There is no doubt that the pandemic and subsequent economic challenges that have followed have changed the way we think about our finances. Although things are by and large back to normal, there will always be some employers struggling with either their own or the latest economic uncertainties, which at the moment includes higher inflation.
Whilst the headlines surrounding anticipated record job losses has diminished, the threat of redundancy may still loom for some.
Redundancy no longer carries the stigma it once did, though with mortgages or rent to pay very few of us want to be the next ones to experience it, especially as prices are rising rapidly. However, if you have been made redundant or fear that you could be made redundant in the future there are simple and practical steps you can take to minimise the impact on your financial well-being.
Establish a back-up plan
It’s generally recommended that you have sufficient funds set aside in an instant access account to meet your essential outgoings for at least three months. For example, you may have saved money on travel, holidays, and other non-essentials.
Review your finances
Check your monthly income against outgoings. Your bank may have an app to help you. Budget for the essential items such as your mortgage, food, utilities, and car insurance. Then consider what else is going out of your account and whether you can live without it.
Make sure you receive what you are entitled to
If you do lose your job, make sure you are receiving all the monies due to you. If you have been with the same employer for two or more years, there are rules covering this. If you are a member of a union or staff association, they will advise you or point you in the right direction for the right help.
Don’t pay more tax than you need to
Your employer may offer more than the statutory amount. Up to £30,000 is normally tax free – but holiday pay and pay in lieu of notice is taxed. If you do receive a lump sum, making an additional contribution to your pension is a really efficient way to reduce your tax bill.
You may be due a tax rebate, depending on the date your employment ends. Contact HMRC for help.
Don’t miss out on the benefits available to you
Whether you need the money or not, consider registering for the Jobseekers allowance. Depending on your circumstances, you may be eligible to receive credit for National Insurance. This will help to prevent any sizeable gap in your NI records which could affect your pension and other benefits in the future.
Is this a timely prompt to consider what you want to do next?
Of course, much depends on where you are in life. Time for a career move, perhaps? Would you consider early retirement? Is it time to make that leap of faith and set up your own business? Take the time to consider your next move and how it will impact your future.
Whatever you chose, review the benefits your employer provides and prioritise those you would want to replace. For many of us these include life cover, critical illness, pension contributions, private medical insurance, and income protection.
If you’d like to learn more, please get in touch now.
Tax treatment varies according to individual circumstances and is subject to change.
Approver Quilter Wealth Limited & Quilter Mortgage Planning Limited. 17 April 2023
Sources:
- https://www.gov.uk/redundancy-your-rights/redundancy-pay
- https://www.gov.uk/termination-payments-and-tax-when-you-leave-a-job/what-you-pay-tax-and-national-insurance-on
