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Did you know that you can choose to give up some of your salary in exchange for non-cash benefits? This is called salary sacrifice, or sal sac for short.

Non-cash benefits are perks or rewards provided by your employer. They’re offered instead of giving you the equivalent amount in cash. For example: pension contributions, childcare vouchers, gym memberships, or company cars.

These kinds of non-cash benefits have tax advantages. They’re provided ‘in kind’, which just means they’re given as goods or services rather than as cash.

How this works is that instead of getting the full amount in cash, part of your salary goes towards things like pension contributions, childcare vouchers, electric vehicles, financial coaching or other perks.

This money is taken from your gross pay before it’s taxed by HMRC. So by doing this, you might pay less income tax and National Insurance because your taxable earnings (gross pay minus salary sacrifice) is lower.

Your employer helps set up the agreement and adjusts your salary accordingly. You’ll have a written agreement with your employer that explains the details of the sacrifice and the benefits you’ll receive.

So despite its slightly terrifying name, salary sacrifice is actually a really handy way to access your workplace benefits.

One thing to keep in mind is that some means-tested benefits or tax credits might be affected because your salary is lower.

Once you start a salary sacrifice agreement, it usually lasts for a specific period and can’t be easily changed until the end date. So make sure you check the terms of any salary sacrifice scheme with your employer before making any decisions. And take the time to think about how it will affect your overall salary, pension contributions, benefits, and future entitlements. If you need to, you can seek advice from a financial coach or financial adviser.

Some things to think about with salary sacrifice

Take a minute to think about the impact on your take-home pay and understand how it will affect your actual earnings before committing to it.
You’ll also want to think about the effect it will have on your budget and money goals if your overall take-home pay will be lower due to salary sacrifice.
If you’re eligible for or currently receive any means-tested benefits, you’ll want to check to see if your eligibility would be affected if your take-home pay decreased.
If you’re thinking about buying a house and planning to put in a mortgage application, you’ll want to see if a reduction in your gross earnings will mean that you miss out on a good mortgage rate or the mortgage product that you want.
Because you usually sign up for a benefit for a certain period of time, make sure you’re comfortable with the amount of time that you’re signing up for.
Check to see the impact this could have on your pension contributions and retirement savings.
Make sure you know the value of the non-cash benefits, and whether they’re relevant to you and your situation or not.
Be sure to read and understand the terms and conditions of any salary sacrifice scheme before signing on.
Make sure you know how flexible the salary sacrifice agreement that you’re signing up for is. For example, can you easily make changes like cut the agreement short or extend it? If you sign up for 12 months but start to regret it after 3, you might be locked into paying for the next 9 months.
If you need money advice before making a decision, you can talk to a financial coach or financial adviser.
If you’re unsure about anything at all, ask your employer’s HR department – they’re there to help!

Payday – that day of the month when we have the chance to get closer to our money goals. But let’s be honest – how many of us actually look at our payslips? And when we do, can we understand what they’re telling us?

Let’s make checking your payslip the first thing you do at the end of the month. Why? Well it helps you track your monthly income and see if you’ve been paid the right amount. Mistakes sometimes do happen, so it’s good to check each month and make sure all your details are correct.

Payslip formats can vary slightly, but we’ll cover the most common items.

Your name: Your full name is mentioned on the payslip.

National Insurance (NI) number: This is your unique ID for National Insurance purposes.

Why is your NI number there?

For verification – It helps confirm your contributions to the National Insurance system.
For compliance – This makes sure the right amount of NI contributions are deducted based on your earnings.
For record-keeping – It acts as a record of your NI contributions for benefits and your State Pension.
For reporting – It allows accurate reporting to HMRC.
Personal identification – It helps identify you uniquely for employment-related matters.

Employer’s name and address: This is the company you work for.

Pay period: The timeframe you’re being paid for, like the start and end dates (because working for free is volunteering!)

Payment date: AKA payday – everyone’s favourite day of the month.

Tax code: Your tax code determines the amount of income tax taken from your earnings.

Why is your tax code there?

For tax calculations – It helps figure out the right amount of tax to deduct from your wages.
To show your personal allowance – It takes into account the money you can earn tax-free. This is called your Personal Allowance.
For transparency – You could use it as a record to work out how much you should be taxed.
To follow the rules – It helps everyone stay in line with the tax rules and reporting requirements of HMRC.

Gross pay: This is the total you earned before any deductions are taken into account. This includes normal salary, hours worked, overtime and any bonuses you received in the pay period.

Statutory payments: This is a separate listing, generally in the Gross Pay section, if you’re eligible for payments like sick pay or maternity pay.

Salary Sacrifice deductions: This might sound slightly terrifying but really isn’t Because these deductions are taken out before you’re taxed, using salary sacrifice for workplace benefits like pensions, healthcare or money coaching (wink wink) means the salary on which you’re taxed is lowered. So you have less tax to pay – win!

These can be seen either in the Gross Pay or Deductions section of the payslip. These lower your overall earnings on which you need to pay tax. So you’ll pay less taxes!

Deductions:

A deduction is an amount subtracted from your gross pay. They’re made to cover various obligations and contributions to HMRC and other external organisations. Many common deductions include: income tax, National Insurance contributions, workplace pension contributions, student loan repayments, and other voluntary deductions like union fees or court-ordered payments.

Deductions can be mandatory or voluntary, depending on the nature of the deduction. They reduce the gross pay, resulting in a lower net pay, which is the amount you actually receive in your bank account.

What are the main types of deductions?

Income tax: The tax taken from your earnings based on your tax code and income.
National Insurance contributions: These are deductions for state benefits like the NHS, your State Pension and Maternity Allowance.
Pension contributions: This is the amount taken if you’re in a workplace pension scheme.
Student loan repayments: These are deductions that are taken if you have a student loan.
Other deductions: These are any extra amounts taken, like union fees or court-ordered payments.

Net pay: This is the amount you receive after taxes and other deductions. More commonly known as your take-home pay.

Year-to-date (YTD) figures: This is the cumulative totals of your earnings, tax, and deductions for the current tax year. BTW, the tax year runs from the 6th of April to the 5th of April the following year.

Employer contributions: These are the contributions made by your employer, such as towards your pension.

Tax and National Insurance breakdown: This is a detailed breakdown of tax and NI contributions.

P60: This isn’t on your payslip, but you may get it at the end of the tax year. It summarises your earnings and deductions for the whole year and is often needed for tax purposes.

The new year is the perfect time to reflect on your money wins from the previous year, and think about your money goals and new money habits for the next 12 months.

This 30-minute webinar will help you manage your money roadmap for the year ahead. You’ll learn how to set goals and start new habits in a way that helps you stick to them. We’ll make sure you’re on track with your finances, whatever your money goals.

If you have goals in life, chances are you’ll need money to make them happen.

Maybe it’s buying a property. Or visiting every single country in the world. Or running a petting zoo full of miniature animals.

No dream is too big or too small. Maximising your savings will get you there faster. And a money plan will help keep you on track.

If you have money goals, savings accounts can be a great way to help you achieve them.

Here are a few things to consider when choosing a savings account to make sure you’re making the most of your money:

How much you’ll get

Also known as interest rates. This is often the highest priority when choosing where to put your money. Different types of accounts offer different levels of interest. They can be fixed (the rate is set and won’t change) or variable (the rate can be changed by the bank or building society). Some offer higher interest rates for an initial period of time or up to a certain amount to attract new customers.

The small print

Before opening a new account, read through the account summary to find out how to open and manage your account. You’ll want to see if there are any minimum deposit requirements, whether you need to make regular transfers, how you can make withdrawals and how interest is paid.

Access to your savings.

Check how quickly you can access your money if you need to. Any savings you might need for emergencies should be easily accessible. If you have any savings goals you can plan for ahead of time, you can consider locking it away for a set period of time. Generally, you can get a higher interest rate for money you are willing to lock away. This just means you agree not to withdraw money from that account for a certain amount of time. If you do take money out, you might have to pay a fee.

Can I take out my money whenever I want?

Some types of accounts require you to give notice before you can access your money. This can range from 30 days to 180 days. These can be used for savings you’re planning ahead for, for example a holiday that you’ll be taking in 2 years’ time or your child going off to uni.

When can I access my money?

With some accounts like fixed-rate savings accounts, you’ll keep your money locked away for a longer period of time. This can be anything from 1 year to 5 years. These accounts often offer higher interest rates.

How much tax do I have to pay?

Everyone gets a personal savings allowance each financial tax year. As a basic rate tax payer you can earn up to £1,000 in interest tax-free. As a higher rate tax payer you can earn up to £500 in interest tax-free. If you want to protect your money from tax, you can use a Cash ISA. Tax-free means more money in your pocket. You can put up to £20,000 into different ISAs each tax year.

Is my money safe?

When you keep your money with a fully UK-regulated bank or building society, it’s protected in case they go bust. Your savings are protected up to £85,000 per person per bank or building society by the Financial Services Compensation Scheme (FSCS). If you have more than this amount saved with one bank, consider spreading it across different savings accounts in different FCA approved institutions.

Sometimes the hardest part about saving is just taking that first step and getting started.

Having a plan can help with this!

Here’s a simple step-by-step guide you can follow:

Review that spending

Start by looking at your past 3 bank statements to see how much is coming in and how much is going out. Once you know where your money is going it’s easier to see where you can improve and where you could cut back.

Do some deal hunting

Price compare to see if you can get a better deal and reduce your costs.

You can do this with your mobile phone and broadband contracts as well as your energy and gas bills. The energy market has been quite volatile so it might be difficult to get better deals at the moment. But it might be worth doing when things settle down.

Get down with your budget

Make sure your budget is realistic and that there’s room for things you enjoy.

Take into account your past spending and make sure to include a savings category with an initial savings amount that feels achievable to you. Aim to increase your savings with time.

Make automation your BFF

Open a separate bank account for your savings.

Keep your savings separate from your spending and treat it like a bill! Set up a standing order on pay day with the savings amount in your budget.

The magic of apps

Use apps to your advantage.

You can also use a digital bank account that allows you to track your spending from their app. Some apps have a “round up” feature, so that each purchase gets rounded up to the nearest pound and the difference is added to a savings pot.

Track those wins!

Know what you’re saving for. When you have a purpose for that money, saving becomes easier. It’s a bit challenging to just ‘save money.’ But if you’re saving for a holiday or your first home, then that helps you to stay motivated towards your goal.

An emergency fund might sound a bit intense, but it’s really just a savings account that you have for unexpected expenses or emergencies. Think of it as a security blanket – it’ll always have your back.

Unexpected events and emergencies can be stressful enough without the added worry of money. So what an emergency fund does is provide you with a financial safety net that you can tap into without worrying about getting into debt. If you have an emergency fund, you can use it to cover any costs instead of using overdrafts, credit cards or high-interest loans.

The amount you need to keep aside will depend on your lifestyle and your living expenses. But the general recommendation is to save 3 to 6 months of your take home pay or your expenses. If you’re a freelancer or self-employed, you might feel more comfortable having more than this.

You can use your emergency fund for:

Unemployment – to cover your expenses while you look for a new job
Unexpected home maintenance and repairs
Unexpected car maintenance and repairs
Medical and dental emergencies
Unexpected pet costs and vet bills
Mobile phone and laptop or other electronic breakdown
Extra living costs after a relationship change

Once you’ve dipped into your emergency fund, you’ll want to work towards topping it up again.

It doesn’t have to be done all in one go. You can build it back up little by little each month.

What is a savings account?

A savings account is a type of account where you can safely keep your money until you need to use it.

Banks pay their customers interest on money held in savings accounts, and usually have a variety of accounts with a range of different interest rates and timeframes for you to choose from.

Easy access savings accounts

Easy access savings accounts let you withdraw your money easily and without notice, but often have lower interest rates than other types of savings accounts.

Fixed rate or fixed term savings accounts

Fixed rate or fixed term savings accounts often offer higher interest rates than easy access savings accounts, but they require you to lock your money away for a fixed amount of time with a fixed interest rate. The benefit of this type of savings account is that the interest rate is guaranteed and you know exactly how much money will be in the account when the term ends. A drawback of this type of account is that you might not be able to access your money if you need it, or you might have to pay a penalty if you do withdraw the money before the end of the fixed term.

Regular savings account

A regular savings account is a type of savings account where you can save money on a regular basis. These accounts usually have a minimum and maximum monthly deposit amount, and that money is locked away with a fixed interest rate for a fixed period of time. This type of account is great for people who want to develop a habit of saving money, but who might not have or want to lock away a lump sum, but still want to get a higher interest rate than an easy access savings account.

Individual Savings Accounts (ISAs)

Individual Savings Accounts (ISAs) are a type of tax-efficient savings account available to UK residents. There are four types of ISA accounts: cash ISAs, stocks and shares ISAs, innovative finance ISAs, and Lifetime ISAs (LISAs). Each account type has a different purpose and different benefits and limitations, but the biggest advantage of an ISA is that you don’t pay tax on any interest on cash held in an ISA, and you don’t pay income tax or capital gains tax from investments in an ISA.

The government sets an allowance for each account type every tax year, and you can save the full allowance into one type of account or split the allowance across some or all of the account types.

Our explainer on banking will tell you all you need to know about banking in the UK, and the things to look out for to make sure you are managing your money in the best way for you, your lifestyle and your future.

Why do I need a bank account?

Money is an essential part of our lives, and something many of us use daily in order to buy things that we want and need – products, services and experiences.

It has a long and fascinating history, and we’ve come a long way from bartering to exchange goods for other items to all of the digital banking options we have today.

As human society became more complex, it became necessary to find a way to use something to represent and store value. This meant moving from bartering to using gold, feathers and even cowrie shells, which evolved over time into the use of coins, paper money, credit cards and debit cards.

Ultimately, money has value because people believe they will be able to use it to pay for goods and services in the future – it has value because people agree to give it value.

People joke about keeping their money under the mattress, but that’s a bad idea for a lot of reasons including risk of theft, risk of natural disasters or accidents, and it loses value over time due to inflation (Link to explainer content on inflation) if it’s just sitting there.

The most common way for people to manage their money is with bank accounts held with banks which are regulated by the Financial Conduct Authority (FCA) and where the money is protected by the Financial Services Compensation Scheme (FSCS) in the event that the financial firm fails or goes out of business.

Is my money safe in the bank?

In the UK, there are protections in place to ensure that your money is safe.

Companies that offer financial services or operate in the financial industry have to follow specific rules and laws. These rules and laws are also known as financial regulation.

What is the FCA?

In the UK, the financial services industry is regulated by the Financial Conduct Authority (FCA). The FCA is a publicly funded independent organisation that works with HM Treasury to protect consumers, keep the industry stable and to promote healthy competition between providers of financial services.

Companies that provide financial services must follow the standards set by the FCA in order to keep doing business in the UK.

What is the FSCS?

The Financial Services Compensation Scheme (FSCS) protects customers from losing all of their money. It works by paying up to £85,000 per person per firm if their bank goes out of business. So if you have £100,000 in a savings account with one bank, and it goes bankrupt, you’ll receive £85,000 of your money back, not the full £100,000. If you have £100,000 saved with two different banks – let’s say £50,000 with one bank and £50,000 with a different bank – then you would get £50,000 back for each one. So you’ll be compensated for the full £100,000.

The FSCS is independent and fully funded by companies working in the financial services industry.

What is a current account?

A current account is a type of bank account where you can deposit and withdraw money. It allows you to easily manage your day-to-day income and spending.

Current accounts are the most common type of bank account in the UK.

Many people use current accounts to receive salary or benefits payments, pay bills, set up direct debits and standing orders to make regular payments, withdraw cash from ATMs and make payments with a debit card.

Will I be charged a fee to have an account?

Most basic bank accounts offered by high street banks don’t charge a fee to just open or maintain an account. But there are some cases when you might be charged a fee.

Some common charges include:

Overdraft interest and charges
Transaction fees for unapproved overdrafts
Charges for declined Direct Debits standing orders
ATM fees
Foreign transaction fees
Fees for one-off requests

All banks have to provide a full list of the fees they charge. The easiest way to check these is on their website or in their app.

Some banks offer accounts with more exclusive benefits and services targeted at higher earners. These ‘Premier’ or ‘Platinum’ accounts do charge fees to access their services.

What’s an overdraft?

Some current accounts have an overdraft feature which allows you to borrow money in the short-term to make a payment if the balance in your account is too low to cover the cost. This means that if your account goes below £0, you’re using your overdraft.

For example, if your weekly grocery shop costs £40 but there is only £20 in your current account, if you have an overdraft you can still pay for it because your bank will allow the transaction to happen. But your new balance will be -£20 and you will have to repay the £20 you borrowed to complete the payment. So, an overdraft is basically like a loan, and banks will often charge you interest on it.

If your overdraft is arranged with your bank there will be an agreed limit on how much you can owe, usually without being charged interest. If you go below this amount or you don’t have an agreed overdraft, then there is a chance you might have to pay interest on the amount you borrowed. It’s really important to make sure you’re aware of any overdraft limits you have on your accounts.

How many accounts do I need?

Many people have at least one current account and one savings account to manage their money. But with so many new challenger banks, online banks and app-based banks offering new and different features, there’s no limit to the number of accounts you can open and what you can use them for. Some banks have ‘pots’ or ‘jars’ you can set up for specific saving and spending categories. Automatic savings apps either work out how much money you can afford to save each week and send it to a separate savings account, or use a round-up feature where your spare change is automatically saved or invested.

This is designed to make saving easy and effortless, and help get you into the habit of saving if you are new to saving money.

What’s a debit card?

A debit card is a type of payment card – usually plastic – issued by your bank, which you can use to make purchases. The money comes out of your account directly. It’s different from a credit card, which you pay off at the end of the month.

Tips for managing your bank accounts

Make a regular habit of checking your bank statements. This will help you spot any fraudulent activity happening in your account so that you can report it to your bank.
Make sure you are aware of any banking fees linked to your account, such as overdraft allowances fees, account maintenance fees, paper statement fees, ATM fees and charges for overseas cash withdrawals or debit card spending so that you can be prepared for them.
Download your bank’s app on your smartphone to use mobile banking.
Consider using an app or direct debit to automate your savings.
Research and compare interest rates on savings accounts from time to time, so that you can make sure you are getting the best available interest rate. There are many websites that make this step easy.
If you’re not happy with the services that your bank provides, consider switching banks.

Did you know you can earn interest on your money and get to keep it, tax-free?

The personal savings allowance (PSA) is a tax-free allowance that allows UK residents to earn up to £1,000 in interest, tax-free.

The PSA covers interest earned from:

bank accounts
savings accounts
credit union accounts
building society accounts
corporate bonds
government bonds
gilts

It includes interest earned on pounds and other currencies held in UK-based savings accounts.

Your allowance depends on your income tax rate.

Basic-rate taxpayers (20%) have a £1,000 tax-free allowance
Higher-rate taxpayers (40%) have a £500 tax-free allowance
Additional-rate taxpayers (45%) don’t get an allowance

And to clear up one common question…the allowance is the interest earned not the amount deposited into the account.

So if you’re a basic-rate taxpayer and your savings accounts earn less than £1,000 in interest in a tax year, you don’t have to pay any tax on it.

As interest rates on savings accounts have been quite low in the previous years, you’d need to have tens of thousands of pounds in savings to exceed the £1,000 PSA limit and start paying tax on your interest.

Most UK savers (around 95%) don’t pay any tax on their savings interest because of the personal savings allowance.
This allowance is separate to other allowances like your ISA allowance.