Is It Worth Selling Your Car?

I once recommended that new graduates should go car-free if at all possible. It's time to take my own advice.

When we first moved to Bristol we decided to keep Jools the Peugeot. We thought that the high cost of train fares home would go a long way towards balancing out the cost of insurance and road tax.

Jools is an old car (T reg/1999), so we have been saving a fair amount each month towards repairs or replacement. He had been doing quite well lately, but his power steering system was an expensive repair in December and his clutch cable had to replaced this month too! (The Boyfriend was driving, not me!!)

Here is a breakdown of what we budgeted for the car:

• Insurance - £420 - likely to go down this year, but not by very much.
• Road tax - £220 
• Fuel - £570 - £60 each time we go home to Cornwall (estimated four times) and another £20 or so of fuel each time we are there, plus another £50 to visit The Boyfriend's family in Coventry, plus a miscellaneous £200 per year (supermarket trip, travel to friend's, trip to Cardiff, etc.)
• Maintenance and replacement - £1000 - this is the biggie. I have spent a lot on repairing this car in the past year, so we set a large budget to cover any repairs whilst hopefully saving for a replacement car.

Annual total = 2210. Monthly total = £184.


Of course, if you have a newer car then the cost of repairs would be less, but you may have higher insurance, car payments, and of course, you would have to save more to buy another car of the same quality when your car dies.

As you can imagine, £184 is a massive chunk of our postgrad student budget! I decided to work out how much it would cost us to get by without the car.

Annual costs of car-free living:

• Young Person Rail Cards - £56 (for two) - These would save us a third off most rail travel, which is reflected in the prices below.
• Trips to Cornwall - £480 - four trips budgeted at £120 for a return ticket for two people in case we need to travel home at short notice, however the price is £93.10 for both of us if booked in advance.
• Insurance whilst in Cornwall - £120 - It costs £30 to insure myself on my Mum's car for a week. I can then proceed to steal her car in the evenings if she doesn't want it! :)
• Fuel while in Cornwall - £80 - same as before, £20 per trip.
• Train to Coventry - £100 - budgeted at the expensive short-notice price, however a ticket for two is £62 when booked in advance.
• Food shopping - £150 - this is £3 per week get Tesco to deliver groceries. We might only need to order food once a fortnight, so it could be only £75.
• Bus fare to Portishead - £150 - our good friends live in nearby Portishead. The bus costs us £24 for both of us, because we tend to travel back the next day and would have to buy another ticket.

Annual total - £1136 (or as little as £915). Monthly cost - £95 (or as little as £76)


So by getting rid of the car we could save £90 a month or over £1000 a year! But is it worth it?

Pros and Cons of Cars
Initially The Boyfriend was dead against the idea of getting rid of the car. He said it was a luxury worth keeping. With over 31 million cars on the road in the UK, maybe the general public agrees with him.

Advantages of owning a car

• Extremely convenient - don't have to rely on timetabled public transport so can travel whenever you are ready.
• Easier shopping - you can buy in bulk and take it all home with ease (although you can also get this delivered when shopping online).
• Faster than public transport - inter-city travel usually takes longer by bus or train.
• Able to reach remote areas - this is a big one living in Cornwall, where public transport is sporadic at best. Many people live miles from the nearest bus stop.
• Groups can travel more cheaply - a group train ticket costs more than a road trip where fuel costs are shared.

Disadvantages of owning a car 

• Expensive - insurance, road tax, fuel, maintenance, MOT, breakdown cover and eventual replacement. As you can imagine, it all adds up to a massive amount.
• Source of worry -  I have to worry about when my car will next break down. You might worry about your nice new car getting stolen or dented.
• Bad for the environment - I'm a biologist, and I worry about the effect we are having on the planet. Cars are a source of pollution and greenhouse gases. Of course, buses and trains pollute too, but per traveller the emissions are much lower.
• Dangerous - You are much more likely to be killed in a car than a bus/plane/train. On the other hand, cycling is even more dangerous.
•  Driving is stressful - As you know, I'm a country girl at heart. I don't like driving in cities and especially not at rush hour. Reading a book on a train is a far better way to get around!

I eventually persuaded The Boyfriend that we really don't need a car while we're living in Bristol. We live a 20 minute walk (or 5 minute bus ride) away from the train station and neither of us use the car to get to University anyway!

I think the biggest factor for me was that Jools is an old car and eventually he will need to be replaced. Would we get a newer car? (But why, when we rarely use it?) Or would we get another old banger? (Another hole to throw away money on repairs!)

I've mentioned before that savings are really only savings until you spend them. It didn't seem right to me to be spending so much on a car whilst we are at Uni instead of saving for our futures (for example, a deposit on a home when we graduate).

I am currently in the process of trying to sell my car. It's not worth much, but it will stop the drip drip drip of unnecessary spending!

Take home message for students and new graduates: work out the cost of car vs car-free living. Is the hassle worth the cost-benefit of going carless in your case?

What about you? Do you need a car for your work? Do you cycle miles each day? Do you get the bus? Have you compared the costs?

How to Claim Your Uniform Tax Rebate

Do you wear a uniform to work and earn enough to pay income tax? You're probably entitled to a tax refund! :)

If you have to wear a specific uniform to work and wash and repair it yourself, you are entitled to reclaim tax relief for uniform maintenance. This is taken from the income tax you have paid, and HMRC requires that:

• It's a recognisable uniform
• Your employer requires you to wear it
• You have to pay for laundering it yourself (so either wash it at home or pay to wash it at the laundrette)
• There are no facilities provided for you to wash it for free at work
• You have to have paid income tax in the year in which you are claiming for

How much am I entitled to?

The basic tax relief is £60 a year, although some jobs are higher if agreed by their union. If you are reclaiming tax already paid, this means you will probably get a rebate of 20% of £60 (if you pay the 20% basic rate tax), which is £12. Some professions can also claim for tool maintenance if used for their job. 

You can reclaim uniform tax relief from up to four years ago, so if you've never claimed before you have a few quid coming your way! It might not be £100s but it's worth the cost of a stamp!

Please note: you must have paid at least the amount of income tax you are trying to claim back in order to be eligible!

How can I claim my uniform tax rebate?

It's very easy to reclaim your uniform tax allowance and no, you don't have to sit on hold for an hour to do it. All you have to do is write to HMRC (HM Revenue & Customs, Pay As You Earn, PO Box 1970, Liverpool, L75 1WX) stating the following:

• Your name, National Insurance number and address.
• Your occupation(s) and your employer's name and address for the past four years (if applicable)
• What your uniform consists of and why you cannot wear it outside of work (for example, it has a company logo)
• Inform them that there are no laundry services or payment for laundry costs provided by your employer (of course, if you DO have laundry costs reimbursed then you are not eligible for this tax relief).

Template Letter

Here's the letter I sent to reclaim my tax, with places for you to enter your own details:

Your address

Date

Dear Sir/Madam,

I am writing to request a possible work uniform tax rebate. I wore a uniform during the following jobs:

Date - Date : Job title at Employer, employer's address

Date - Date : Job title at Employer, employer's address

Date - Date : Job title at Employer, employer's address

(include all jobs you wore uniforms for within the last four tax years, as well as your current job with a uniform if you have one)

No laundry service or compensation was provided for the cleaning of these uniforms by any employer.

The uniforms were specific to each job and could not be worn outside of work:

• Description of uniform for job one: (eg. black shirt with company logo, black work trousers)
• Description of uniform for job two
• Description of uniform for job three
  Etc. etc.

Many thanks for your time.

Yours Faithfully,

Name

NI number

Date of birth

A Happy Ending

I was sent a cheque for £54 to cover the costs of laundering my uniform in the past! 

 

Give it a try! You have nothing to lose (but the price of a stamp) and you could get a nice bit of cash back for the past few years!

Have you tried this? How did it go?

What Would You Do With a £1000 Windfall?

Say you won £1000 in a contest. What would you do with the money? It's not an absolutely huge life-changing sum, but it's a still a nice windfall of extra money to fall into your bank account.

So what would you do with the unassigned money?

I had to make this decision recently. I knew I was in for a tax refund because I'd been on the wrong tax code for six months of the past year! I was very pleasantly surprised to see that I was due a refund of just over £1000!

Now, the thing about my tax refund is that it isn't “free money”, although it is VERY easy to think of it as an excuse to spend! It's money that I had to give up valuable hours of my life to attain. Then again, even if I won £1000 it would be hard to forget that it is worth nearly 165 hours of my life (at minimum wage). Ouch, that is painful to write! I think my time should be worth a lot more than that! 

Here's what I did with my hard-earned yet unassigned money:

• Bristol fund - £410. I completed my Moving-to-Bristol fund. This was the main thing I was saving for, so it was important to me to sort it out long before I might need it at the end of the summer!
• Travel fund - £60. I save a little money every month for future travel and I thought it would be great to use some tax refund for something that I will really enjoy. I love seeing the rest of the world! :)
• Gift fund - £50. May and June are particularly expensive months for birthdays in my world, so it was good to re-build my depleted gift fund!
• Family meal - £30. My family rarely go out to eat because it can be quite expensive. I treated us all to breakfast on my sister's birthday with a little of the cash.
• Emergency fund - £200. After meeting my main savings goal (Bristol fund) I have started bulking up my emergency fund because you never know when you'll need some cash.
• Concert ticket - £24. If I am going to spend money, I would rather buy an experience than an object. When I heard one of my favourite bands was coming to Cornwall and putting on a concert on a local beach, I had to go!
• Bike repairs - £26. I had a blow-out the other day. I don't know what I ran over but the puncture ripped straight through the tyre and into the inner tube, leaving a big tear in both of them. I bought a new tyre and upgraded my inner-tube to a puncture-proof variety. So far so good!
• Current account buffer - £200. I tend to transfer any “spare” money into my ISA, so occasionally my current account goes into my interest-free overdraft. This doesn't cost me anything so isn't really a problem, but since I got out of debt I really don't like seeing the number go below £0. I put a £200 buffer in this account and think of it as £0, so now I should never actually go into the red.

What would you do with a windfall? Save it all or blow it on a holiday or the latest iGadget? :) Did you get a tax refund? Click here to find out if you are entitled to a refund and how to get it!

P.S. That 58 minutes on hold to HMRC was the best-paid hour I've ever spent!

Why is Jimmy Carr's Tax Avoidance Not Illegal?

Jimmy Carr was in the news today for using a K2 tax avoidance scheme. This is basically where an individual resigns from their UK job, then signs with an offshore company who receive the individual's salary from the UK company. The offshore company then pay the individual a small “wage” (which they pay a small amount of tax on) and give them a large (tax-free) “loan”. 

Many people in this country earn minimum wage, yet still have to pay 20% income tax on anything they earn over the tax threshold (currently £8105 per year). Low-income families face a multitude of financial struggles, yet tax avoidance in the high income tax threshold (over £150,000 a year) was as high as 30% last year. This means that some people earning hundreds of thousands of pounds a year are paying less tax than the average UK family. How is this legal?! 

According to the BBC, tax evasion is the criminal act of avoiding paying the income tax you owe, whereas tax avoidance is the legal practice of paying some dodgy accountant to use offshore accounts to reduce the amount of income tax paid by the UK's richest to as low as 1% (much higher than someone earning minimum wage for a full-time job). What exactly is the difference here?? It sounds like two names for the same thing, but if your account does his job well you can get away with it!

The Prime Minister declared Jimmy Carr's tax avoidance “morally wrong” (yet refused to comment on recent OBE-awarded Gary Barlow's use of another scheme currently under investigation by HMRC). Income tax is used to fund vital services like the NHS, education, the police and social security. Perhaps Jimmy Carr and others do not use any of these services (although I can't imagine he wouldn't call the police if his mansion was being robbed!), however do they expect the rest of the country to shoulder their share of the cost of keeping the UK functioning? It is incredibly unpatriotic and, I would agree, morally wrong.

Mr. Carr has since withdrawn from the tax avoidance scheme, calling it a “terrible error of judgement”. I call it ironic, considering his jokes about other people's abuse of the UK economy!

I just hope that the government's plans to stop tax avoidance in the rich goes further than just cutting their income tax rate to 45% (from 50%). Surely that's just going to earn less money from those responsible enough to pay their dues.

What do you think? I am outraged!

Her Majesty's Revenue and Customs

My tax code has been wrong for the past six months and now that we're in a new tax year I really thought it would've been sorted out. Wrong! Originally they were waiting for information from the Chinese restaurant I used to work at, but they were sent that MONTHS ago now. COME ON GUYS!

I, like most other people, hate being on hold on the phone. Unfortunately I had to resign myself to listening to the bizarre Super Mario-esque music of the HMRC helpline in order to try and get this sorted out. I mean I'm losing ~£150 a month in overpaid tax! (I know you get it back eventually, but I need that money to do the things that I want to do, rather than have it gain interest in the government's coffers (or worse..).

So:

14:15 – get home from work.

14:30 – settle down in my room with my lunch, a cup of tea and an Easter egg. You just never know how many supplies you'll need! Got to keep your strength up!

14:35 – finally make it past the irritating “If you want this random selection of options, press one”, complete with a minute or two of “helpful” advice after each option, including the never-ending referring you to their website. Believe me, if I could do this online I WOULD!

14:50 – still on hold. Getting a little narked now because the sandwich is gone and I've been thanked for waiting about 400,000 times already.

15:00 - every so often the music seems to cut out, causing me to hope against hope that my call will be answered. Then it starts again. Same track.

15:10 – wishing I had driven the 30 minutes to the tax office. It'd have taken less time, AND probably have cost less (since it's an 0845 number and we're not with BT..)

15:15 – starting to go a bit crazy. What if I accidentally press the hang up button? Would I have the stamina to ring again? (Answer: no).

15:20 – I was two chapters into my book when someone announced themselves. It made me jump! I explained my situation, and she told me that they'd send out the new tax code to my employers and that the tax rebate should be set in motion sometime in June when all the information has been received from employers. (I will be checking up on this as they've never actually managed to do it on their own before...)

15:28 – I finally get off the phone. My ear is sweaty.

FIFTY-EIGHT MINUTES! I know it must be a busy time of year for them, but I also know they take on extra staff to deal with the influx of calls. Still, it's probably worth it to get an extra £150 a month. Probably.

If you are in a similar situation, write to them. It will probably get there faster.

Your UK Tax Code: Myths and Realities

Have you ever wondered why you pay the tax you do? Maybe you think you're on the wrong tax code? I hear so many people throwing incorrect “facts” around about income tax! This post is to discuss the facts, and importantly the myths, of your UK income tax! (Information most useful to PAYE employees, rather than self-employed self-assessment tax)

Standard tax code

Employers have to deduct a specific amount of tax from each pay cheque and send it to the government for use in their schemes. If you are the employee of a company, the most likely tax code you have is 747L (due to change to 810L in April). 747L means that you are entitled to £7475 a year before having to pay any tax (the tax year is 6^th April - 5^th April). This is known as your personal allowance. 

If you are aged 65-74, you are entitled to a larger personal allowance of £9,940 (your tax code will end in a P), although if you receive more than just £24,000 you will have to pay tax on all of your income. If you are 75 or over, your personal allowance is raised to £10,090 (tax code ends in a Y).

Rather than waiting until you've earned £7475 then taxing you heavily, HMRC (Her Majesty's Revenue and Customs) divide the allowance between each pay cheque. If you are paid every week, your weekly allowance would be £7475 / 52 = £143.75. If you are paid monthly, it would be £7475 / 12 = £622.92.

Incomes up to £35,000

If you earn less than £35,000 a year, you will be charged 20% on anything above the allowance. For example if you earned £243.75 one week, that would be £100 over the £143.75 personal allowance, so you would pay £20 (20% of £100) in tax that week.

If you earn £120 one week, but £200 the next week, you would not be charged any tax on the first week but would pay tax the second week.

High earners (£35,001 to £150,000)

If you earn between £35,001 and £150,000, you will pay 40% of whatever you earn over your personal allowance. If you earn more than £100,000 a year, you are not eligible for the personal allowance and will pay tax on all your earnings.

Extremely high earners (£150,000+)

If you earn more than £150,000, you do not have any personal allowance and will pay 50% of whatever you earn as income tax.

MYTH: You pay so much tax on a second job that it's not worth doing!

If you have a second job, your tax code will be BR (Basic Rate) and you will pay 20% tax on all your earnings (unless you're earning more than £35,000 in your second job). This is because your personal allowance is all allocated to your first job and it is assumed that you will reach the £7475 income threshold.

You are paying exactly the same amount of tax as you pay on whatever you earn over your personal allowance at your first job, so your time is worth the same wherever you put in the extra hours!

If you are paid more at your second job, you should get in contact with your local tax office, who will be able to switch the allowance over to the higher paying job. This means you will not be paying as much tax overall.

If you do not receive more than £7475 for either job, you can ask the tax office to split the personal allowance between the two jobs, so that you receive some tax-free income from both employers.

MYTH: Students don't pay tax

The most common misconception I hear about tax is that students (either full-time or part-time) don't pay tax. RUBBISH! Students have the same tax code as anyone else, but because they often only work a couple of days a week, they generally do not earn enough to reach the £7475 personal allowance boundary.

A common problem for some students is actually paying too much tax! This can occur when you work full-time in the holidays, but don't work during term time. You are charged 20% tax on whatever you earn over the personal allowance each pay cheque (£143.75 a week, £622.91 a month), but you don't earn the full £7475 a year. This means that you are owed tax back at the start of the next tax year (6^th April). 

Claiming tax back

If you started a new job after the 6^th April, or you have been on the wrong tax code for part of the year, there is a good chance that you have paid too much tax and are owed a refund by the government. Don't wait for HMRC to come to you, cheque in hand. They are supposed to, but I waited two years before taking matters into my own hands!

You can check how much tax you are owed by using the form (P60) you are given at the end of a tax year. This sheet shows you how much you earned and how much tax you paid. You can use the online tax-checker provided by HMRC to calculate whether you are entitled to a refund.

If you find you are owed money, you should ring HMRC on the number provided on your pay slip, or call 0845 300 0627 (8.00 am to 8.00 pm, Monday to Friday, 8.00 am to 4.00 pm Saturday).

Please note: You can only claim tax back for the past six years. If you discover you are owed tax, claim it back ASAP!

Driving a Golden Car

Owning a car is one of the least frugal things you can do, so why are there over 31 million cars on the road in the UK? Frankly, in cities like London with excellent public transport I have no idea why people feel the need to drive. Even the convenience factor of having your own vehicle is negated by the frequency of the buses/tubes, which are usually within walking distance even on the outskirts.

I, however, live in Cornwall. Unfortunately for me (and my bank account) I live 8 miles from the nearest town and 2 miles from the poorly-serviced bus stop. This makes it almost prohibitively inconvenient to use public transport and a car is an essential expense.

My little Nissan Micra finally gave up the ghost about a month ago, so I was forced to buy myself a new car. I was hoping to get away with spending £550, however the cars I looked at in this price range were.. interesting.. One man tried to sell me a “great little runner”, which it may well have been if he'd managed to get it to start.

In the end I bought a £750 Peugeot 306, which came with 12 months MOT but no road tax. It's a 1.9L engine, which means I jumped to the higher tax bracket of £215 for a year. Luckily it's diesel, which means its uses less fuel than the petrol equivalent, however the cost of petrol at my local garage is 135.9p/L, whilst diesel is 139.9p/L. (I include this rip-off so that in days to come I can look back and long for the days when it was this “cheap”). I've worked out that it'll do ~10 miles per litre of diesel, meaning I'm spending ~£20 per week on fuel.

That's not the end of the expense of running a car however; I still had to insure it. I was on my parents' insurance whilst I was at University but now I felt it was time to start building my own No Claims Discount (for future cash saving). I'm 22 and still count as a “young driver”, so with no NCD I knew it was going to hurt. It ended up at £56 per month (£668 per year – almost what I paid for the car!).

These ongoing costs have all been added to my budget (which I'll mention in a later post) so I knew I could just about afford them alongside saving money, but I just wondered how much I'd be spending overall on the car this year...

Initial purchase: £750

Insurance: £56/month (£668/year)

Fuel: £20/week (£1040/year – OUCH!)

Tax: £215

So even before any repairs, next year's MOT, oil, de-icer, screen wash, car parking money, etc., the grand total is: £2673!

When I first calculated this I couldn't believe it and had to add it all up again in the vain hope of an error! Sadly this was not the case. I'll definitely be using some hypermiling techniques to get the most of my fuel! 


It's just so frustrating that I have to try that much harder to save money in other areas just to get to work safely and in less than 2 hours!