The Fizz! Blog

Stuffocation: Living More With Less

Last year, we really liked the book Happy Money - it had some really good evidence-based ideas about how to change your spending to improve your wellbeing.  Along similar lines is James Wallman's Stuffocation: Living More With Less.

Wallman's main (again, largely evidence-based, though perhaps not as rigourously as Happy Money) conclusion is that being an "experientialist" is better than being a materialist, i.e. allocating money/time to *experiences* not to things.  Stuff makes people less or no more happy, and is environmentally bad, and things that give you intrinsic enjoyment (i.e. you do them because you like them) are shown to be healthier for you psychologically than things that give you extrinisic enjoyment (i.e. they impress other people).  He says that experiences often do have extrinsic benefit (you can show off about them on Twitter and Facebook) but that, empirically, experiential things are more likely to be bought for intrisic benefit than physical things are, even if sometimes they are bought partly to show off, so you should not worry too much about the detail and just prioritise experiential things over physical things anyway, as statistically you'll end up with more intrinsic enjoyment.

Sometimes it's hard to tell the difference between the two, Wallman correctly says (you might buy a nice suit both because of the way it feels and the way it looks, and you might go on a weekend away both to absorb it but also to have some interesting pictures and comments to pass on).

 

A really interesting thing Wallman says is that one of the five things that mean a trend or development is likely to take off (he's a professional cultural forecaster) is that it has to be observable by other people so that the mainstream can copy the innovators and early adopters.  So he doesn't think minimalism (another potential rival to materialism) can take off because you can't see volumes of people doing it in day-to-day life (unless you happen to notice someone always wearing the same clothes).  Whereas Facebook and Twitter mean that you *can* see people sharing an experiential life every day.

 

His advice on practical steps was a) get rid of stuff you don't need, b) don't replace it and then c) spend a couple of months spending the same amount of money you'd normally spend on stuff, but spending it on experiences instead.  In practical terms we think we're probably experientialists already to a large degree at Fizz - but we can always do better!

If you're interested in this kind of thing and enjoyed Happy Money, then you should read Stuffocation.  If you're interested in this kind of thing and haven't read Happy Money, read Happy Money and *then* Stuffocation!

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Much bigger tax debts to be collected via PAYE from April

At present, if you owe some tax and are paid via PAYE, HMRC will often let you off paying the tax in a lump sum, and instead collect it via PAYE.  At present, the maximum debt that can be collected in that way is £3,000 - in other words, £250 extra being deducted from your salary each month for a year.

From April, that ceiling is increasing markedly.  The £3,000 limit will remain if a person is paid £30,000 or less.  Above that salary, it goes up on a graded scale, and by the time someone is earning £90,000 or more, £17,000 of tax debt can be collected via PAYE - so, £1,417 extra being deducted from your salary each month.

This is going to result in some pretty odd coding notices for payroll departments to operate, and some employees being a bit surprised when their net pay suddenly plummets in April.  Of course, they ought to be pleased, because in the old days they'd have had to pay the whole debt in a lump sum, but many people aren't going to see it that way, no doubt!

For what it's worth, where a taxpayer has the funds to just pay their tax bill, we almost always advocate doing it that way, rather than having it deducted via PAYE later.  Most people just find it confusing to have tax deducted via PAYE miles after the year it relates to.  So if you're in that position, do consider just paying the bill and moving on.

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£50,000 - an income threshold to think about if you've got kids

Income of £50,000 never used to be of any particular importance in tax terms - it just sat in the 40% tax band and nothing special happened when you reached that marker.  Now, it's the point where recipients of Child Benefit have to start giving it back.  If the higher earner in the household has income of £50k, they have to start returning the Child Benefit the household has received, and by the time they get to £60k they've had to give it all back.

How much you have to give back depends on how much Child Benefit your family receives, and of course that depends on how many children you have.  In the extreme case of having eight children, you have to repay so much that there's effectively a 100% tax rate in that £50k to £60k band - the combination of tax and the clawback of Child Benefit means that you don't keep a penny of that £10k of income!

If you think you're going to be there or thereabouts, and it fits in with your personal finances and retirement planning, you might think about about making pension contributions to reduce your income and let you keep more (or all) of your Child Benefit.  Charitable donations would achieve the same thing, though of course you no longer have the money in your own hands.  And there are one or two other things you could do.  In any case, if you're in that position you should have a think about it whilst there's still time before the end of the tax year.

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The Marriage Allowance - a (small) tax saving for (some) couples

From 6 April, there's a new allowance that will provide a small tax boost to some couples.  It will be possible for spouses and civil partners with income of less than £10,600 to transfer part of their tax-free personal allowance to their partner, if their partner is a basic rate taxpayer.  In other words, one of you must earn less than £10,600, and the other between £10,600 and £42,385.  The maximum tax saving available is £212.

You can't actually make a claim with HMRC yet, but you can register here to be told how to claim in due course:

https://www.gov.uk/marriage-allowance

There's no particular urgency to do so, though - you'll be able to claim any time in 2015-16.  Who knows how long the allowance will last, but in the meantime if you qualify you might as well take advantage.  It's of no benefit if you have your own limited company and your only income is your salary and dividends from the company, unfortunately.

www.fizzhq.com