I'm wasteful with money, need advice and have a goal...

[thenortherner]

Hi,

I could do with a bit of advice with some help and advice with my spending… I reckon the only way is to be absolutely honest with the detail:

I’m 31
Single
Earn roughly £48K basic with around £2K (gross) bonus paid in April each year
I have no debt, no loans, no credit card balance
I’ve a company car, so no running costs, other than private fuel

My net pay is around £2250 PCM - this figure is very slightly variable as my private fuel is deducted from my pay.

Outoings:
Rent - £625
Council tax £90
Gas / electric / water - £75
Gym - £30
Mobile phone / internet - £38
Contact lenses - £25
Food - £150

And so circa £1000 a month outgoings minimum.

Student loan is paid off
I’ve no pension(!)
I’ve £3.5K in savings

The issue is that I am, by my own admission, wasteful with money. I won’t go into detail about the crap that it goes on, by almost all of it is needless and in most cases not even materialistic so I’ve actually nothing to show for it. That said, I own everything I need and short/medium term there’s nothing I need to buy.

I really need to change my ways and intend to start 2016 differently, and really need a kick up the ar*e! Indeed, even typing the list made me realise how wasteful I am with the money I have spare.

I move around a lot with work, having lived in 5 different locations in as many years and I’ve always rented. I now need to grow up and buy, even if it’s a buy to let. I’d like to be on the ladder in 2-3 years. My aspiration it to own something nice in Manchester centre or close by.

Given my honest account of things, what would you do in my shoes given my outgoings and my long-term plan? Any advice gratefully received.. I reckon I could comfortably put away £500 - £700 a month.

I’ve read about the government ISAs which add 25% to whatever you save up to the value of £12K, so £15K paid out when buying times comes. What do you reckon?

Perhaps I should consider a house share which should see my save another £250 a month? But then again that’s the price of total freedom.

Thanks in advance.

[thenortherner]

Thanks for the suggestions.

I'll probably look to open an ISA and do as suggestion in terms of the monthly transfer of £500-700, set up as a S/O.

And you're right, keep moving is definitely not ideal and it's likely to be on the cards for some years to come. That is, until I say enough's enough and then career progression becomes limited. The alternative that colleagues face is Mon-Fri is a hotel and then home at the weekends, or they rent out their property and rent elsewhere.

I know there's a lot to consider in terms of buying - my mortgage provider might not allow for a buy to let and I don't know the consequences of letting out a property where the mortgage doesn't allow for this. And by the look of it, the government ISA doesn't allow you to use it for a buy to let either.

I'm just pissed off with dead money in terms of rent. What will I do if/when I retire too as I wouldn't be able to keep up rent payments!?

[thenortherner]

russ_a said:

Your Net pay is around £900 light. Get rid of the company car!

Really? Can't be right, can it? It's a MINI Cooper SD, so very low tax bracket is worth £23500 in terms of BIK.

Perhaps the £2200 was less than I'd thought. Here's last months's payslip detail. Where am I going wrong?

Ps. Stuck with the car for 3 more years I'm afraid. And I do 5000 business miles a year and wouldn't fancy sticking that on a private car, not least one I'd like to run if it were my own money.

Payslip details as below:

Basic - £3929
Pension / salary exchange - £39

Chargeable benefits:
Car benefit - £371
Medical insurance/private health care - £62

Tax - £823
Fuel - £232
Car trade up value - £2

Total pay = £3890
Total deduction = £1408
Net pay = £2481

[thenortherner]

Oh and:

Tax code - 1060L
Tax basis - 0
NI Cat - A
Pension fund - RSP AE
Tax Ref - 673/B137

I'm embarrassed to say that I don't know what at least some of that means, or if my tax code's correct etc!

[thenortherner]

Thanks for the feedback. Much appreciated. From what's been said my net income seems about right then. How could I get this independently checked? i.e. my tax code etc?

There's a running theme, so it looks like:

ISA - monthly instalment straight out after pay day of £600 or so
Make sure it's a government ISA
Look into a company pension asap - I've been burying my head on this for a long while
Spunk whatever's left as I still need some fun!

The company car's staying I'm afraid. It can't be given back for 3 years. And in all honesty, yes it's costs me more than it would do if I were to run the same car privately. But then again, I go through front tyres every 10K miles at £140 a corner. And when it gets damaged like that last one, I have no insurance excess to worry over. And no insurance, no VED, no depreciation, no servicing or MOT. I appreciate it still works out more expensive but I wouldn't have the deposit to chuck at financing one.

I started to think a bit more seriously about my spending when I opted for this particular co. car. It's cut my fuel bill to less than half of the previous car. I know that's not a PH thing to say.

Edited by thenortherner on Monday 14th December 20:31

[thenortherner]

blank said:

Your car is costing you £600 per month!

The tax value looks like it includes fuel benefit, and then you're paying over £200 for fuel as well?! That seems like a lot in a diesel MINI.

It also looks like you're paying 1% in to a pension. Increase that if you can. Think of it as a very long term savings account. With the tax/NI savings, and if your employer matches contributions then £200 in your pension might only cost you £58.

Something just doesn't seem right.

I have a fuel card. I have to submit my mileage monthly online. If I do 1K miles in a month, for example, and 500 of those are business, then 50% of these are business and the other 50% are therefore private miles. So 50% of the total spend gets deducted from my wage. This is how it works each month.

Trust me, there's no benefit in kind!

I'm not disagreeing with your £600 pm but how have you come to that number? I'm really curious now that a few people think there's a black hole / my car is costing me £600 in tax etc, but others reckon my net income's about right. Totally confused!

Cheers,

[thenortherner]

blank said:

Hold on, you've missed off national insurance.

The £371 should be the benefit value, so you should actually pay about £148 (40%).

It's confusing as your car and health benefits almost add up to your deductions, so it looks like you're paying their full value. But I think the difference is actually NI and you're probably paying the right amount.

Which means the healthcare is much better value!

www.thesalarycalculator.co.uk and the company car website will let you check it all.

Edited by blank on Monday 14th December 21:42

Oops, you're right. NI was £350 that particular month.

As far as the co. car tax goes, how do I know for certain whether I'm overpaying or being charged BIK for a fuel card that's of no benefit? Is it reflected in my tax code? I really want to get onto this.

Fuel's usually around £100 private miles, including commuting. That seems an exceptional month at £238. I need to look into that as I can't think of why it'd be so high.

It looks like I've underestimated my net income too:

June - £2595
July - £2555
August - £2500
September £2610
October - £2481
November - £2538

[thenortherner]

TwigtheWonderkid said:

That's the full allowance of £10600 without any BIK deductions. Very weird.

Good, bad or indifferent?

How do I know it's correct? I still don't understand how/where my BIK for health and car are reflected, so I can see exactly how much tax I'm paying.

[thenortherner]

A bit of an update:

I've an appointment with a chartered account in January. I spoke to him briefly on the phone today about what I was looking for and he's advised that I bring as much documentation with me as possible.

http://www.markgreeve.co.uk/aboutus.html

I cannot believe my car costs me £600 PM in tax. Hopefully the accountant will get to the bottom of it.

I've also decided to go down the high interest savings account route and will possibly give the government backed savings account a miss. Over 24 months I'll be capped at putting £4800 in there, with the government adding £1200 when it comes to house purchase time.

I think I'd be also more motivated with just one big pot of money and seeing it grow.

I've allowed my personal work expenses to mount up over the past 5 months, but I've also the receipts and it's been signed off today. So that's £3500 straight into my future savings account.

It's a 1 bed flat so no chance of a room mate I'm afraid. The lease is up in 4 months, so maybe I should consider a house share.

Edited by thenortherner on Tuesday 15th December 21:37

[thenortherner]

Thanks for the advice everyone.

Applied for 2 ISAs yesterday, having had a look at the government supported first time buyer one and decided I'd go for it. I can tip in £200 there and take it out without any penalty etc. I'm also allowed another ISA to run at the same time, so applied for a separate one too.

[thenortherner]

rb5er said:

£230 to fuel a diesel mini for a month?

Get rid of that crap.

Based on what? And you'd know how many miles I'd travelled that month, or any month, to come to that conclusion?

Have a read of the rest of the thread. I'm sure I mentioned it didn't look right and I'd be looking into it. I have since done - I'd not completed my mileage submission before cut off, therefore all fuel spend (read £230) was deducted from my wage in a month where over half of this spend was business related. I got the difference back the following month.

Thanks for your input though.

[thenortherner]

Eric Mc said:

If you have a company car, how come your PAYE Tax Code is 1060L? 1060L indicates that the full, normal, personal tax allowances for 2015/16 of £10,600 is being offset against your salary.

However, when an individual has a Benefit in Kind, such as a company car, HMRC will tax them on this benefit by reducing the level of personal tax allowances. In fact, in many cases, a company car can completely wipe out your personal tax allowances.

Are you therefore paying too little tax?
Is there a big tax shock heading your way when HMRC realise they haven't taxed you properly on your company car?

I don't know, that's why I'm having an accountant look at it in January.

I've had a company car for 4 years and before that I took the opt-out allowance.

[thenortherner]

AyBee said:

What are the rates on your ISA? I opened up a Halifax HtB ISA last week - 4% (no tax) and then 25% extra when you buy seems like a bit of a no-brainer if you're looking to buy at some point in the future. Set up a standing order for £200 to go out the day after payday and forget about it I'd then look at something like the Classic Plus from TSB which pays 5% (pre-tax) on balances up to £2000 or the Sandander 123 at 3% (pre-tax). You have to stick £500 in to those two accounts each month but you can set up £500 to cycle through them, i.e. pay £500 into TSB and then £200 out of that into a HtB ISA.

Best of luck

Many thanks.

[thenortherner]

Truckosaurus said:

Is it a 'real' company car or just a salary sacrifice lease?

The £230 for fuel isn't 'tax' either, just paying for what's used for personal use.

It's a real co. car - the pay slip shows vehicle reg, emissions etc etc.

[thenortherner]

oldaudi said:

thenortherner said:

I don't know, that's why I'm having an accountant look at it in January.

I've had a company car for 4 years and before that I took the opt-out allowance.

This happened to me. I had the "luxury" of a company car or a cash instead option. Halfway through a tax year I took the company car, had the rest of that year and then a following year being on a normal 960L Tax code or whatever it was at the time. Then then I moved jobs and the tax man caught up with me for unpaid tax on the car for almost 20 months. I turned to my employer and they said that it was my responsibility to tell them that my circumstances had changed and I should be doing a tax return and not depending on their PAYE tax. My tax code has only just sorted itself out. You could be getting a huge bill come your way so I suggest you start with that first!

The trouble is there's quite a lot of differing opinion on here - some say I'm paying too much in co. car tax and others too little. So the best way is to see an accountant.

I've not moved employers in 6 years.

One question I'll be asking the accountant is if they're obligated to report if they find I'm 'winning' as far as tax goes, unless someone can help me here?

Anyhow, £1.5K in the bank, personal expenses processed today and will go through in Jan 4th. So the best part of £5K will be in my savings in a few weeks time. I still need to write to the Student Loans Co to claim my over payment - they confirm I'm owed £500 too.

All in all I feel a bit more in control of things. It's even turned me into a tight bd as far as claiming for expenses, things I'd have just swallowed up in the past. A 25 mile round trip at the weekend to have the tyres changed on my co. car has been claimed for! And £4.50 for a coffee and cake had on the motorway due to a 320 mile round trip for a 1 hour meeting also claimed for!

I've also applied to have the council tax band re-appraised on my flat. Can't believe it's band C for a 1 bed flat. The lying bd estate agents told me it was a B too.

[thenortherner]

coletrickle01 said:

thenortherner said:

The trouble is there's quite a lot of differing opinion on here - some say I'm paying too much in co. car tax and others too little. So the best way is to see an accountant.

I've not moved employers in 6 years.

One question I'll be asking the accountant is if they're obligated to report if they find I'm 'winning' as far as tax goes, unless someone can help me here?

Perhaps i've misunderstood what you're asking with the last sentence. If not and by "winning" you mean not paying enough tax, then the accountant's obligations don't come into it - you are obligated to put it right.

You've understood it correctly, but I'll wait to see what they say. Co-incidentally, all co. car users had a couple of emails from HR recently telling us that we may receive a letter from HMRC ref. us not paying enough tax - but on both occasions the email said we were to ignore this and they were working with HMRC to put it right. Starting to make me wonder...

Wouldn't mind so much but it's a massive organisation and there's easily 100-150+ co. car users.

[thenortherner]

forest07 said:

thenortherner said:

You've understood it correctly, but I'll wait to see what they say. Co-incidentally, all co. car users had a couple of emails from HR recently telling us that we may receive a letter from HMRC ref. us not paying enough tax - but on both occasions the email said we were to ignore this and they were working with HMRC to put it right. Starting to make me wonder...

Wouldn't mind so much but it's a massive organisation and there's easily 100-150+ co. car users.

Your employer will submit a P11D direct to HMRC which will list your benefits and their values. This should be done annually by the employer.

Thanks. Presumably from this, they'll set my tax code correctly, so worst comes to worst is that I could have had the incorrect tax code for 11 months?

Then again, I've had a car / the same benefits for 4 years so there'd be no change?

[thenortherner]

forest07 said:

Sheepshanks said:

thenortherner said:

Chargeable benefits:
Car benefit - £371
Medical insurance/private health care - £62

You could do with clarifying with HR before you meet the accountant, but I reckon they've put the gross BIK values there. It looks spot on for the car and the medical figure is a pretty typical company scheme monthly cost.

Your actual cost is tax at 40% of those figures - so the car is costing you £125/mth. It's not clear whether that's actually being taken or not, as the figures you posted don't add up, but as others have commented, on the face of it you're not paying as your tax code looks wrong.

I reckon the same re the BIK values, so speak to HR & Payroll before paying an accountant.

Thanks for the help so far. Much appreciated.

I've done well to resist spending unnecessarily since I started this thread. I've about £100 to last until the 26th, with all bills paid, other than food.

Apologies for being a bit thick over the comments re. gross BIK etc, but I'm not following... Can you explain it as though I'm 6 years old so I'll understand - and no, that's not me being sarcastic!

Better still, can you let me know exactly what questions I should be asking HR - if I could copy and paste from here it'd be great! I'll defer the meeting with the accountant meanwhile.

A few have said that the numbers on my payslip aren't clear / don't add up, so I scanned a copy to help, obviously with all personal details removed! Here's the link...

[thenortherner]

Thanks for the replies. Still, I'm even more confused now - seems to be a total split between people saying it's right/wrong.