Financial first aid: how to make it through the second Covid lockdown
With much of the UK in lockdown and many businesses forced to close for at least four weeks, household finances are set to be squeezed again. This week, charities said they had seen an influx of middle-income families who needed to access food banks after being plunged into crisis by job losses and gaps in state help.
If you are being made redundant, are going on to furlough and face an income cut or are self-employed and having to close for weeks, there are places to turn to for advice and help. Here we look at what steps to take in a financial emergency.
Day-to-day spending
“Completing a budget is often the most important first step you can take,” says Jane Tully, a director at the Money Advice Trust charity that runs National Debtline. “Seeing what you have coming in and going out will show what you can afford to pay. Remember to focus on your essential costs like food, housing, heating and council tax first.” National Debtline has an online budget tool, so does Citizens Advice, while StepChange has a budgeting template you can fill in.
Do not be afraid to use your savings. If you have rainy day money, do not leave it untouched while you struggle as this is exactly the type of situation it is there for. Lots of benefits and grants are assessed on the basis of what savings you have – if you have a lot, you may not qualify for payments – so letting money sit there is not helping you in any way.
View image in fullscreenThat rainy day for savings may well have arrived. Photograph: Alamy
Go through your household bills and see if there are any costs you can cut, either by cancelling services or moving on to a cheaper deal. With the winter coming, start by seeing if you can find a cheaper energy tariff. Use a comparison site such as Uswitch, Comparethemarket or Gocompare to shop around.
If you cannot pay your energy bills, call your provider. You might be able to arrange a payment plan that spreads your costs, or to switch to a cheaper tariff. Some energy firms offer grants to help those in the greatest need – and you do not necessarily need to be a customer to qualify. For example, the British Gas Energy Trust will consider applications from anyone, although the bulk of its money is allotted to its own customers. To apply for a grant you need to have received advice from a money advice organisation, among other criteria.
Call your water firm if you are struggling to pay. It should be willing to discuss a payment plan with you that makes it easier for you to keep up with what you owe. And it might have other ways to help you. Severn Trent, for example, has a scheme, WaterSure, where your bill is capped if you receive certain benefits and have a medical condition, and also the Severn Trent Trust Fund, which helps those in hardship. Ask your water supplier or look on its website to find out about similar schemes.
Councils have stronger powers to recover debts than some other creditors, so it is vital to contact yours if you are worried about missing your council tax payment. One option may be to spread your repayments over a full year, rather than the 10 months that is standard. Your council may also be able to offer you a one-off discount. And if you claim certain benefits or are on a low income, you might qualify for a discount of up to 100%.
You might be able to cut the cost of your weekly shop if one of your household is a key worker – Morrisons this week added school staff to the list of people it offers a 10% discount to. The reduction applies to support staff as well as teachers, and to qualify you just need to show your school pass in store. NHS workers can also get a discount, and if they register it applies online, too.
Mortgages and loans
View image in fullscreenMortgage payment holidays have been extended. Photograph: George Clerk/Getty Images
The Financial Conduct Authority has announced that payment holidays will be extended, so if you are struggling to meet the monthly cost of a mortgage, credit card or loan this could be your best option. Under its proposals, borrowers will have until 31 January 2021 to ask for payments to be deferred.
For mortgage borrowers, lenders should consider requests for payment breaks of up to six months in total. When you defer the payment it will increase the size of your overall mortgage because interest will keep being added to your loan. However, as interest rates are low the extra cost will not grow too quickly. According to figures from Halifax bank, on a £100,000 repayment mortgage with a rate of 2.75% and a 20-year term remaining, a three-month payment break will add £9 a month to the eventual repayments and increase the total cost of the mortgage by £485 to £130,605. The FCA is also proposing that no one will have their home repossessed without their agreement until after 31 January 2021.
If you have already delayed your repayments twice or by six months in total, you will not be able to request another break. But lenders have said they are keen to support people who are struggling, and should be willing to work with you to arrange a repayment schedule.
Help for tenants
Talk to your landlord about what support might be available. Some private landlords have been flexible with tenants, reducing rents or giving people more time to pay.
Normally tenants are given a “no-fault” section 21 notice when a landlord wants them to vacate a property. The minimum notice period was set at two months but this was raised to three months at the onset of the first lockdown and is now six months for any notices served since 29 August. So a landlord issuing a notice today cannot force you to leave before next May.
On Friday the government announced that the eviction ban in England and Wales had been extended to cover the latest lockdown. With rules already in place to prevent evictions over the Christmas period, that means bailiffs will not be able to try to repossess your home until 11 January at the earliest. This does not apply to cases where tenants have been served notice because of antisocial behaviour or fraud, or in domestic violence cases, but other tenants can rest easy.
Getting help
Claim any benefits you are entitled to. The website entitledto.co.uk has a great calculator to help you find what you could be due.
“Check what additional support is available from your local authority,” says Lorraine Charlton, an adviser at Citizens Advice. “You may be entitled to additional support with your living costs, and school costs if you have children.” Councils can help with things such as school meals, transport and uniform costs, and have hardship funds that you might be able to claim from.
Councils also have funds to help people who have to self-isolate and cannot work and earn as a result. To qualify you need to be receiving one of the benefits aimed at those who are on low incomes or unemployed, and to have been told to isolate by NHS test and trace but you could get £500 on top of sick pay. Contact your council to make a claim.
Many charities have grants available. See below for more.
View image in fullscreenCharities have seen an influx of previously middle-income families who need access to food banks. Photograph: Christopher Thomond/The Guardian
If you are struggling to afford to eat, a food bank is an option. For many you will need to be referred. “If you have a referral, you’re still allowed to travel to a food bank – either for yourself or someone who’s vulnerable,” Charlton says. “You can start by looking online to see if there are any independent local food banks that you can go to without a referral. Alternatively, you can seek a referral from a GP, social worker or a charity such as Citizens Advice, among others.”
Money problems bring huge stress and anxiety, so consider getting help if you need it. Visit Moneyandmentalhealth.org/ get-help for details of organisations to talk to.
If you do end up entering some kind of debt management plan, there could be fees attached – but do not rush into paying for advice. National Debtline, Citizens Advice and StepChange have people you can speak to at no cost. Go to their websites for details, or one of your service providers may give you contact details when you get in touch.
How to claim universal credit
View image in fullscreenThe application process for universal credit is all online on the Gov.uk website. Photograph: M4OS Photos/Alamy
Workers who have lost their jobs – or a chunk of their income – as a result of the second lockdown can apply for universal credit. This benefit pays single adults up to £410 a month plus help towards their rent.
Those on reduced hours or on furlough can apply to top up their income to the minimum levels.
If you are unsure whether you qualify, use a benefits calculator – there is one on the Turn2us website.
The biggest bar to many will be the fact that anyone with savings of £16,000 or more is not eligible for universal credit. They can only apply for jobseeker’s allowance of £74.35 a week – but will receive no help with rent.
The application process for universal credit is now all online. The application has to be completed within 28 days. This involves an interview with Jobcentre Plus within 10 working days, either by phone or at the local office.
Each person’s entitlement is based on their household income: their partner’s earnings, how much rent they pay, how many children they have and other personal circumstances.
The standard payment for a single person under 25 who is not working, is £343 a month.
A single person over 25 will receive £410 a month, or about £94 a week basic benefit, provided they have no other income.
An unemployed couple on universal credit will receive £594 a month. If they have two children they will be paid a further £472 a month, or £517 if the first child was born before April 2017.
For every £1 you earn, the sum you are entitled to is reduced by 63p – unless you, or your partner, are looking after a child or have a disability or health condition. If that is the case, there is a certain amount you can work each month before the reductions kick in.
You can also get help with rent (formerly housing benefit), although in many cases it will cover only 70%-80% of what people actually pay.
Claimants receive the local housing allowance, which varies by region. If you are paying more in rent than your allowance, you will have to make up the difference.
First-time claimants with a mortgage will find there is no help with payments until they have been claiming benefits and not earning for nine months – and, even then, it comes as a loan that accrues interest.
Applicants face a five-week wait for the first payments, although those in difficulty can apply for a speedier “advance” on the sums due.
Grants: is there help for your industry?
View image in fullscreenWorkers in the hospitality sector are among those who can get help from industry-specific grant schemes. Photograph: Victoria Jones/PA
Thousands of charities, religious groups and other organisations are offering help to those who have hit hard times.
In most cases they target a particular sector or group of former or current workers. Most offer cash grants, or will provide money to pay for an essential item or service – for example, they might fund a new washing machine, or help you with a deposit on accommodation.
The hospitality sector is one of the hardest hit by covid, and there is a specialist charity helping bar and restaurant workers. Hospitality Action will consider applications for grants for essential items and it has also set up a Covid-19 Recovery Grant, worth £250 or more.
Applicants can apply online, and as most do so by phone the process is also set up for that. They have to provide evidence of employment in the industry and of a job being terminated or hours reduced, as well as a bank statement. A decision is made within two weeks and the money paid into their bank account.
Another charity, Education Support Partnership (ESP), exists to support teachers and teaching staff in financial difficulties. As well as offering financial information, it has grants available for those who have money problems because their circumstances have changed. Teaching Staff Trust offers hardship grants to anyone who works or has retired from working in schools, nurseries and other education roles for under-19s.
The Charity for Civil Servants helps current and former civil servants, while the Ben charity supports members of the motor trade. The latter can offer help with financial problems, including advice and welfare grants.
The Turn2Us website has a grants search where you can input your postcode, job and other personal details. It will signpost organisations that might be able to help you. Or you can Google “benevolent charity” and the sector you work in.
This article was amended on 10 November 2020 to make clear that the Charity for Civil Servants helps current and former civil servants, not just ex-civil servants as originally stated.
