Managing your money if you lose your job
If you're one of the 2.5 million people out of work in the UK, you'll know the money problems and stress it can bring.
Here are some steps that can help you manage your money if you lose your job.
1. Claim your benefits
As soon as possible after stopping work, contact your local Jobcentre Plus to find out what benefits or other support you are entitled to.
If you are unemployed this will usually mean claiming jobseeker's allowance.
If your income is low, you may be eligible for other entitlements, such as housing benefit and help with council tax.
Contact the Tax Credits Office. If you're already claiming tax credits, you need to let them know about your change of circumstances.
If you're not yet claiming, you might find out that you qualify now that your income is lower.
You may also be entitled to free or discounted services, such as NHS dental care or school meals.
2. Check your insurance
Next on the checklist if you've just become unemployed is to find out whether you have any of the following insurance policies:
Cheaper energy bills
Advice from the Energy Saving Trust:
- Insulate your hot water cylinder. Could save up to £60 a year
- Get an eco-shower head. Some water companies are giving them away free; could save you up to £75 a year
- Swap halogen spot lights with new LED bulbs. Replacing all traditional bulbs with energy saving versions can save £60 a year
• Mortgage payment protection insurance
• Payment protection insurance on any loans or credit cards
• Income protection insurance
• Short-term income protection insurance
Payment protection insurance covers loan or debt repayments in the event of unforeseen problems, for example if you become ill or lose your job.
These policies are often sold as part of the deal when consumers take out a loan, mortgage or credit card.
If you have a policy, make a claim straight away. There's usually a waiting period before any payout starts, but making the claim starts the clock ticking.
If you have insurance and your claim is refused, you may have been mis-sold the policy and could be eligible to claim compensation.
Because of the way payment protection policies were sold in the past, you may not realise that you have this cover.
It's always worth checking, even if you think this doesn't apply to you.
3. Are you owed tax?
If you stopped working part way through the tax year - which starts on 6 April - you could be entitled to a tax refund.
Whether or not you can claim a rebate will depend on how long you've been out of work and whether you've claimed taxable benefits since being unemployed.
The best way to find out what you may be owed is to use HM Revenue & Customs' tax checker tool.
You will need to have your payslips and bank statements to hand to complete the form.
4. Do you need to pay tax on redundancy pay?
Redundancy pay up to £30,000 is tax free. Anything you get over that amount is taxable at your highest rate.
Your final pay probably included other payments - like holiday pay or pay in lieu of notice. They will be taxed in the same way as your normal pay.
When you get your redundancy pay, your employer will usually have already deducted tax from it.
However, it's very common to find they have taken off too much or too little tax.
At the end of the tax year you need to check with HM Revenue & Customs that you've paid the right amount of tax. This is your responsibility.
5. Set a budget
Supermarket money saving
- Plan your meals to avoid waste
- Understand discounts to be able to spot a good deal
- Know how to store your food properly to avoid waste
It's essential to establish what money you have to live on from month to month.
Draw up a budget, listing of all your income from benefits and other sources such as savings.
Then list your outgoings, like your mortgage or rent, bills and food shopping.
When doing your budget, remember to put aside money to cover the cost of searching for a new job.
Expenses can include postage, travel and interview clothes.
If you find you have less than you need to live on, look at increasing your income, cutting your spending, or both.
6. Shop smartly and cut back
It's worth taking time to look for better deals, perhaps switching to a cheaper energy supplier or shopping in cheaper places.
It also may be time to cancel subscriptions like the gym or magazines - at least until you are in a better financial position.
The cut-back-calculator may be enough to frighten you out of making those spends.
7. Keep on top of your borrowing
Make sure you know what your priority debts are.
Your mortgage and any loans secured on your home should be your top priority. If you fall behind on those you could end up losing your home.
If you think you might not be able to carry on making your mortgage payments, contact your lender straight away.
They should discuss ways to make your repayments more affordable.
If you have any savings, use them to pay off expensive debts like credit card bills and loans - savings usually earn less interest than you get charged on loans.
If you're worried about getting into debt it's always better to get help sooner rather than later.
8. Improve your skills
If you'd like to brush up on your IT, maths or English skills, ask what courses are available at your local further education college, adult education centre, or library.
Literacy and numeracy courses are usually available for free. If you're an IT novice, visit UKOnline to find a beginner's course near you.
If you need help paying for a course, ask the course provider about applying for discretionary learner support.
For free advice on training in practical skills visit the National Careers Service website.
Online advice on the maths and English skills useful for a range of jobs is also available at BBC Skillswise
9. Getting to the interview
Sanctions for JSA claimants
Since Oct 2012 jobseeker's allowance might be cut if
- You leave a job voluntarily. Your allowance will be cut for 13 weeks
- You are not actively seeking a job or available for work. Initially your benefit could be cut for a month
- You fail to attend/participate in an adviser interview/training scheme. Could mean loss of benefit for up to 13 weeks
The 'Travel to Interview' scheme, which used to help with the cost of travelling to a job interview, is no longer running except in Northern Ireland.
However, it's worth asking your personal adviser at the Jobcentre Plus if you can claim any help with travel costs as they now award on a case-by-case basis.
Some employers will offer to reimburse your travel costs when they invite you to an interview, but this is quite rare. It's probably safest to assume you'll have to pay it yourself.
If you're travelling by train, buy your ticket as far in advance as you can and you'll almost always pay less.
If you can avoid peak times, for example by delaying your return journey, you'll probably be able to pick up a cheaper ticket.
If you're travelling within London for interviews get an Oyster Card. You can use it on the Tube, on buses and on most local overground trains - cheaper than buying tickets for each journey.
10. When you get a new job...
Give your new employer your P45. This should mean you'll get the right tax code and your employer will deduct the correct amount of tax right from the start.
Not all your benefits will stop as soon as you start work. Some benefits might carry on, and others - like Working Tax Credit - may be available after you start working. Ask your Jobcentre Plus adviser.
If you're using public transport to get to work, you might qualify for a free travel card for the first month in your new job. Your Jobcentre Plus adviser will let you know about this too.
After that, it's normally cheapest to buy a season ticket. Some employers offer an interest-free loan to buy the season ticket which is then repaid over the course of the year.