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UK People To Save More Due To Tax Increases

by Jim ONeil on March 26, 2011

in Personal Finance Tips

In April, several reforms to benefits and tax take effect in the UK. The Institute for Fiscal Studies reports this will have a negative effect of £200 on the average UK household. This is in addition to the £480 cost resulting from the January 2011 increase in VAT. Consumers should start saving now so they can cover these without needing to take out loans.

Credit Action, a money education charity, identified 45 changes to benefits and taxes. Among these is a one percent rise in National Insurance contributions. The threshold for higher rate income tax will decline, causing 750,000 additional UK residents to be included in the 40 percent tax bracket.

Instead of being linked to the Retail Price Index, which is more generous, increases in tax credits, benefits, and pensions in the public sector will be tied to the Consumer Price Index.

A penny per liter increase in fuel duty is also scheduled but could be withdrawn within the upcoming budget. Add rising prices and unemployment and a possible increase in the interest rate, and you have a recipe for disaster if counteractive measures are not taken.

Individuals need to revisit their finances and make sure that expenses are at least £480 less than income.

Though additional loans may be required, individuals should check their credit report before applying for these. Lenders look at this information to judge the creditworthiness of the applicant, so make sure all the details are updated and accurate.

If errors are found, contact the appropriate lender immediately.

Reducing spending on essentials like insurance, electricity, and gas can make a difference. Price comparison sites illustrate money saved by switching. Exercising careful spending, such as packing a lunch and using the office coffee machine, can also help.

Zero interest credit cards can provide relief to the wallet but ensure the credit score is in top shape before applying for these.

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