced in 1977 and replaced the previous Family Allowance system. Anyone who is responsible for bringing up children can claim it. It’s not means tested, so there’s no need to prove how much you earn in order to qualify for it. 

Payments are made at fixed rates - so everyone gets the same rate regardless of how much they earn or have in the bank.

How does child benefit work? 

Child benefit lets you claim a weekly payment for every child in your household – and there is no limit on the maximum number of children you can claim for. Payments continue until the age of 16, or 20 if they are in ‘approved’ full-time education or training. Child benefit stops on the 31 August on or after a child’s 16th birthday, so if your child is staying in full time education or taking part in an approved training course, then you will need to reapply for child benefit, otherwise your payments will stop. 

However, only one person per household can claim child benefit and, as Clare Moffat, pensions and legal expert at Royal London points out, you shouldn’t automatically assume that it should be mum. “If there is going to be a non-working parent in the household, then it should be that person who claims the child benefit. This is because claiming child benefit means you automatically get National Insurance (NI) credits, which help with qualifying for the state pension. You get 12 years of NI credits for each child. It also means that your child will automatically receive a NI number when they are approaching 16, rather than having to apply for it.”

Child benefit is paid every four weeks, directly into your bank or building society account.

How much is child benefit?  

Child benefit is paid at two different rates, both of which went up in April 2024. For your first child, you will now receive £25.60 per week, which works out as £1,331.20 per year. For any subsequent children, you will receive £16.97 per week, which equates to £882.44 per year.   

The money will be paid directly to your bank, building society account or credit union account every four weeks - usually on a Monday or Tuesday.

Source – HM Revenue & Customs 

If you are a single parent or are claiming certain benefits, including income support, you may be eligible to claim weekly payments instead.

If you want to change the way your payments are made, or have them paid into a different account, contact the child benefit helpline on 0300 200 3100. 

Am I eligible to claim child benefit? 

Anybody who has parental responsibility for one or more children is able to claim child benefit. However, the benefit is not as straightforward as it once was. Since a change of rules in 2013, once you or your partner earn over a certain amount a year, while you can still receive child benefit, you will be liable for a High Income Child Benefit Tax Charge.

However, child benefit is finally becoming fairer. In his Spring Statement 2024, Chancellor Jeremy Hunt announced that the threshold at which parents incur the High Income Child Benefit Tax Charge would be increased from £50,000 to £60,000, which will take 170,000 families out of paying it all together. The upper limit for the High Income Child Benefit Tax Charge has also been increased from £60,000 to £80,000, which means the window for tapered payments is increased. 

If you want to carry on receiving child benefit but need to pay the charge, you should tell HMRC by registering for self-assessment and filling in a tax return. Your personal allowance will then be changed to deduct the tax charge. 

You can use the government's child benefit tax calculator to see how much tax you pay depending on how much you earn.

Should I claim child benefit if I have to pay the money back?

Lots of couples decide not to claim child benefit if it means they’ll have to complete a tax return and pay the money back. However, that may not be a sensible move, especially if you take time out of work to raise your family. This is because claiming child benefit will earn you national insurance credits that work to build your entitlement to the state pension (you need 35 years of national insurance contributions to get the full state pension).

Royal London's Clare Moffat says: “The most important point is to always claim child benefit for each child to ensure you qualify for NI credits.”

In addition, with the new threshold changes, which came into effect on 6 April 2024, you might now qualify for the whole child benefit entitlement, and no longer have to pay the high income tax charge. 

What happens if I’ve missed out NI credits by not claiming child benefit?

There’s no need to panic if you’re worried you’ve missed out on NI credits that you were entitled to, by not claiming child benefit.

As Clare Moffat explains, the government is planning to rectify the situation. “Many people didn’t claim child benefit in the past because of the High Income Child Benefit Charge and could be worried about losing out on state pension credits. However, the government announced at the end of April 2023 that these parents wouldn’t be disadvantaged when they start claiming state pension. It has said there will be legislation introduced which will allow someone to claim NI credits retrospectively and more information will be available in in due course.”

How to claim child benefit

You can start claiming child benefit as soon as you have registered your child’s birth, or the child you’ll be responsible for comes to live with you. Claims can be backdated for up to three months, however it can take up to 16 weeks to process new child benefit claims so it’s worth applying as soon as possible. 

To get started – you need to download and fill in a child benefit claim form (CH2). This may look daunting, but the information needed is basically your personal details like your name, address, date or birth and national insurance number, along with your partner’s details, if that’s relevant. You also need to complete details of the child, or children you are claiming for and how you want your child benefit paid.

Once the form’s completed, send it back to the address on the form along with any requested documents – usually your child’s birth or adoption certificate. These must be originals - not photocopies – and should be returned to you within four weeks.

If at a later stage, you want to add another child to your claim, say after having another baby, you can call the child benefit helpline directly on 0300 200 3100. You will need your national insurance number and the child’s birth certificate in order to add them to your existing child benefit claim.

What happens to your child benefit if your family splits up?

If you and your partner split up, it’s usually the person whom the child lives with for the majority of the time who will claim child benefit.

However, in the event you split up and have two children and decide that, under your new living arrangements, one of your children will live with you and one will live with your ex-partner, then you can both claim child benefit.

In this case, you will both be able to claim the higher rate of £25.60 per week for your first child, however if you have more children, you can only claim £16.97 for each and every other child.

If you move in with a new partner who also has children, then the oldest child will be eligible for the higher £25.60 rate, and any other children will get the lower £16.97 weekly rate.

When does child benefit stop? 

Payments will stop on 31 August on, or after your child’s 16th birthday, or when your child leaves further education or training before their 20th birthday.

Sarah Coles, head of personal finance at Hargreaves Lansdown explains what counts as further education or training: “This includes things like A-levels, T levels and NVQs up to level 3. If they are still learning, you will continue to receive it, until the end of February, May, August or November after they leave the approved education. However, you have to tell the Child Benefit Office they’re still studying or it will stop”.

You should also tell the child benefit office about any change in your child’s circumstances as this may affect whether or not payments will stop, even temporarily. Changes include if your child starts paid work for more than 24 hours a week, lives away from you for more than eight consecutive weeks or goes abroad for more than 12 weeks.  

You can report any changes to either your child’s circumstances, or your own, online or by calling the child benefit helpline on 0300 200 3100.

What other benefits can you claim as well as child benefit? 

You can still claim other benefits while you are claiming child benefit. Any other benefits or payments you can claim will depend on your financial and living situation. If you are not working, or on a low income, it’s worth using a free online benefits calculator to see what you could be entitled to.   

If you are a new parent, as well as seeing which benefits you are entitled to, it's also worthwhile seeing what free baby stuff you could get too. 

Millions of families will be wondering ‘when will I get the £650 cost of living payment’ as they continue to struggle with rising food costs, sky high energy bills and record fuel prices. 

The good news is you don’t have to wait too much longer to receive some of it. But it won’t be paid in one go - it will be split into two smaller payments rather than a single payment of £650. 

More than eight million low-income households are eligible for the payment as part of former Chancellor Rishi Sunak’s cost of living support package. He said: “We have a responsibility to protect those who are paying the highest price for rising inflation, and we are stepping up to help.”

Find out when the cost of living payments for 2023 will be paid.

When will I get the £650 cost of living payment?

The £650 cost of living payment will be made in instalments and the Government announced back in June when low-income households could expect the first payment. The first instalment of £326 will be paid directly into your bank account from 14 July and all qualifying households should receive it by the end of the month. 

The second cost of living payment of £324 will be made in between 8 and 23 November.

You don’t need to apply for the payment - it will be made automatically to those who are eligible. According to the Department for Work and Pensions, to be eligible for the second cost of living payment of £324, you must have received, or later receive one of the following, for any day in the period 26 August 2022 to 25 September 2022:

• Universal credit
• Income-based Jobseekers Allowance
• Income-related Employment and Support Allowance
• Income support
• Working Tax Credit
• Child Tax Credit 
• Pension Credit.

The payment will be tax-free, will not count towards the benefit cap, and will not have any impact on existing benefit awards.

It is estimated that one in four families will be eligible for the second cost of living payment. More than eight million families received the first instalment which was paid in July. 

What other cost of living payments could I receive?

All households qualify for a £400 energy rebate from October to help with rising energy prices. But you won’t receive this as a direct payment to your bank account - it will be knocked off your energy bill. 

There is also a separate £150 payment for those with disabilities and a £300 payment for pensioners. 

Households in council tax bands A-D will also qualify for a £150 council tax rebate. Many will have already received this, but if you haven’t had yours yet, check your local council’s website for more information. 

While not a cost of living payment, a recent change in the National Insurance threshold could also see millions of people see a bit more money in their pay packet each month.

You might also be interested in our article on whether everyone who received Universal Credit will receive the £650 cost of living payment. 

Income tax may be automatically deducted from your salary before it hits your bank account, so you may not think too much about it. But alongside national insurance, it is important to understand exactly what income tax is, how it's calculated and why you have to pay it.

With households needing to keep a watchful eye on outgoings with inflation rising and energy bills skyrocketing, knowing what tax you need to pay can be a big help. 

Sarah Pennells, consumer finance specialist at Royal London says: “Income tax was introduced in the UK over 200 years ago as a temporary measure and is still with us today! It’s a tax that does what it says on the tin, in that you pay it on your income – but not necessarily on all your income.”

It is also important to understand the details of your income tax. If your tax code is incorrect you could be paying much more than you need to. If this is the case, you could be due a tax rebate.

What is income tax?

Income tax is a tax that you pay on the money you earn. The amount you pay depends on how much you earn. Essentially, the more you earn, the more you pay. It is collected by HMRC on behalf of the government to help provide funding for public services such as the NHS and education. It’s also used to fund the welfare system, as well as investment in public projects, such as roads, rail, and housing.

There are three income tax rates:

• the basic rate at 20%
• 40% is the higher rate
• 45% is the top rate.

But you don’t necessarily pay one rate on your income. It is tiered. You won't pay any income tax if you earn less that £12,570 per year. (Importantly, thanks to a recent change in the National Insurance threshold, you won't pay any National Insurance either if you earn less that £12,570). 

You’ll currently pay 20% on anything you earn between £12,571 and £50,270 and 40% on earnings between £50,271 and £150,000. Those with an income of over £150,000 pay 45%. But from April 2023, the point at which you start paying 45% income tax rate will be reduced to £125,140. This means more higher earners will be paying more income tax than they did in the current tax year.

Former Chancellor Kwasi Kwarteng had announced a raft of changes to the income tax system in his mini budget on 23 September 2022. These included dropping the basic rate of income tax to 19% and abolishing the top rate. The government u-turned on getting rid of the top rate 10 days after it was announced. The reduction of the basic rate was then scrapped by new Chancellor Jeremy Hunt on 17 October. 

However, a month later, Jeremy Hunt went on to announce more changes to income tax in the Autumn statement. He said: "Asking more from those who have more means that the first difficult decision I take on tax is to reduce the threshold at which the 45p rate becomes payable from £150,000 to £125,140. Those earning £150,000 or more will pay just over £1,200 more in tax every year.

"We are also taking difficult decisions on tax-free allowances. I am maintaining at current levels the income tax personal allowance, higher rate threshold, main national insurance thresholds and the inheritance tax thresholds for a further two years taking us to April 2028."

The freezing of the thresholds ultimately means that for some people, when their wages go up and the tax thresholds don't, they will be moved into a higher tax band and have to pay more income tax. This is what people mean by stealth taxes.

Income tax bands are different if you live in Scotland.

To determine your own level of tax, HM Revenue & Customs (HMRC) issues a personalised tax code. It is made up of letters and numbers and will be displayed on your payslip, P60 as well as on your annual coding notice letter from HMRC.

Understanding your tax code

The first four numbers on your code represent how much you can earn or receive as income before you start paying tax. This is known as your personal tax allowance. The standard personal allowance is £12,570. This would be expressed as 1257 on your tax code as all allowances are divided by 10. Most people should start out with this tax code.

The four numbers are followed by a letter, which refers to your individual tax situation.

Here are some examples:

• L – This is a standard letter and means you’re entitled to the tax-free personal allowance
• N – This will appear if you have elected to transfer 10% of unused allowance to your spouse or civil partner
• OT – This code denotes that all your tax allowances have been used up - with the result that all your income will be taxed. This might be used if you've started a new job and don't have a P45 showing your earnings and tax paid at your previous job.

For a full list of tax codes check on the official government website.

Do I have to pay income tax?

Yes, employees and the self-employed must pay income tax on earnings above the personal allowance. Other types of taxable income include rent from a buy-to-let property, pension withdrawals, and dividends (or cash payout) from shares. However, you don’t usually pay income tax on all your taxable income. This is because most people qualify for one or more tax-free allowances.

Everyone gets a personal allowance, though once your earnings hit the £100,000 threshold, your personal allowance is reduced by £1 for every £2 you earn above it, until it reaches £0. So if you earn £125,000, you pay income tax on the lot, and there’s no tax-free allowance.

There’s also the marriage allowance. This allows you to transfer £1,260 of your personal allowance to your spouse or civil partner if they earn more than you. However, there are eligibility rules - one of you must be a non-taxpayer and one must be a basic-rate taxpayer. Higher or additional-rate taxpayers aren't eligible for this allowance.

Katt Mann, savings and investments specialist at Nutmeg said: “These allowances are worth knowing about. The marriage allowance, for example, could reduce a tax bill by up to £252. It is also worth checking if you are eligible to backdate your claim, in some cases you may be eligible to claim from tax years since 2017.”

Income tax calculator - work out how much you will pay

Calculating tax can be seriously complex, so we have developed a specialised tax calculator to crunch the numbers – so you don’t have to.

Type in your annual salary and the calculator will generate a series of numbers. You’ll be able to view your take-home income per month and per week, once income tax - and National Insurance (NI) - have been deducted. You will also be able to see a breakdown of the income tax and NI applied to your level of earnings.

Once you have a clear picture of your earnings once tax has been taken off, you can understand exactly what you will receive on payday to allow you to be in control of your budgeting.

Bear in mind too, that the 1.25 percentage point National Insurance increase that came into effect in April 2022 will be reversed from 6 November 2022. 

How is income tax paid?

If you are employed, income tax (and national insurance) will automatically be deducted through the Pay As You Earn (PAYE) system. You don’t need to do anything, your employer will take care it. If you’re self-employed, you pay it at the same rate as everyone else. But you pay it a year in arrears through a self-assessment tax return, as well as a ‘payments on account’ which is a twice-year payment towards the upcoming year's tax. These payments are calculated based on the previous year's tax bill. Self-employed workers must have a keen understanding of what they will owe to ensure they keep enough back to cover the tax.

What happens if I work part-time, do I still have to pay it?

Yes, income is subject to tax regardless of whether you work full or part-time. Employees who move to part-time hours with the same employer should not need to take any action provided their PAYE code is correct, as the system should automatically recalculate the tax throughout the year.

It’s important to keep an eye on your tax code if you move jobs or change hours.Kat Mann added: “HMRC will tell your employer which tax code they should use for you, so that your income can be correctly taxed. However, the onus is on individuals to check that their tax code is correct – this can be particularly important when you have a change in salary, if you receive regular bonuses and when you change jobs.”

You can check your tax code with HMRC and if you’re unsure, it can be worth calling to check you have the correct tax code. Even a small error could mean you’re overpaying or underpaying by hundreds of pounds.

Do I still pay if I am on maternity leave?

Yes - if you earn over the personal allowance threshold, you will need to pay income tax when you're on maternity leave. Maternity pay is paid in the same way as your income when you are working - this includes statutory maternity pay (SMP). There’s no alternative rate when you take time off after having a child. If you’re self-employed you’ll need to declare your SMP as earnings and pay income tax on the total.

“If your level of pay is above the personal income tax allowance, then you will pay income tax on your maternity pay,” added Kat Mann. “National Insurance contributions are also deducted.”

Video of the Week:

With the cost-of-living crisis escalating thanks to rising inflation and soaring energy bills, it’s important to be in the know about how much income tax you pay.

It’s also vital to be prepared for tax rises in the future.

Rebecca O’Connor at Interactive Investor said: “Tax isn’t the most exciting topic to think about but it has a very real impact on your earnings. It’s important to get a handle on it so that you’re in the know about what you will take home each month and what you have to spend.”

How much income tax do I pay?

To find out how much income tax you pay, try our income tax calculator. It will show you how much income tax you can expect to pay over the next tax year (or scroll down to use our calculator for the current tax year). It will also show you how much you can expect to pay in National Insurance.

It's important to note if you earn less than £12,570 per year, you will not pay any income tax. And now that the National Insurance threshold has been increased to the same level, you won't pay any National Insurance either if you earn less than £12,570.

Once you have a clear picture of your earnings once tax has been taken off, you can know exactly what you will receive on payday to allow you to be in control of your budgeting.

Income tax calculator to 2022/23 tax year

You just need to type in your annual salary and the calculator will show your take-home income per month and per week, once income tax - and National Insurance (NI) - have been deducted.

You will also be able to see a breakdown of the income tax and NI applied to your level of earnings.

How is income tax calculated?

The income tax you pay depends on how much you earn. On earnings above a certain amount, income tax is tiered.

Everyone can earn up to £12,570 without paying any income tax at all. This is known as the ‘personal allowance’.

You’ll currently pay a basic rate of 20% between £12,571 and £50,270 and 40% on earnings between £50,271 and £150,000. Those with an income of over £150,000 a year pay a top rate tax band at 45%. But following changes announced in the Autumn Statement on 17 November, from April 2023, the point at which someone started paying the top rate of income tax will be lowered from £150,000 to £125,140.

Thresholds are set to be frozen until 2028. This means that for those whose wages rise could find themselves pushed into a higher tax band by stealth and have to pay more income tax.

On 23 September 2022, former Chancellor Kwasi Kwarteng announced that these rates were set to change from April 2023. The basic rate of income tax was set to drop to 19%, and the higher and top rate bands were set to be replaced with a single higher rate of 40%. However after strong criticism, the government u-turned on the decision to scrap the 45% top rate of income tax just ten days after it was announced. On 17 October 2022, the reduction of the basic rate of income tax was also scrapped by new Chancellor Jeremy Hunt. 

Income tax bands are different if you live in Scotland.

To determine your own level of tax, HM Revenue & Customs (HMRC) issues a personalised tax code.

It is made up of letters and numbers and will be displayed on your pay slip, P60 as well as on your annual letter from HMRC entitled the “coding notice”.

Is income tax going up?

While income tax rates aren't going up, the Government has frozen income tax thresholds until 2026. This means that people who have an increase in salary that moves them across a threshold will be pulled into higher tax brackets and pay higher tax bills.

O’Connor said: “Frozen thresholds sounds harmless, but actually, if your income goes up - you could end up being dragged into paying tax if you don’t currently, or paying higher rates of tax.

“It’s important to make sure you’re clued up on the latest tax changes so you can plan ahead and not get caught short.”

Net pay going down? Here are five tips on how you can reduce your costs elsewhere to recoup the losses:

1. Be a savvy supermarket shopper

Since grocery bills are noticeably higher, it pays to find ways to cut the cost of your supermarket shop. Bargains are often hidden away on the bottom shelf so make sure you don’t just select goods at eye level. And look for bargain non-branded items when you’re buying pasta, rice, butter and cheese. Don’t forget to check the ‘yellow sticker’ bargains for things already on your shopping list.

2. Stick to the list

Plan menus carefully and buy only what you need at the supermarket to avoid overspending – and waste. The charity WRAP estimates that households throw away 6.6 million tonnes of food each year and that 70% of that could have been eaten. This equates to £500 worth of edible food being thrown away by households each year.

3. Sign up to reward schemes

Supermarkets and high street retailers offer loyalty schemes that earn shoppers discounts or points that you can turn into vouchers. All the big brand names, apart from Aldi, have a reward scheme. Asda is offering a trial in a few stores at the moment. On the high street Boots and Superdrug reward schemes are worth considering.

Since most schemes are offered through membership cards, you can double up on rewards if you have a credit or debit card that earns you air miles, cashback or points on your spending.

4. Shop around

Price comparison websites are not just for energy bills and insurance. If you’re looking for something specific – perhaps a new vacuum cleaner or washing machine - use online comparison tools, such as pricerunner.com. You can not only find the best price for more than 2.2 million products, but you can also read reviews from other users to make sure you're making a wise purchase.

5. Join the cashback club

Using cashback websites for shopping can boost savings. Instead of visiting a retailer’s website to buy something, you go to a cashback app or website, search for the company that you want to buy from and click on its logo to be directed back to the shop. The app or website usually earns commission from what you have bought because you have clicked through from its site, and it then refunds some to you.

How much you earn depends on what you buy and who from, but you could make £100s if used wisely. You can get rewards as gift cards for shops, or cash paid into a bank account. The main cashback sites are Quidco and TopCashback.

Knowing how to claim 30 hours free childcare has never been more important, especially as average childcare costs are rising. In fact, research from smart money app Plum shows that more than three quarters (77%) of parents have seen their childcare fees recently increase or expect them to increase soon.

Sue Andrews, HR & business manager at KIS Finance, told us: “30 hours of free childcare a week could make a substantial difference to overall disposable income that families have. At a time when budgets are already being stretched to their limits, this is certainly something that parents need to be aware of and explore.” 

When parents and parents-to-be are already concerned about how much it costs to raise a child, and even debating whether it's financially worth returning to work after having a baby, it's never been more important to be aware of any government support that you could qualify for.

How to claim 30 hours free childcare - step by step

1. Check you’re eligible

Right now, you may be able to get 30 hours free childcare if:

• You live in England
• Your child is three or four years old 
• You, and your partner if you have one, are in paid work
• You, and your partner if you have one, earn at least the equivalent of 16 hours a week at National Living Wage
• You, and your partner if you have one, each earn less than £100,000 annually
• You have a National Insurance number.

You can get 30 hours free childcare at the same time as claiming Universal Credit, tax credits, childcare vouchers or tax-free childcare.

If you don’t qualify, all families in England are eligible for 15 hours free childcare per week (or 570 hours a year) for three and four year olds. 

But the government has announced changes to who is eligible for 30 hours free childcare, with the scheme being opened up to children over nine months old, but this is a massive change to the current system, and so the change will be introduced in stages to make sure there is enough childcare supply to meet the demand.

It's worthwhile also checking what other help with childcare costs you might qualify for.

2. Make your application

You can apply from when your child is 2 years and 36 weeks old, as outlined in the table below:

You can also apply outside these dates but there’s no guarantee you’ll receive your free childcare code in time. 

Before you make your application, you’ll first need to set up a childcare account on the government’s website. You’ll need to have your National Insurance number to hand and if you’re self-employed, you’ll need your Unique Taxpayer Reference (UTR). You’ll also need one or more of the following:

• Your UK passport
• Tax credits
• P60 or recent payslip

You can then complete your application online. 

3. Give your code to your childcare provider

Once your application has been approved, you’ll be given an 11-digit code for 30 hours free childcare and this must be passed on to your childcare provider. You’ll also need to give them your National Insurance number and your child’s birth certificate.

Childcare providers must be registered with local authorities in order for them to be paid via your bank of ‘free’ childcare hours. But keep in mind that they do not have to take part in the 30 hours offer, so always check in advance. 

Lisa Holmes, childcare expert and community manager at tiney, says: “What counts as approved childcare does vary geographically.

“In England, the provider will need to be on an Early Years Register with Ofsted or with a registered early years childminder agency.”

Approved childcare can include nurseries, pre-schools, children’s centres, after-school clubs, a childminder or nanny, a school, or home care worker. 

Wales and Scotland have their own Care Inspectorate lists of approved providers, and Northern Ireland has its Early Years Teams.

4. Sign in to your account to reconfirm your details

To keep getting your 30 hours free childcare and keep your code valid, you will need to sign into your account every three months to reconfirm your eligibility.

You can easily do this online, but it’s important to pay attention to these dates or the reminders you’re sent, so that your code does not expire. 

Will childcare be made cheaper in the next Budget?  

With research from money app Plum revealing that two out of three parents are delaying having or will not have another child due to high childcare costs, parents will be keen to hear whether childcare gets a mention in the Budget on 15 March. 

Personal finance expert at NerdWallet, Rhiannon Philps, says: “Jeremy Hunt is understood to be exploring ways in which childcare can be made cheaper in order to support more parents at work. Either way, it is expected that there will be something in the Spring Budget that reduces financial strain on parents paying for childcare.”

Potential options include more limited increases in the number of free hours, and giving workers the legal right to ask for flexible working from their first day of a new job, rather than waiting six months. This could encourage new parents back to work sooner. 

How does 30 hours free childcare work?

The 30 hours free childcare scheme is for working families with children aged three and four. As part of the scheme you can get 30 hours of childcare for free for a specific number of weeks per year. 

Money blogger Joseph Seager, who runs the Thriftychap.com blog, says: “Those 30 hours a week can be used during term time, so for 38 weeks of the year. However, if you use fewer than 30 hours a week you might be able to extend it across 52 weeks, but you'll need to check with your childcare provider.”

Funding is given directly to registered early years providers via local councils. 

There are different schemes in Wales, Scotland and Northern Ireland.

• In Wales, the Childcare Offer is available to working parents with children aged three or four years. You could get up to 30 hours a week of early education and childcare, up to 48 weeks of the year. The 30 hours is made up of 10 hours of early education a week and a maximum of 20 hours a week of childcare. 
• In Scotland, all three and four year olds are entitled to up to 1,140 hours of free early learning and childcare a year (around 30 hours a week in term time), funded by the Scottish government and local authorities.
• In Northern Ireland, all three and four year olds are entitled to 12.5 hours per week (475 hours a year) of free pre-school education which is provided by the Department for Education’s Pre-school Education Programme. Funded hours can only be used for 2.5 hours per day, five days a week during term time.

How much do you have to earn to get 30 hours free childcare?

To qualify for 30 hours free childcare you and your partner (if you have one) must expect to earn at least the equivalent of 16 hours at the National Minimum or Living Wage. For example, over the next three months, you must expect to earn at least £1,976 (the National Living Wage for those aged 23 or over). 

However, if either you or your partner has a net (after tax) income of more than £100,000, you won’t qualify. 

You must be in work, or on sick or annual leave, or shared parental, maternity, paternity or adoption leave. However, if you are not currently working, you may still be eligible if your partner is in work and you get Incapacity Benefit, Severe Disablement Allowance, Carer's Allowance, or contribution-based Employment and Support Allowance. 

Can the 30 hours free childcare be backdated? 

No, the 30 hours free childcare cannot be backdated.  Personal finance expert Rhiannon Philps explains: “When you apply for the free hours, you are provided with a code which has an expiration date of three months. You must reconfirm your code before the expiration date in order to keep claiming your free childcare hours. If you haven’t used all your free hours by the expiration date, you will lose them. 

“If you don’t reconfirm your code every three months, you will lose your free childcare hours over the next term.”

Other ways to save on childcare costs

As childcare costs can eat into a huge part of your income, it's important to keep costs down where possible. Sue Andrews, from KIS Finance, told us: “According to analysis by Business in The Community (BITC), weekly childcare is costing some families up to 65% of one parent’s take home pay. This is a huge percentage and it’s leaving many families in a position where it’s actually better if one parent doesn’t work rather than pay for proper childcare. Not only will this reduce the overall income that parents are bringing in, this can also mean that children aren’t getting some of the vital education and socialising that they may need."

1. Start claiming child benefit

Most parents can claim child benefit - although you may have to pay back some of this in tax if you or your partner’s individual income is more than £50,000 a year.

Child benefit is provided by the UK government and you’ll be eligible to claim if you’re responsible for one child or more. Your child/ren must be under the age of 16, or under the age of 20 if they are in education or training. You’ll receive £21.80 a week for your eldest or only child and £14.45 for each additional child. 

2. Choose a childminder over a nursery

Childminders offer smaller settings and can be more flexible in their hours than nurseries. They can also be much cheaper.

3. Discuss flexible working arrangements with your employer

As a parent, you’re entitled to request a flexible working arrangement from your employer. For example, you could ask for flexitime or reduced working hours so that you can cut back on the amount of childcare required. 

4. Look into tax-free childcare

Many families can also apply for tax-free childcare.  Sue Andrews of KIS Finance explains: “You can get up to £500 every 3 months (up to £2,000 per year) for each of your children. If a child is disabled, this goes up to £1,000 every 3 months (up to £4,000 per year).  

“In order to benefit from this scheme you will set up an online childcare account and for every £8 that you pay in, the government will put in £2 (20%). You can then use this money to pay for approved childcare, for example; nurseries, childminders, nannies, and after school clubs.”

5. Ask for help from grandparents or friends

Finally, if possible, you could ask a grandparent or close friend if they are able to help. Your child might be able to go to their grandparents one day a week for example, or a friend might be able to have your child two mornings a week.

This will reduce the amount of paid-for childcare you require. But be aware that if your friend receives payment or reward for looking after your child for more than three hours a day, they need to register with Ofsted.

Understanding how council tax is calculated is crucial at a time when soaring inflation is putting increased pressure on household budgets.

Even though the Government has stepped into help by introducing the Energy Price Guarantee, plus a £150 council tax rebate for those in council tax bands A to D, millions of families remain concerned about how they will pay for household bills. This is even more important given that council tax is going up again in 2023.

Philip Stubbins, managing director at Money Expert, told us: “Council tax is something that the majority of households pay in the UK, unless exempt. Therefore it’s wise to understand how it is calculated, what services it pays for and the repercussions if it’s not paid on time. 

“The country appears to be slipping into a recession, alongside issues with rising inflation and a cost of living crisis, meaning that understanding our outgoings is more important than ever. With local authorities now having more control of how much they can increase council tax by each year, households need to be aware of any upcoming price hikes and how they can manage their outgoings effectively.” 

How is council tax calculated?

Knowing your council tax band is key to understanding how council tax is calculated. The amount of council tax you pay each year is based on two key elements. The first is your property’s council tax band. The second is the funding needed by your local council. If your home sits in one of the lower council tax bands, which start from A, you’ll pay a lower rate of council tax. Those in higher band properties, which go up to H in England and Scotland, and I in Wales.

When it comes to the actual amount you pay, band D is used as the benchmark for the full rate of council tax with an average annual charge of £1,966 a year for 2022-23. This is up from the 2021-22 figure of £1,898. 

• For households on either side of Band D, bills are reduced on a sliding scale
• Those in band A will pay the lowest amount of council tax
• The biggest council tax bills will be paid by those in band H, or I (if you live in Wales)

You can find out how much council tax your local authority charges for each council tax band by plugging your details into this postcode checker.

Which months do you not pay council tax?

If you pay your annual council tax across 10 instalments each year, then you won't pay council tax in February and March. You will only pay it between April and January. This two month break can be really useful post-Christmas and can help people recover from the most expensive time of the year. 

However, you only get this payment break if you pay your council tax in 10 instalments (you can check your council tax bill or speak to your local council if you're not sure how you pay).

If you have a different payment plan, such as paying across 12 months instead of 10 (which can be a handy way to lower your monthly council tax bill), you will pay council tax every month and won't have a payment break in February and March. 

Will my council tax go up?

Council tax bills went up for most households in April 2022 and they are expected to go up again in April 2023. Managing director of Britton and Time solicitors, Paul Britton, says: “Due to inflation, your council tax bill will always increase per year. However, the last few years have seen inflation dramatically increase compared to previous years. It is the level of increase that is concerning.”

However, while local councils have the power to raise council tax each year, maximum limits are imposed by the Government. Every year the Government publishes ‘referendum thresholds’ for council tax increases. If local authorities want to raise council tax above these levels; they’re legally obliged to hold a referendum.

In November’s Autumn Statement, Chancellor Jeremy Hunt announced that councils could raise council tax rates by up to 3% without holding a referendum. On top of this, they can also add another 2% for social care.

How can I reduce how much council tax I have to pay?

Depending on your financial situation and living circumstances, you may be eligible for a discount or exemption on your council tax. This could be between 25 and 100%, so it's definitely worth understanding what qualifies for council tax reduction and whether your circumstances mean you are eligible. 

“An important discount people often forget to check is the single person discount,” says solicitor Paul Britton. “Council tax bills are based on the assumption that at least two adults live in your property. If you live on your own or with children, you can apply for a 25% reduction on your council tax bill in most areas.”

If you’re on benefits, you may be eligible for a council tax reduction on Universal Credit. In some cases this can mean your council tax bill being reduced by up to 100%. And if you’re disabled, depending on your living situation, you may be eligible to pay a lower rate of council tax. This can mean, for example, being moved from paying band D to band C.

Contact your local council to ask about council tax reduction schemes, discounts and exemptions.

If you think you’re in the wrong council tax band, you can always challenge your council tax banding. 

Solicitor Paul Britton says: “Local authorities are stretched thin in terms of resources and many houses could be in the wrong council tax band. The Valuation Office Agency will only investigate if households challenge the valuations.”

Challenging your tax band can mean reduced payments going forward along with a backdated refund on any overpayment. However, do be cautious as it could be found that your property sits in a more expensive council tax band. If this is the case, you will end up paying more. So make sure you do your research beforehand.

If you have moved from one local authority's area to another and not closed your old council tax account, you may find that you are due a council tax refund.  

What should I do if I can’t pay my council tax?

If you can’t pay your council tax you should speak to your local council as soon as possible. If you just need some financial breathing space, one option may be to spread payments over 12 months, rather than the standard 10 months. This is something that can be arranged with your local council at no extra cost.

Money Expert’s Philip Stubbins told us: “Missing payments when your council tax bill is due runs the risk of slipping into arrears and trigger warnings from your local authority demanding payment. Councils will send reminder notices if payments have been missed, giving you seven days to pay the monthly amount. If payment is not made within these seven days, you will have to pay the full amount of council tax required for the whole year instead. It’s essential that payments are made on time or that you speak to your council as soon as possible if you’re struggling to pay.” 

Most councils also have discretionary funds that can help if you’re in serious financial difficulty and you’re receiving Universal Credit or housing benefits.  

As councils have their own individual schemes, exactly how much financial help you get, will depend on where you live along with your living situation, for example if you have children living with you.

Doing nothing is the worst thing to do. Finance expert Philip Stubbins says: “If the council cannot obtain payment of council tax, residents are at risk of having financial benefits or allowances reduced so the amount can be recouped. Councils can also send bailiffs or take you to court to recover any debts.”  

What does council tax pay for?

The council tax you pay goes straight to your local council to help fund local services. Miles Brook, director of tax strategy at Coin Ledger says: “Council tax enables local authorities to provide important services to their communities. Some include street lighting, bin collection, providing security, and fire rescue.” It also pays for looking after public spaces, sports centres and local libraries along with support for the elderly. Each council can decide how your council tax is spent.

When it comes to how every £1 of our council tax is spent, the bulk of our council tax goes towards social care, according to the most recent Local Government Association figures, at 57p per £1.

Around 8p in very £1 goes on public transport and also on education. 7p is spent on waste management services like recycling and bin collections. Just 5p towards local services like museums, parks and libraries.

Council tax payments make up nearly 20% of local authority income according to the Ministry of Housing, Communities & Local Government. Other sources include government grants, business rates, and council rents. 

Related video: How to save money on fuel 

Wondering how to consolidate debt or whether it’s the right option for you? As living costs continue to rise, find out whether consolidating your debts could help ease the financial strain.

Knowing how to consolidate debt is vital as the cost of living soars and monthly budgets gets tougher to manage. With bills rising and National Insurance going up too, it has never been more crucial to get your finances in the best shape possible. That includes sorting out outstanding debts such as credit cards, payday borrowing and personal loans. You may not be in a position to repay these debts, but it may be possible to cut the cost of servicing them.

Myron Jobson, senior personal finance analyst at interactive investor, says: “Everyday costs are continuing to surge. We’re spending more just to heat our homes, have hot showers, to cook, and to fill up the tank. Having a variety of debt payments looming each month will only add to your financial woes.”

Debt consolidation could be one way to ease the pain. Find out what it means to consolidate your debt and whether it’s a sensible option for you with our guide.

How to consolidate debt

The key to consolidating your debts is choosing the right option for your circumstances. Debt consolidation means taking out a new unsecured loan to pay off all your outstanding debts. This leaves you with just one loan to repay each month. The monthly repayment should come to less than the total of the repayments you’re currently making.

In practice, there are two ways of achieving that objective. In an ideal world, you’ll be able to arrange new borrowing at a lower interest rate than the rate you’re currently paying. The alternative is to move to an arrangement where you repay what you owe over a longer period. This may increase the total amount of interest you pay. But it could reduce your monthly repayment, helping with the squeeze on your finances.

Laura Suter, head of personal finance at AJ Bell, says: “Consolidating debt onto a cheaper credit card or a new personal loan is relatively easy to do. But the number of options and low-interest deals available to you depends largely on your credit rating. Start by checking your credit report to make sure it’s accurate, and check your rating. Then you’ll need to list out all the debt you have and where the borrowing is.”

Options for debt consolidation

When considering how to consolidate debt, you could use an ordinary personal loan. However, if you’ve missed a few payments or your credit score has slipped, you might need a dedicated debt consolidation loan for bad credit.

If you own your own home you may also be offered a secured debt consolidation loan. This is sometimes called a homeowner loan and is arranged against your property. These are easier to get if you’ve got a lower credit score because the lender has security in the form of your home. But they are higher risk for you, as your home will be at risk if you struggle with repayments.

A balance transfer credit card might also be an option if you’re only consolidating credit card debts. These are often available on a 0% basis. But if you're wondering how do credit cards work, make sure you do your research before you apply for one. With a balance transfer card, there will be no interest to pay for a period, which will stop your debt from growing any larger while you repay it. But you’ll need a decent credit score to get one.

With a new balance transfer credit card, you simply give the provider the details of the outstanding balances you have on other credit cards. Your new credit card provider will then do all the legwork and transfer the balances onto the new card.

However, personal finance expert Laura Suter points out that consolidating debts with a 0% balance transfer card does take discipline. “If you’re doing this, you need to make sure you have a plan to pay off the debt during that time, as the rate will shoot up once the 0% offer period is over. If not, you’ll have to make a note to shift the debt once the deal has ended.

“People with low credit ratings may not be able to access these deals, but it’s still worth looking if a cheaper rate is available than what you’re currently paying.”

Do your research on how to consolidate debt and check your eligibility

Whether you’re exploring loans or credit cards, it’s important to do your research. This is necessary to get the best rate, but also to check your eligibility. This is because any rejected application will leave a black mark on your credit record. John Webb, senior consumer affairs executive at credit rating agency Experian, says: “If you’re looking to consolidate debt, use comparison services to see the types of credit you’re likely to be accepted for. You can also know the limits and rates before you apply, so it won’t affect your credit score.”

Most comparison sites now offer free eligibility checkers. These will let you know whether you’re likely to be accepted for a loan or credit card, without it leaving a ‘footprint’ on your credit record.

The pros and cons of debt consolidation

Pros:

• ✅  You may be able to get a lower interest rate on your debts. This will reduce your monthly repayment and could help you become debt-free faster.
• ✅  By choosing a longer loan term, you may be able to reduce your monthly repayments. This can give you some much-needed financial breathing space.
• ✅  When dealing with just one lender and have one repayment to make each month, you may find it less stressful staying on top of your borrowing.

Cons:

• ❌  The interest rate on your new loan may be higher if you’ve missed a few repayments or your credit score has deteriorated.
• ❌  If you go for a longer loan term to make repayments more manageable, you’ll end up paying more interest overall. You’ll also be repaying the debt for longer.
• ❌  Your home may be at risk if you go for a secured debt consolidation loan and you struggle with repayments
• ❌  There may be charges, for example, set-up fees or exit fees for paying off certain loans early.

How to consolidate debt in the easiest way

The best way to consolidate your debts is usually with a personal loan (which won’t be secured to your home). Or, if we’re only talking about smaller credit card debts, a balance transfer card – a 0% one if you’re eligible.

However, there are alternatives. When you research debt consolidation online, you may see adverts from debt management companies offering to consolidate your debts. This may well be through a debt management plan. Here the company liaises with your creditors on your behalf and sets up a plan with more affordable repayments.

However, Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, says while this route might look appealing and give you a degree of breathing space, you will end up paying more overall.

She warns: “If you use a loan consolidation company, it will charge fees that will make your borrowing more expensive rather than cheaper. The monthly cost will be cut, but it will be spread over a longer period of time, so you’ll be paying interest for longer.”

For this sort of arrangement, you are likely to pay a set-up fee as well as a monthly handling fee. This could be in the region of 20% of your payment.

Does consolidating debt affect my credit score?

When you take out a loan or credit card it will have an impact on your credit score – irrespective of whether you’re consolidating debts. Once you’ve taken out any loan, it’s important you keep on top of repayments. Over time you should see your credit score go up. But it will slip if you miss or are late making repayments.

Experian's John Webb says: “When you apply for, and open, a new credit agreement, your credit score will probably go down slightly. This will happen for around six to 12 months until you build a positive repayment history.”

How much can you save by consolidating debts?

How much you stand to save by consolidating your debts will vary hugely depending on your situation. If you can transfer your debts onto a lower rate loan or credit card, you will cut your borrowing costs. With a 0% balance transfer card, you could stop any further interest being added to your debts, so long as you pay it off during the required period.

It may be that your biggest priority is to make your monthly repayments more affordable. Debt consolidation can help with this. But it’s important to be aware that this will usually mean you end up paying your debts back over a longer period. This will increase your overall borrowing costs.

How much debt do you need to have in order to consolidate?

There’s no fixed amount at which debt consolidation becomes an option. The key is whether it can cut your borrowing costs. Consolidating several credit cards with just a few hundred pounds outstanding could be a sensible move if you’re eligible for a 0% balance transfer card.

The minimum you can borrow with a personal loan is normally around £1,000 rising to a maximum of £25,000. Secured loans will often start at £10,000.

Bear in mind that interest rates on loans often decrease the more you borrow. This means that if you’re using loans, in ‘numbers terms’, the savings potential for consolidating larger debts will likely be greater than for smaller debts.

Is debt consolidation a good idea?

Consolidating your debts certainly makes sense if you can access lower interest rates. It may also make sense if you’re struggling to keep up with repayments and need to repay over a longer period in order to reduce your monthly bill. It is always a good idea to manage your finances as efficiently as possible, including paying as little as possible to manage borrowing.

Sue Anderson, head of media at debt charity StepChange explains: “If debt consolidation enables you to replace more expensive credit with less expensive credit, with the added convenience of a single monthly payment that is affordable for you, then it may be worthwhile. Consolidating debt can be a sign of underlying affordability problems or being financially overcommitted, and if this is the case then consolidation will not necessarily solve the underlying problem.”

Personal finance analysts Sarah Coles agrees. “If you see this as a ‘get-out-of-jail-free card’, and start building up loans on credit cards again, you’ll end up in a worse position,” she warns. “You need to think of it as a step towards solving a debt problem rather than a solution in itself.”

If you aren’t sure whether debt consolidation is right for you, try StepChange’s debt consolidation calculator or seek professional debt advice which is available free of charge from a range of debt charities including StepChange and National Debtline.

Related video: How to pay off your debts 

National Insurance payments rose by 1.25 percentage points in April, meaning the amount of National Insurance you pay went up. 

It was a controversial decision and one that’s been heavily criticised. This is because the news came at a time when households were feeling the financial squeeze after the energy price cap increased and prices for things like fuel and food were also rising.

The National Insurance increase was first announced by the former Prime Minister Boris Johnson in September 2020. Then Chancellor Rishi Sunak supported the announcement, saying: “To fund this big increase in permanent NHS spending and social care, we’re making the tough but responsible choice to increase taxes.” 

But in his Spring Statement on 23 March, Rishi Sunak announced a further change to National Insurance that meant the planned increase would be effectively cancelled out for some people and less steep for others. Find out more about how the National Insurance threshold change affected how much NI you pay.

However, Chancellor Kwasi Kwarteng has just announced that April's National Insurance increase will be reversed, just ahead of his first 'mini budget'.

How much did National Insurance go up by?

National Insurance increased by 1.25 percentage points in April 2022. Sarah Pennells, consumer finance specialist with life and pension provider Royal London explains the numbers. “In April, National Insurance went by 1.25 percentage points for employers, employees and those who are self-employed. So the standard rate for people who are employed rose from 12% to 13.25%, while the upper rate rose from 2% to 3.25%. For people who are self-employed, it went up from 9% to 10.25%, and from 2% to 3.25%.”

The April increase applied to employers, employees, and the self-employed who surpassed the minimum threshold.

However, as announced in the Spring Statement, the threshold at which you start paying National Insurance will be increased by £3,000, to £12,570 from 6 July 2022. 

While this threshold change applies to workers on PAYE, those who are self-employed could also see a reduction in how much they pay in the light of the National Insurance shake up. 

By making this change to the threshold, almost 2.2 million people were taken out of paying National Insurance Contributions (NICs) altogether.

But from 6 July 2022, the minimum threshold increased, meaning that you can now earn more before having to pay NI.

How much National Insurance will I pay now?

Thanks to the announced change in threshold, between 6 July and 5 November 2022, the 1.25 percentage point rise will not be as steep as it would have been for those on higher salaries, while for those on lower salaries, they will not see an impact of the rise, and could even pay less than they do now. MoneySavingExpert’s Martin Lewis tweeted that those earning less than £35,000 per year will see no rise in National Insurance contributions.

Use the table below to see how your NI contributions will have been affected.

Source: Quilter (assumes primary threshold of £9,880 for April, May and June 2022 and £12,570 thereafter)

However, from 6 November 2022, the National Insurance increase will be reversed, and rates will effectively drop by 1.25 percentage points back to the same levels as the 2021-22 tax year. 

But the threshold increase will remain in place, so people can still earn up to £12,570 before they need to start paying National Insurance. 

Why did National Insurance go up?

National Insurance went up to fund the former Government’s plans for more investment in the NHS. The investment was aimed at easing the backlog caused by the pandemic. It was also planned to go towards plugging the gap in funding for social care as the Government introduces a price cap of £86,000 on the amount people pay in care costs during their lifetime.

NI is not the only nationwide thing increasing in 2022, with Royal Mail announcing that the cost of First and Second Class stamps will go up in April too.

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There isn't much you can do about the rising cost of living, but you can take full advantage of loyalty cards and the different ways they can help you to save some cash. Here's how get exrta value from your Nectar card.

From sky-high petrol prices and increasing energy bills to a National insurance price hike and even the cost of stamps going up, many of us are feeling the pinch when it comes to family finance. Using loyalty cards is one way to save some money when you're shopping.

Nectar is the UK’s largest loyalty card scheme. Run by Nectar 360 Ltd, its partner companies include Sainsbury's, Esso, and eBay.

What is a Nectar card?

If you're a Sainsbury's customer, you can collect Nectar points every time you shop online or in-store. You'll earn one Nectar point for every pound you spend.

First, you'll need to apply for a Nectar card via the Nectar website. You can also apply for a Nectar card via the Nectar app or fill in one of the application forms that you'll find in-store at Sainsbury's. If you're a Smartphone user, it's well worth downloading the Nectar app. It's handy for ensuring that offers are always close at hand, instead of rummaging through a drawer at home for your card or vouchers.

You can choose whether to go for a Nectar card that fits in your purse or wallet, much like a credit card, or a digital version that you can access via the app without needing to remember to bring a physical card with you when you shop.

To collect Nectar points, simply swipe your Nectar card or scan the app on your phone when you're paying for your shopping.

How to earn Nectar card points

Sainsbury's, of course - you can collect points when you shop online or in-store. In addition, Sainsbury's will show you personalised offers on items that you buy frequently when you're a Nectar cardholder.

But you can also earn Nectar points at more than 300 other retailers including Argos, eBay, and Esso, to name just some of the brands that have partnered with Nectar. Just connect your Nectar card to your debit or credit card via your bank and use the connected card when you pay for a qualifying purchase.

At both Argos and eBay, you'll earn one point for every pound you spend when you present your Nectar card at the checkout. When it comes to refueling your car, you'll earn one Nectar point for every litre of fuel you buy at an Esso service station. And if you're a Sainsbury's Bank customer you can also earn Nectar points on products like home insurance. If you have a Nectar credit card, you can also earn Nectar points for every £1 you spend on the card.

Don't forget to connect your Nectar account to your bank or credit card, so you can earn bonus points when you shop at Nectar's partner retailers including Costa, Just Eat, Dominos, Expedia, and ASOS.

Where to spend Nectar card points

Once you've clocked up some Nectar points, it's time to think about how you plan to spend them. You can put your Nectar points towards your grocery bill the next time you shop at Sainsbury's, of course, or use them to get money off when you shop at other Nectar brand partners such as Caffe Nero, Argos and eBay. You can also spend your Nectar cards in-store at Sainsbury's or when you shop online, and also when you pay for petrol.

To spend your Nectar points, simply choose where you'd like to spend them and don't forget to swipe your Nectar card when you checkout.

If you do lots of shopping online, it could also be worth downloading the Nectar Toolbar to your web browser. You can get bonus points for doing so and the Toolbar will remind you when you're shopping online on a site where you could be collecting Nectar points.

Depending on where you choose to spend your Nectar points, you may need to convert your points into a voucher beforehand. There are more than 500 online Nectar brand partners so take your time to browse the options before you spend your points.

These are just some of the places where you can put your Nectar points to good use:

• Eurostar - Put your Nectar points towards a Eurostar escape to Paris, Brussels, Lille, Rotterdam or Amsterdam
• Argos - 500 Nectar points are worth £2.50 when you spend them at Argos
• Caffè Nero - Swap 250 Nectar points for any hot or iced drink at Caffè Nero
• eBay - Swap your Nectar points for vouchers you can use for money off at eBay
• BA - convert Avios and Nectar points when you link your British Airways Executive Club account

Using your Nectar points to donate to charity

If you've been quietly amassing Nectar points but have no real plan to spend them, you could always opt to donate your Nectar points to charity. Do note, however, that you'll need at least 200 points to do so and donations can only be made in multiples of 200.

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Need to know how to pay off debts fast? Whether you’ve built up a hefty overdraft or run up a big bill on your credit card that you can’t afford to pay off, follow these tips to become debt-free

Knowing how to pay off debts fast will be a high priority for those who might be pushed into borrowing with the cost-of-living crisis biting at most family budgets. Whether it's the increased energy price cap, or national insurance on the rise, millions of families are feeling the pinch. Even the most careful budgeters will know that it’s all too easy to get into debt - whether that’s going into your overdraft or running up a big bill on your credit card that you can’t afford to pay off.

“When your finances are spread thin it’s all too easy to put off paying off debts,” says Martyn James of consumer website Resolver. “But the most cost-effective thing you can do is clear what you owe, simply because debt interest and charges will only compound your debts the longer you leave them. You don’t have to clear everything in one go. But make a plan to get those debts cleared, one by one.”

How to pay off debts fast

1. Get organised

The first step to paying off debts is to get organised. After all the faster you can clear debt, the less interest you will pay. Set aside enough time to go through your debts and make a note of what you owe to who, what interest rate is being charged, and how many months left to pay. Then it’s time to make a plan on just how you’re going to become debt-free. Our tips below should help you on your way.

You might also benefit from creating a budget planner to keep all spending under control.

2. Focus on your biggest debt first

It makes financial sense to repay the most expensive debt first to reduce the number of interest payments you’re making as much as possible. “Having gone through your finances, you should have everything you need to work out what’s costing the most,” says Martyn James. “In other words, seeing what debts are charging the highest rate of interest.”

It’s likely to be your overdraft that is costing you the most, with typical interest rates at around 40% compared to a typical credit card rate of 20%. But it’s important to double-check the rate you’re being charged so you have all the accurate information to hand.

Even though overdraft agreements don’t come with any set repayment plan – like you’d get for a personal loan, for example – you can create your own plan to repay in a number of regular instalments. Set yourself goals for each month to chip away at the debt.

With credit cards, you might be able to move to another card on an interest-free deal. Martyn James warns: “Check what the fee is for doing so, and how long you get versus what you can afford to pay off – so you make a big dent in the debt.”

Personal loans tend to charge much lower rates of interest so this might be last on your list. Plus there’s not usually the flexibility to overpay month to month. You might even be charged a fee for clearing it early. Make sure you check with your lender.

3. Move your overdraft to a 0% money transfer credit card

To clear an expensive overdraft fast, one option is to use a specialist money transfer credit card. It works by using the card to pay cash into your bank account. The cash clears your overdraft, so you owe the card instead, but at 0%. You then make monthly repayments to the credit card during the interest-free period, meaning that every penny you repay goes towards clearing the debt, and not towards bank charges. There is likely, however, to be an initial outlay for the transfer card in the form of a “handling fee” of 3-4% of the money you borrow. Look for cards that don’t come with a fee.

Find out more about how credit cards work with our handy beginner's guide.

4. Consider a low rate personal loan to pay off your debts

You could take out a personal loan to pay off your overdraft. With interest rates still relatively low, borrowing is pretty cheap with the best loan rates on offer at around 4%. Paying a lower interest rate will save you money in the long run, which means you can clear your overdraft faster and pay less interest to the bank. Don’t forget to compare loans to ensure you apply for the one with the cheapest rate.

5. Switch credit card debt to 0%

Balance transfer cards can help borrowers get debt under control. They offer the chance to switch debt built upon another card - where typically it will be charging around 21% - to a new card that offers zero interest for a set period.

Paying no interest at all means that every penny you repay goes towards paying off the debt, rather than going into the bank’s pockets. Some cards offer as much as 36 months interest-free. However, the longest interest-free deal might not be the most cost-effective, as these interest-free cards usually charge a fee each time you switch. Luckily, not all cards apply such a fee. Find the best deal at a comparison site such as moneyfacts.co.uk.

4. Track your progress with a weekly spreadsheet

Martyn John of Resolver suggests keeping a weekly spreadsheet or using an online app to monitor how you’re doing. He says: “It might seem helpless at first, but you’ll really feel like you’re making a difference when you see those debits come down.”

5. Look out for better deals - and switch if you can

Spend a day going through your bills and phone each supplier to see if you are eligible for better deals, discounts, freebies or trials. This might involve navigating lots of touchtone menus and call queues. But make a (large) pot of coffee and be patient. By the time you reach the bottom of the list – which will include the likes of Netflix, Amazon Prime and Disney+ TV streaming subscriptions, mobile phone, broadband and line rental– you should achieve some decent savings that can be put towards reducing debts.

6. Look out for duplicate payments

While you comb through your bank statements for savings to be made on bills, check on every direct debit registered to your account. Anti-virus software is a common one to forget about or double up on, according to Martyn James at Resolver. “When you buy a new laptop or desktop computer you will likely sign up for anti-virus software, without cancelling old ones, perhaps. We’ve seen people with a whole trail of annual subscriptions they’re paying for unnecessarily.”

7. Check automated card payments

Checking card payments – both debit and credit – is essential to spot any “continuous payment authority” commitments that could save you money. They differ from direct debits or standing orders and – unhelpfully - there is no list available of those you’ve signed up to. Payments made for a subscription service via this payment method are automatically renewed - usually annually – but you may have no paper (or email) trail of such a sign-up.

8. Get paid to spend with cashback cards

You can use a cashback credit card to pay for weekly spending. You earn a percentage on your spending and the money is typically credited to your card account once a year. Just make sure you repay every penny each month or it negates any benefit.

Search for the best cashback card on a comparison site such as moneyfacts.co.uk. You can also use cashback websites such as Topcashback.co.uk and Quidco.co.uk. Once logged on, you click on the links to retailers and start shopping. Each offers a different cashback percentage for assorted items. Just don’t overspend for the cashback - use just for things you’d be buying anyway.

9. Switch to a new bank account

Plenty of banks are offering cash rewards for switching your existing current account. First Direct and NatWest are paying £150 for new customers. At Nationwide you can earn £125 for moving your current account. Check for eligibility before you apply.

10. Be a babysitter

You can earn around £12 an hour for babysitting. You can spread the word locally or on social media and online such as yoopies.co.uk where you can register and advertise for free. Having a good set of references, experience, and being a parent (or grandparent) yourself will stand you in good favour. Having a DBS check will give you an added advantage. Earning extra money in your spare time can be a great solution when wondering how to pay off your debts fast.

11. Earn while you walk

Lockdown prompted many families to get a dog. Now getting back to the office, dog sitters and walkers are in demand. Register with an app such as Rover or Trusted House Sitters and make some money while on your daily walk. You can choose your own fees. Typically you could earn £10 or more per walk.

12. Sell your old items to raise some cash

If you haven't had a clear out for a while, see what you can find in your garage, spare room or loft space that’s worth selling. Sell on auction website eBay or Amazon Marketplace which allows you to sell second hand and new versions of an item already sold on its main site. You can also try cash-for-clutter website musicmagpie.co.uk, which takes smart phones, tablets, DVDs, CDs, games and electronics off your hands. Type in what you have to sell and get an instant price. You can direct proceeds to paying off debt. This is one of the easiest solutions when it comes to how to pay off debts fast.

13. Clear our your old sports gear

Use a specialist firm geared towards selling certain equipment you have upgraded or perhaps items for hobbies you may have given up. For example, golfbidder.co.uk will buy your golf clubs. Website camerajungle.co.uk does a similar job for those who want to sell photography equipment.

14. Get paid for taking part in surveys

Earn money for your opinion at survey websites. They can be about anything from tourism, food, media, shopping or public affairs and politics. Surveys often take 30 minutes. While some operate under a reward scheme where you earn points for surveys completed that can be exchanged for shopping vouchers, others pay cash – up to £15 per survey.

Check out surveycompare.net, crowdology.co.uk, yougov.co.uk and ipsos i-say.

Never pay to register and set up a new email address so your personal account doesn’t overload.

15. Be part of a focus group

Many market research companies pay well for your time at a focus group session. You can earn anything between £10 to £350 for offering your point of view on the chosen subject which can be anything from bank accounts to holidays. Some projects may involve product testing. You can also opt for Amazon or shopping vouchers. Visit paidfocusgroup.co.uk where registration is free.

16. Get paid to recycle and reduce debt

Dig out old phones and sell them online at websites such as envirofone or mazuma. You can also part exchange them for a new one with some retailers. Some websites even pay cash for empty printer cartridges. Take a look at cashforcartridges. As most households have several old mobile phones that are no longer used, this is a great solution when it comes to how to pay off debts fast.

17. Reunite with lost prizes

Premium Bond prizes worth a combined £74 million remain unclaimed, according to the latest figures from National Savings and Investments (NS&I). You can check to see if you’ve won by using the online prize checker as long as you know your holder number. If you’ve lost all documents NS&I can trace them for you.

18. Refer a friend

Rewards for referring friends to retailers are a very simple way to earn money. Many offer credit off your next spend but there are some websites that pay actual cash. For example, Topcashback.co.uk, pays out for referring mates. Members get £25 referral bonus once the friend has earned more than £10 cashback. There are plenty of retailers that have a referral reward scheme. Check with those you already shop with.

19. WFH? Get £125 back from the taxman

If you've worked at home for even one day over the last year because of Covid, then you could be entitled to £125 back from HM Revenue & Customs. The relief is to cover extra costs incurred such as higher heating, electricity and internet bills. Check if you are eligible and to make a claim here.

If you do claim yourself, how much you will get depends on the rate of income tax you pay. You can backdate your claim for up to the last four tax years, as long as you qualify.

20. Claim money-saving grants

You might be able to save money on soaring energy bills by making your home more energy efficient. Find out if you’re eligible for a home energy grant to help pay for things like loft and cavity wall insulation.

21. Check benefits

Millions of people are missing out on around £15 billion of unclaimed benefits, at the last count. This includes housing benefit, income support or income-related employment and support allowance (ESA), which increases the risk of individuals being pushed into financial hardship.

Anyone on a low income needs to regularly check that they’re getting all the help available to them. Search at turn2us.org.uk to ascertain what benefits you might be eligible for.

22. Check your tax code

If over the past four years you have been issued the wrong tax code you may be due an income tax rebate. Every year, millions of people pay too much tax. Find your tax code on your payslip and use an online checker such as the one on MoneySavingExpert. Brace yourself just in case you find you owe the taxman rather than being owed.

23. It pays to talk

If you’re struggling, speak to the card or loan company and ask what help they can offer you while you get back on your feet. If they refuse to help, or make the situation worse, you may be able to complain to the Financial Ombudsman - for free.

24. Avoid payday loans

Payday loans are an expensive way to borrow - and are never a good solution when it comes to how to pay off debts fast. They were designed to tide people over until payday but if you use them regularly and can’t pay on time, the charges, and debt, can spiral out of control. Avoid them at all costs.

25. Know when to get help for your debts

If you are unable to repay debts and even borrowing more to make repayments, it’s time to speak to a professional. Getting help from a debt charity is free and they can go through your finances and advise you on the best path on how to pay off debts fast. They can also deal with the bank on your behalf in some cases, sometimes getting them to freeze interest charges. Try Stepchange.org or Nationaldebtline.org.

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You may qualify for an income tax rebate if you've changed jobs, gone part time or have gone on maternity leave - and it's something that all parents should check to make sure you can get back any money you have overpaid. 

With an estimated one in three people paying too much income tax, it could be that you have been overpaying and could be owed potentially thousands of pounds in the form of an income tax rebate.

As the cost of living remains high, families are feeling the financial pressure across the board. And while an income tax rebate will be a pleasant bit of extra cash to help ease the squeeze on your finances, there is an important fact to remember. 

Goodto.com's Money Editor, Sarah Handley says: "While you could be owed money if you've paid too much tax, it is equally possible that a tax code error means you have underpaid and actually owe more tax. If you have underpaid, you will have to pay it back eventually, so it's best to find out as soon as possible."

The deadline to claim for overpaid tax from the 2018/19 tax year is 5 April 2022, so act fast to get your income tax rebate if you're owed.

Will I get an income tax rebate?

In simple terms, you will get an income tax rebate if you have paid too much income tax. This is measured over the course of the tax year, which runs each year from 6 April to 5 April the following year. Most people find they are due a tax rebate if they are put onto the wrong tax code.

For example, if you’ve changed jobs or gone on maternity leave during the tax year and your Pay As You Earn (PAYE) code is not adjusted properly, you may have overpaid income tax and be due a rebate. If you switched from full-time to part-time work you may have also overpaid.

How will I know if I am due an income tax refund?

It’s best to never assume that you are on the correct tax code. You should definitely double check your tax code if you have recently:

• Started your first job
• Changed jobs
• Gone on maternity leave
• Started getting employee benefits like a company car or health insurance
• Been earning income from more than one source, whether a second job or taxable state benefits
• Retired or have more than one pension.

To check your tax code for the current tax year, previous tax year, and upcoming tax year, you can take a look at the government website.

An online tool such as the MoneySavingExpert tax code calculator is also really useful. This will compare your current tax code to the most common tax code for your salary. While just an estimate, it could be a good indicator of an incorrect tax code.

How to check your tax code

You should be able to find your tax code on your payslip. You could also find it on a P60 or P45 form that you may have been sent by your employer. It will be a series of numbers and letters, for example, 1257L. 9If you live in Scotland, there will be an S at the beginning of your tax code. If you live in Wales, your tax code will begin with a C.0

The numbers refer to how much you can earn without paying tax. This is also known as your personal allowance. On tax code 1257L, your personal allowance is £12,570 for the current tax year. The letter L means you are entitled to a standard tax-free personal allowance.

If your tax code ends in W1, M1 or X, that is a sign you are on what is known as an emergency tax code. This can happen when there is a delay in HMRC receiving details of a change in your circumstances. Being on an emergency tax code can result in you paying more in income tax than you ought to.

If you are unemployed or self-employed, you won’t have a tax code. In the case of being unemployed, this is because you won’t pay tax. If you are self-employed, you pay tax through a process called self-assessment.

If you think you are on the wrong tax code, it’s important to contact HMRC - the government department for the collection of taxes - as soon as you can.

Have I overpaid income tax and how do I get it back?

If you’ve looked at your tax code and think you may have overpaid your tax, you can use the government income tax calculator to estimate how much you may be owed. You can then take this estimate to HMRC either by letter, filling out an R38 form, or logging onto your personal tax account to claim a refund. How long it takes to get an income tax refund depends on how much you are owed.

If you have overpaid in the current tax year on your current tax code, HMRC can inform your employer to pay it back. The overpayment can be paid back to you in your pay packet each month until fully refunded.

If, at the end of the tax year, HMRC has found you have overpaid tax, you should receive a P800, or Simple Assessment, letter. This will also explain how you can claim what you are owed via the government’s website.

The tax year ends on 5 April 2023, so don’t expect such a letter before then - it usually arrives around September time. 

How long does it take to get an income tax rebate?

If you get a letter that says you can make your claim online, you will get a refund in your bank account in around five days. If you do not claim within 21 days, the government will send you a cheque in the post. You will get this cheque within six weeks of the date on your P800.

However, if your letter states that HMRC will send you a cheque, you do not need to make a claim. You should automatically receive your cheque within 14 days of the date on your P800. If you have contacted HMRC saying that you think you are on the wrong tax code, and they agree, they will then send you a P800.

How do I know if I’ve overpaid in previous years?

If you think you might have been on the wrong tax code for more than the current tax year, all is not lost. The good news is that you have four years from the end of the tax year to claim a refund. For example, the deadline to claim tax overpaid in 2018/19 is 5 April 2023. 

You should know if you’ve overpaid income tax in previous years because HMRC reviews everyone’s earnings at the end of each financial year. This is the case whether you pay tax via PAYE or by filing a tax return. Under this annual review, you should receive an income tax rebate automatically from HMRC if you are owed one.

If you’ve found that you’ve overpaid outside of the four-year claim window, you may still be able to claim. Speak to HMRC to see if your circumstances mean you are still eligible for a refund.

What happens if I’ve underpaid my income tax?

By checking your tax code, you may have also found that you have in fact underpaid income tax. If you’ve underpaid, you will be notified by a P800 letter. The P800 letter will explain if you can pay what you owe online. Usually, you’ve underpaid your income tax because you have changed jobs or have more than one source of income. 

HMRC is obligated to notify you of underpayment within 12 months and usually does so between June and October.

If you have underpaid tax and you have PAYE income, HMRC should try to collect the tax through your PAYE code in instalments. This should take place over the following tax year. Depending on the amount you owe, they may ask for it in a lump sum.

However, if this is going to be a struggle for you, you can ask HMRC to arrange a payment plan. This means you can spread what you owe over a longer period of time - sometimes several tax years. In the event HMRC does not notify you of the underpayment error within 12 months you can ask them to drop any payment demand.

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