The government recently announced that National Insurance contributions are going to rise by 1.25%. However, these changes will not come into effect until April 2022. So, if you are concerned about a reduction in your disposable income as a result of the increase in National Insurance, there is still plenty of time to come up with creative solutions to counteract the shortfall.
If you are not sure where to begin, here are a few helpful tips.[top_pitch]
How much extra will you pay in National Insurance?
The National Insurance increase is set to affect around 25 million people in the UK. How much extra you pay will depend on your income.
Here are the amounts by which your National Insurance contributions could increase based on your current annual salary:
£10,000 salary – £5 extra
£20,000 salary – £130 extra
£30,000 salary – £255 extra
£40,000 salary – £380 extra
£50,000 salary – £505 extra
How can you save money to cover the National Insurance rise?
Nick Drewe, online discounts expert at Wethrift, has provided five money-saving tips that could help you cover the money you could lose out on due to the National Insurance hike.
1. Book travel tickets early
If you are planning a trip in the near future, it pays to book it early. Long-distance train journeys, in particular, can be much more affordable if tickets are purchased in advance. A good time frame to aim for is one to three months in advance.
If possible, also try to book train times that do not coincide with rush hour periods.
2. Look for discount codes when ordering takeaways
You can save a lot of money on takeaways by using coupons, discount codes or special offers from some of your favourite food delivery apps. Before you hit the checkout button, check voucher sites for any discount codes or other incentives, such as free delivery, that could lower your total costs.
Also check your emails on a regular basis, as some brands will send you promotional codes or vouchers after you order to entice you to order from them again. Such regular saving could quickly cover the cost of National Insurance changes.
3. Find the best exchange rate
If you’re planning a trip abroad, make plans to exchange your money early rather than doing it at the last minute at the airport. Exchange rates at the airport tend to be very poor. If you are unable to exchange your money early and find yourself in need of cash when you arrive at the airport, exchange only a small amount and try to look for a better deal elsewhere.
You could also think about getting a travel credit card. This type of card will help you get the best exchange rates of the day. Also, a travel credit card will not charge you extra for foreign transactions or cash withdrawals.[middle_pitch]
4. Time your shopping trips wisely
If you are strategic about the time you shop, you might be able to score great bargains and potentially save money. One great time to shop is in the late afternoon or early evening. This is when supermarkets price down stock that needs to be sold that day.
5. Cancel unnecessary direct debits
Sifting through your direct debits or recurring payments and weeding out those that are not necessary or that you don’t make full use of can help to offset the impact of the National Insurance rise. Any unused streaming subscriptions or gym memberships could be cancelled.
While you are at it, make sure you check for any unfamiliar or questionable outgoings. Report such anomalies to your bank immediately.
Can you reduce your National Insurance bill?
One potential way to cut your National Insurance bill is through a salary sacrifice scheme (if your company offers one). Also known as salary exchange, this is essentially where you give up a portion of your salary in exchange for a certain non-cash benefit. An example of such a benefit could be pension contributions.
By forgoing a portion of your wages for pension contributions, your gross (pre-tax) salary will reduce and so will your National Insurance bill. At the same time, you will bolster your retirement nest egg for your future.
Before considering this route, make sure you assess the effect that a reduced salary will have on your current financial wellbeing.
The post National Insurance rise: 5 tips to help you save money on bills and expenses appeared first on The Motley Fool UK.
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