GIVE YOUR MEMBERS A 20% PAY RISE

Offering advice on reducing members’ tax liability might seem outside the remit of club officials, but when you consider the disposable income this could suddenly free up it’s worth exploring. FELICITY HANNAH, deputy editor at moneysupermarket.com reports

While the recession has been particularly tough for people who’ve lost their jobs, those who are still employed also face difficult times ahead.
Even with predicted average pay rises of 3% in the private sector this year, according to Incomes Data Services research, most homes are facing a drop in their spending power, as inflation remains stubbornly high.
As we go to press, the consumer prices index is currently at 4.4%, while the retail prices index is even higher at a painful 5.5%. Add on the VAT hike from the start of the year, and we’re looking at an extra £500 being added to average family bills. It’s hardly surprising that so many of us are feeling the pinch
But in this article for Club Mirror, we reveal how you members can potentially save up to £5,166.69 over a year. With the average gross annual salary at £25,900 - according to the Office for National Statistics - that would be a very healthy 21% pay rise! (Please note: details were correct at time of writing).

Of course, not everyone will qualify for every saving outlined in this article, but even if members could make just a third of them, they’d still be boosting their salary by an inflation-busting amount.

Using salary sacrifice for childcare Childcare can eat such a hole in earnings that it sometimes feels like there’s little point working.
But if employers offers childcare vouchers under a salary sacrifice scheme then that could pay for that expensive service out of pre-tax income.

That means there are no payments to be made on tax and NI contributions on the money spent on childcare. Effectively, parents are agreeing to be partly paid in childcare vouchers. They can request up to £55 a week or £243 a month.
A basic rate taxpayer could save up to £933 a year this way. However, the rules for higher-rate taxpayers changed in April. Now, higher and top rate taxpayers will only be able to take £28 a week in vouchers, meaning a total potential save of £623, while those who pay the top rate of 50% tax can claim a maximum of £22 a week - saving potentially £606 over the year.
But taxpayers already in the scheme will not be affected, so members already making use of the scheme don’t need to worry.

Checking benefits Are your members getting all the financial help they’re entitled to?
In 2010, a group of charities, including Citizens Advice and Save the Children, warned that more than £16 billion of means-tested benefits and tax credits go unclaimed each year. In fact, the organisations worked out that half of working families entitled to housing benefit don’t claim it, meaning they are missing out on an average of £37.60 a week - £1,955 a year.
Why not suggest that members check the benefits calculator on the Turn2us website - www.turn2us.org.uk - or that they book into a local Citizens Advice Bureau for a benefits check.

Company pensions
Where an employer offers a pension scheme where they make contributions, this can mean an effective pay rise - i.e. as they’re contributing an extra percentage to regular income.
So, for example, using the stated ‘average annual salary’ of £25,900: if an employer matches those pension contributions up to 5% then that’s a pay increase of £1,295 a year. This would mean contributing a proportion of monthly incomes - which won’t boost any immediate spending power - but it’s money for nothing.

Using tax-free savings
The returns made on savings are taxable, unless money is put money into a tax-free wrapper, namely an individual savings account (ISA).
A maximum of £10,680 a year can be saved, half of which can be saved into a cash account. And if members have savings - whether it’s a small rainy-day pot or something more substantial - it makes sense to use any taxfree allowance to avoid the taxman taking a cut.
The benefits are clear to see. For example, if over the last tax year anyone lucky enough to be able to save £5,100 into an account paying 2.85%, would be £29.07 better off after 12 months, than if they’d saved into a taxable savings account paying the same rate.
The returns are even better for those with bigger tax burdens. In fact, a higher rate taxpayer would be £58.14 better off and a top-rate taxpayer would be £72.67 richer as a result of saving into a tax-free account.

Using a cashback credit card
Anyone clearing a credit card balance in full every month could be earning free money every time they shop.
For example, one popular cashback card at the moment gives new customers 5% cashback for the first three months, up to a total spend of £2,000.
At that rate, it’s possible to earn £100 in a quarter of a year. After that, earnings are up to 1.25%, depending on how much is spent. Pay for everything using the card, and income can be boosted: for example, someone spending £2,500 a month with such a cashback card would earn an extra £381.25 a year.
However, cashback cards tend to demand a high annual percentage rate, so this is not a money-making scheme unless you clear your balance each month.

Offsetting savings Members who have savings (and a property) but aren’t earning as much as they’d like could consider an offset mortgage to save them money. Higher and top rate taxpayers need to earn 5.51% and 6.61% respectively Once you factor in tax and inflation, in order to make real returns on their money. However, the highest-paying fixed rate bond just now pays just 4.75%. So potentially that money could be better used to offset expensive mortgage debt. By taking out a mortgage product that allows savings to be offset against the balance of their mortgage, homeowners can pay it off years earlier or choose to cut their monthly repayment bills. On top of that, while they’d pay tax on their savings returns, there’s no tax to pay just because they’ve lowered their mortgage payments. With an offset mortgage, savers can still access their cash balance when they need to, it’s just the money is held against the mortgage debt in the meantime. For example, if a member took out a £175,000 offset loan at 2.99% and held £50,000 in a linked savings account, they’d only pay interest on the remaining £125,000. On a 25-year mortgage, they’d save £14,334.33 in interest - that’s a saving of £573.37 a year, or four years (with two months cut off the term of the mortgage). Just think how the club could help them to spend the savings!