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Step 2Your business and household budget

A business and household budget is an essential tool to help you tackle debt problems.

Our budget tool My Budget will help you work out a detailed budget. You can use our budget tool if you are a sole trader, a partner in a partnership or a director of a limited company.

You can then see how much you have left over and this will help you work out the best way to deal with your debts.

Once you have entered all your information into My Budget you will be able to save or print off your budget.

Working out a budget sheet using My Budget is easy, but you can also use these Step 2 pages if you need any extra help. Use this section to guide you through filling in your budget.

  • Use the first part of this step if you are a sole trader or a partner in a partnership. This will help you work out how much you have coming into your business and what is going out. You can then see how much the business can afford to pay you (your drawings). This is called Your business budget.
  • You should then fill in Your personal budget using the second part of this step. If you are a director of a limited company you should only fill in Your personal budget. This will help you see how much is left over so you can work out the best way to deal with your debts.

Are you filling in the right budget?

If you are a sole trader, a partner in a partnership or a director of a limited company you can use the advice and guidance in this section to fill in My Budget. If you own one or more buy-to-let properties, you can also use My Budget to work out a budget for each property.

Limited company budget sheets

If you are a director of a limited company, we advise you to ask your accountant for help to work out a company budget. This is because the company is a separate legal entity to you and its finances should be separated from yours. You should then be able to work out how much the business can pay you. This will help you to fill in My Budget based on your household spending.

Checklist for business budget

Use this simple checklist to make sure you take the right steps to work out your budget.

  • Work out a business budget sheet. Follow the advice and guidance in this section to list all your income and outgoings so that you can see how much the business can afford to pay you (your drawings).
  • Can you increase your business income? Before you start to look at Your business budget, check to see if there are ways of increasing your business income.
  • Can you cut down on your business outgoings? You might be able to cut down on some of your business outgoings by budgeting better or shopping around for the best deal.
  • Splitting business and household costs. There are some costs you may have for your business and for your home. This can include things like travel and phone costs. Remember to work out how much of the cost is for business use and how much is for household use.

Working out your business budget

Working out a business budget is important because it helps you:

  • see how much money is coming into your business;
  • see how much money you are spending on business costs;
  • work out roughly how much income tax, National Insurance and value added tax (VAT) you will have to pay;
  • see how well your business is doing and where you may be able to cut costs;
  • decide what you can really afford to draw (take) from your business each month;
  • plan your personal budget around how much you are going to draw from your business; and
  • work out affordable offers to your creditors if you think this is the best way to deal with your debts. 

If you have multiple businesses or buy-to-let properties, you can use My Budget to create a budget for each business and property.

Why do I need to fill in a business budget?

  • Once you know how much you have left over to pay your creditors, you will be able to decide your best option for dealing with your debts.
  • You should save or print a copy of your budget so that you can keep track of how you spend your money.
  • If your circumstances change, you can log back into My Budget and update your information. 

If you have problems using My Budget, contact us for advice.

Working out your business income

  • In My Budget, enter the income for your business.
  • Use your business accounts, books and bank statements to work out how much money you have taken for sales over the last three months. This will help you work out what your average monthly business income is, as for most businesses income is not the same every month. Do not include money for work you have done or things you have sold but have not yet been paid for. Only include money you have actually received.
  • Divide this total by three to get an average for each month.
  • If your receipts or takings go up and down a lot over the year, you may need to work out the average over a longer period, for example, 12 months. This could be because your business is seasonal.
  • Make sure you use a period of time that reflects the current income of your business.

Tax returns

We would not normally recommend you use your last tax return to work out these figures. This is because your tax return figures are usually over 12 months old. Also, the figures you work out for income tax, National Insurance and VAT on your budget are only estimates. They should not be used to complete the tax returns you send to HM Revenue & Customs (HMRC) .

Security over business assets

Some creditors, such as banks, may ask for security over your business assets. This could mean you don’t have the right to sell the assets yourself. If you can’t pay the creditor, they may go to court to take these assets to reduce the amount you owe them. This means you could struggle to keep trading if the assets are essential to your business. If you are not sure whether you have given security over any business assets, contact us for advice.

Working out your business outgoings

Filling in the Your business budget part of My Budget will help you identify all of the costs of running your business. At this stage, don’t include any debts, arrears or credit payments.

The Your business budget section in My Budget includes the following areas.

  • Fixed costs such as business rent and business rates.
  • Variable costs such as business utilities, business travel and business phone costs. 

What if I am not sure how much to include?

In this section, we give you hints and tips on:

  • how to work out the right amount to put in your business budget for your regular bills and payments;
  • how to work out the right amount to put in your business budget for any variable costs you might have; and
  • how you might be able to reduce some regular bills and payments.

​Will my creditors think my business outgoings are reasonable?

Many of the figures in the Your business budget section of My Budget will be based on your regular bills or direct debits and standing orders from your bank account. You might not have much control over some of these amounts. Your creditors know that this is the case and it is important that the amounts you put in your business budget are based on your true spending.

  • Be careful and be realistic: Do not include figures that are less than you are really spending. If your figures on your business budget are too low, this will mean that any payment arrangement that you agree with your creditors will be higher than necessary and you will find it hard to keep to it. 
  • Be sensible about your spending: If your creditors do not think that the amounts are reasonable, this will mean they are less likely to agree to reduced payment offers. If you are not sure, contact us for advice.
  • Give reasons if your spending is high: Your business outgoings may be very different to another business, even if that business offers the same service or trade. Make sure you include everything you are spending. If you think that any of your business outgoings might be high, it is important that you tell your creditors the reason why your spending is higher in this area. You can write this information in the additional notes section of your budget or put this information in the letter that you send to creditors with your budget.

Types of business outgoings

Fixed costs

Fixed costs are those that are the same amount each month, for example, business rent and business rates.

Business rent

If you pay business rent every three months, divide the amount by three to work out how much the rent costs each month. You may find it easier to budget by paying the rent each month. You can ask your landlord or the agent about this. Otherwise, work out the monthly rent and put this amount aside every month so you can pay the bill every three months.

Business rates

These are fixed each year and are normally paid in ten monthly instalments. You can ask your council if you can pay over 12 months to help you budget.

Business water rates

These are also fixed each year. You can ask if you can pay each month instead of once a year. If you have a water meter, bills are normally sent out every three months. Add up the last 4 bills and divide the answer by 12 to work out the cost each month. Since 1 April 2017 in England, you may be able to shop around for your water and wastewater retailer.  See the Open Water website for more information about shopping around for water and wastewater services.

Business loans

Your loan repayments are usually fixed. However, if you are borrowing on a variable interest rate, your repayments may change if the bank’s interest rate changes. If the loan is not with the same bank where you have your business bank account, and is not secured on your property, it may be best to treat it as a credit debt.

​Variable costs

Variable costs change depending on how much trade you have done. They may include stock and employees’ wages. Do not include your own living costs or your drawings (money you take from the business) here. These are included in the Your personal budget section of My Budget. If you work from home, you may want to include a proportion of your household costs (for example, heating and lighting costs).

Use your receipts, books and statements to work out how much you have spent on variable costs over the same number of months you used to work out your average income. Divide the total variable costs by this number of months to work out the average cost each month.

Business gas, electricity and phone bills 

Business gas, electricity and phone bills are normally sent out every three months. Add up the last 4 bills and divide the total by 12 to work out the cost each month. You may find it easier to budget by paying your bills every month.

If you work from home, you may want to include a proportion of your household gas, electricity and phone bills in the Your business budget section of My Budget. Contact us for advice.

Travel costs

If you have a vehicle that you use for business only, you can put all the costs in the Your business budget section of My Budget (for example, road tax, insurance, repairs, services and fuel). If you use your vehicle for personal or social journeys as well as for business, you will have to divide the costs between your business budget and your household budget to show how much you use for each. You should include fuel for journeys to and from your home and business in the Your personal budget section. Work out your transport costs each month by adding up the yearly costs and dividing this by 12. Remember to put money aside for road tax, insurance, repairs, services and so on. You can then make sure that you are able to afford the ongoing costs of running a vehicle.

Value added tax (VAT)

The rate of VAT depends on the types of goods or services you supply. The rates can change depending on decisions the Government makes. You can use our Tax allowances and amounts fact sheet to find out what the current rate of VAT is.

If your business does not have yearly sales that add up to the registration level shown on the Tax allowances and amounts fact sheet, you do not need to be registered for VAT. If you are already registered for VAT and you want to be removed from the register, you will need to show that your turnover will be less than the deregistration level (shown on the Tax allowances and amounts fact sheet) over the next 12 months. You could use your budget to show this to HMRC.

Use your VAT return for the last quarter to work out the average VAT you pay each month. Unless you do a lot more (or a lot less) business from one quarter to the next, this is usually a reasonably good guide.

If you need help understanding VAT, have problems working out your costs each month or have any other questions, contact us for advice.

Limited companies

If you are a sole trader or in a partnership, you are taxed on your profit before drawings, not how much (or how little) you draw from the business. This is different for limited companies. Contact us for advice.

Drawings

When you take your business’s average costs each month from its average income each month, this will tell you what your profit is before tax. To work out how much you can afford to take from the business each month, My Budget will work out roughly how much tax and National Insurance you will have to pay. You should set aside this amount for when you get your next bill.

Many self-employed people have difficulties paying their income tax and National Insurance because they haven’t budgeted for it as a cost before they take money out of the business. If you do not account for income tax and National Insurance, this may give the false impression that you earn more from your business than you actually do.

Self-assessment – income tax

Under the self-assessment scheme, you have to keep proper financial records, fill in a tax return and make payments during the year (known as payments on account). It is important to know how to fill in the return and to know when your returns need to be handed in. You may have to pay a penalty if you are late handing in your returns or late paying income tax. If you are unsure, contact us for advice.

My Budget will help you work out your monthly income tax and National Insurance. If you have problems working out how much income tax and National Insurance you have to pay, or you have any questions about self-assessment, contact us for advice.

When you have used My Budget to work out your income tax and National Insurance, you will be able to see how much money you can take from your business to add to your household income.

Before you work out whether this is enough to cover your personal outgoings, you should see if there are ways to increase your business income or reduce your business outgoings. If there is nothing left for drawings, contact us for advice.

Is my business viable?

Your business is viable if:

  • you can pay all of your business outgoings on time; and
  • you can take (draw) enough money to live on.

Your business is also classed as viable if you have a lot of assets which, if sold, would pay off all your business debts. If you think your business is not viable, contact us for advice.

Help with managing your money and budgeting for your business

This section gives some useful hints and tips to help you make the right decisions.

Planning ahead

Business income and outgoings can vary from month to month. This can depend on a number of things including the time of year and competition from other businesses. There are also unexpected events, such as the loss of a major customer, that could affect your business income. These things can make it hard to pay bills on time or repay debts.

The money that comes into your business is called cash flow. Filling in the cashflow forecaster provided by Start Up Loans Company will help you estimate your income and outgoings for the future. The Start Up Loans Company provides Government funded loans and business mentors. It is designed to help support people with viable business ideas but who have no access to finance. A cashflow forecaster can help you see when you are likely to experience financial difficulties.

It is important to set aside some of the money from when your business income is higher, to cover bills and debts when business income is lower. You could open up a second business bank account to keep this money separate from everything else. Setting up a business overdraft can also help you cope with differences in business income over the year.

Business bank accounts

It is important to set up a business bank account when you are self-employed. This will help you to keep your business income and outgoings separate from your household income and outgoings. Set up an account with a bank that you don’t have any existing debt with. This will strengthen your position if you have difficulty paying your existing bank debts in the future. By keeping things separate, it will help you to keep records that your accountant will need to fill in tax returns each year. A second business account can help you set aside money each month for your income tax, National Insurance and VAT bills. You could also put money in this account based on the results the cashflow forecaster gives you to make sure that if your business income goes down, you still have enough to pay your bills and any debts. See more about avoiding cashflow problems on GOV.UK. If you have difficulty setting up a business bank account, contact us for advice.

Reducing your business outgoings

You can look at your fixed and variable costs to see if anything could be reduced. This could help to increase the amount the business can afford to pay you (your drawings).

Fixed costs

Although these costs are usually the same each month, there are still ways of reducing them or managing them more easily.

Business rent

You could try to negotiate better terms with your landlord on your business rent, especially if the property is likely to be difficult to rent out to someone else. If your landlord will not reduce the rent, you could think about whether to end the lease or pass the lease on to someone else and look for cheaper premises.

It may be that you don’t need business premises to trade. Think about whether you could trade from home to save you money on business rent, business rates and utility bills.

Business rates

You may qualify for a reduction on your business rates bill depending on where your business is and what type of business you are. The rules can be complicated and you would need to contact your local council to find out what you are entitled to. Contact us for advice.

Professional advice

Always get professional help from your accountant or business adviser before making any drastic changes to your business.

Variable costs

The variable costs you have will depend on what type of business you have, and how much trade you have done. This may include things such as the cost of buying stock and materials, and travel costs.

Business gas, electricity and phone bills

You may be able to shop around for better deals on these types of bills. Check to see if you are tied into a contract as there could be penalties if you try to leave a contract early. If you are not tied in, you can compare the prices of several suppliers. There are independent price-comparison websites that can help you find the best deal. Always check the terms and conditions to see what would work best for your business.

You can also ask other suppliers, such as those supplying you with goods, for better prices. Or you could consider using cheaper suppliers. Ask for recommendations if you are considering changing your supplier.

Other costs

Check to see if you are paying too much for your accountant’s fees. Ask other businesses in the area for recommendations and compare prices to see what would work best for your business. If you pay for advertising, consider the added business this brings in. If your current way of advertising is not bringing in a lot of business, consider changing the way, and how often, you advertise.​

Next steps

You are now at the end of Your business budget. Don’t worry if your budget is only rough at this point. If you need any extra help, contact us for advice. You can use your drawings (the money you can take from your business) to start Your personal budget. Use the checklist that follows to see what you need to think about when doing a personal budget. Doing the personal budget will help you decide what your options are for dealing with your debts.

Checklist for personal budget

Use this simple checklist to make sure you take the right steps to work out your budget.

  • Can you increase your household income? Before you start to look at Your personal budget, check to see if there are ways of increasing your household income.
  • Can you manage your money better? You might be able to cut down on some of your household spending by budgeting better or shopping around for the best deal.
  • Work out a personal budget: Follow the advice and guidance in this section to list all your income and outgoings so that you can work out the best way to deal with all your debts.
  • Deal with any priority debts you have before deciding what to do about your other debts: Once you have worked out your income and outgoings, it is time to look at how you are going to deal with your debts. Start with any priority debts you have as these are the ones you need to deal with first.
  • Decide on the best way to deal with your non-priority debts: Once you have worked out your income and outgoings and any payments that you need to make to priority creditors, you can decide on the best way to deal with your non-priority debts.

​Working out your personal budget

Working out a personal budget is important because it helps you:

  • see how much money is coming into your household;
  • see how much money is going out;
  • see how much money you have left;
  • work out the best way to deal with your debts;
  • work out affordable offers to creditors if you think this is the best way to deal with your debts; and
  • plan your future spending.

Why do I need to fill in a personal budget?

  • Once you know how much money you have left over to pay your non-priority creditors, you will be able to decide your best option for dealing with your debts.
  • You should save or print a copy of your budget so that you can keep track of how you spend your money. 
  • If your circumstances change, you can log back into My Budget and update your information.

If you have problems working using My Budget, contact us for advice.

Working out your household income

In My Budget, enter the income for you and your household.

Include the following.

  • Your earnings from your business (or your wages after tax if you are the director of a limited company).
  • Wages and salary after deductions (normal take-home pay) of your husband, wife or partner (not your business partner). Only include overtime if this is regular. Check with your HM Revenue & Customs that you have the right tax code.
  • Benefits and tax credits, including Child Benefit.
  • Contributions from other people who live in your home, such as grown-up children and elderly relatives. If they have little or no income and cannot claim benefits and so are unable to help with household costs, they will be counted as Other dependants. If they have enough income to support themselves, they will be counted as non-dependants. Make sure that any non-dependant is paying enough towards the household expenses and don't forget to include any extra housekeeping costs for them.
  • If you are on a low income, you may be entitled to benefits that you are not claiming.
  • If you are sick or disabled, you may be able to claim a range of disability benefits. Contact us for advice.

Your assets

Assets are things like savings or the value of property, such as your home or car. You don't have to list your assets. Also, creditors will not usually expect you to sell your home and essential household items to pay off your debts. Use the Your assets section of My Budget to show you have considered whether you can use assets to make lump-sum payments off your debts.​ If you are thinking about using any of your assets to pay off your debts, you may have other options. Contact us for advice.

Working out your household outgoings

Filling in the Your personal budget part of My Budget will help you work out how much money you need to spend on basic living expenses. At this stage, don’t include any debts, arrears or credit payments.

My Budget is split into different areas of spending.

  • Your household outgoings – fixed – this includes your mortgage or rent, and bills for utilities like water, gas, and electricity. It also includes travel, care and health costs, school costs, pensions and insurances, and professional costs.
  • Your household outgoings – flexible – this part includes spending on communications and leisure, food and housekeeping, and personal costs. 
  • Your savings – If you have money left over after meeting your essential living costs, it might be a good idea to pay a regular amount into a savings account.

What if I am not sure how much to include?

In this section, we give you hints and tips on:

  • how you might be able to reduce some regular bills and payments; 
  • how to work out the right amount to put in your personal budget for your regular bills and payments; and
  • how much is reasonable to spend on things like housekeeping and clothing.

Will my creditors think my household outgoings are reasonable?

Many of the figures in the outgoings part of Your personal budget will be based on your regular bills or direct debits and standing orders from your bank account. You might not have much control over some of these amounts. Your creditors know that this is the case and it is important that the amounts you put in your budget are based on your true spending.

Some outgoings are more flexible. For example, how much you spend on food, clothing or phone calls will be different depending on your circumstances. You need to think carefully about the amounts that you put in your budget for outgoings like these.​​

  • Be careful and be realistic: Do not include figures that are less than you are really spending. If your figures on your personal budget are too low, this will mean that any payment arrangement that you agree with your creditors will be higher than necessary and you will find it hard to keep to it.
  • Be sensible about your spending: If your creditors do not think that the amounts are reasonable, this will mean they are less likely to agree to reduced payment offers. If you are not sure, contact us for advice.
  • Give reasons if spending is high: If you think that any of your outgoings might be higher than a typical household, it is important that you tell your creditors the reason for this. You can write this information in the additional notes section of your budget summary or put this information in the letter that you send to creditors with your budget.

Monthly household outgoings: fixed costs​

This section includes regular bills, you may not have much control over what you spend.

Home and contents

Rent

Include your full rent payments here. Write any Housing Benefit you get as income in the Your personal budget section of My Budget. Don’t write your rent arrears in the Your personal budget section. There is space to include any rent arrears payments later on.

Mortgage

Include your full mortgage payments here. Write any Loan for Mortgage Interest payments, or Universal Credit housing cost payments, in the Your personal budget section of My Budget. Don’t write your mortgage arrears in the Your personal budget section. There is space to include any mortgage arrears later on.

Council tax

Check whether you can claim Council Tax Reduction. You normally pay council tax in 10 monthly instalments, but councils in England must allow you to pay over 12 months if you prefer. Some councils will accept payments every week or every two weeks. If you live alone, you will be entitled to 25% off your instalments. The amount you include in this section should be your full council tax. Include any Council Tax Reduction you get as income in the Your personal budget section of My Budget. There is space to include any council tax arrears later on.

TV licence

See the GOV.UK TV Licence webpage to find out how much a TV licence costs. Divide the cost of the licence by 12 and include this amount in your budget if you have to pay for a TV Licence. If you don't have a TV licence or have fallen behind with your payments, you will need to come to an arrangement to pay because you can be fined for not having a licence.

Utilities

Gas and electricity​

If you are on a regular payment plan for your gas and electricity, include the amount you are paying every month in the Your personal budget section of My Budget. If you are paying your bills quarterly (every 3 months), work out the total cost of your last 4 bills and divide this by 12 to find out the cost each month. Gas and electricity cost less if you pay by monthly direct debit from a bank account.

If you are behind with any energy payments, only include your normal energy payments in the Your personal budget section of My Budget. There is space later on to include details of any payments you are making towards any arrears.

Water

Water supply

Most water companies will accept payments every month, every week or every two weeks. Only include your ongoing water bills here. Include any water-rates arrears with your other non-priority creditors. You cannot be disconnected for water debt, but it is important to keep up with your ongoing bills so the debt doesn't get any bigger.

Care and health costs

Childcare costs

This might include childminder fees, nursery fees and the cost of after-school clubs. If you have extra costs because your child is ill or disabled, or if you receive Disability Living Allowance or the Personal Independence Payment because your child is disabled, contact us for advice about how to show these costs in your personal budget.

Adult care costs

Make sure you include any extra costs you have if you or your partner are ill or disabled. If you would like help with how to show these costs in your personal budget, contact us for advice.

Child maintenance or child support

This means maintenance which you or your partner pays to someone else, not maintenance you or your partner receives. Include voluntary payments and any payments ordered by the court, the Child Support Agency (CSA) or the Child Maintenance Service (CMS).

Transport and travel

Include the costs of travel to work, school and for shopping. This should take into account using public transport, buying travel season tickets and all the costs of running a car or motorbike if you have one. If you have extra travel costs because of a disability or because you live in a rural area, use the additional notes section in your budget summary to explain to your creditors what these are.

What if we have more than one vehicle?

If you have a good reason why you need more than one vehicle, it is very important to explain this to your creditors. For example, creditors are likely to be understanding if you need two cars because:

  • someone in your household has a disability;
  • you and your partner need to travel to separate workplaces; or
  • you live in a rural area where there is little or no public transport.

If you have more than one vehicle, use the additional notes section in your budget summary to explain why this is.

​Hire purchase or conditional sale goods and cars

In this section, include payments for any goods you have bought under hire purchase or conditional sale agreements. If you need a car for work or for mobility reasons (and you have bought the car using a hire purchase or conditional sale agreement), you will need to include these payments in the Your personal budget section of My Budget or you may lose the car. If you are behind with these payments or if you have a Motability car, contact us for advice. See our Hire purchase debt fact sheet.

School costs

Include spending on school uniforms, after-school clubs and school trips. The cost of school meals aren’t included in this section. Remember that your council may help with the cost of school clothing. This will depend on your circumstances.

Pensions and insurances

Pension payments

Only include what you actually pay into your pension yourself. Do not include any payments that have been already taken out of your wages by your employer..

Other essential spending

You can use this section to list other fixed spending that is not already listed in your personal budget. For example, if you belong to a church or other religious group, you may wish to give a regular contribution to them. If you are paying a magistrates' court fine and are up to date with the payments, you should add it in this section.

Magistrates' court fines

These are priority payments and you should include them in your personal budget. If you are behind with a magistrates' court fine, contact us for advice. They are different from county court judgments (CCJs), which you should include with non-priority debts.

Monthly household outgoings - flexible costs

Think about whether you can reduce your spending on these sorts of costs, but make sure any reductions are realistic.

Communications and leisure

This includes your home phone and any mobile phones you have. Only include your ongoing bill. Don't pay more than you need to for your phone.

Hobbies, leisure or sport

This might include clubs, pubs, eating out, sports and gym membership. Be careful about how much you spend on these things. If you need to cut back, these are areas you might look at.

Gifts

Don’t forget Christmas, birthdays and charity donations.

Food and housekeeping

You will see that housekeeping covers lots of different items, including food, cleaning materials, school meals, meals at work and so on. Make sure you include any extra costs you have because of an illness or disability. For example, you might have a special diet which means you spend more on food. Don't forget to include housekeeping costs for any other dependants who are included in your household.

School meals and meals at work

Remember, you will save money if you take a packed lunch to school or work. Check to see if you can claim Income Support, income-based Jobseeker's Allowance, income-related Employment and Support Allowance or Pension Credit. If so, you can claim free school meals. You can also claim if you receive Child Tax Credit, work less than 16 hours a week, and your income is below a set amount. If you get Pension Credit (Guarantee Credit), you can claim free school meals. If you get Universal Credit, you can claim free school meals in England. Contact us for advice.

House repairs and maintenance

Don't forget routine house repairs, repairs to washing machines, maintenance contracts and so on.

How much do I have left to pay my creditors?

My Budget helps you to work out payments to both your priority creditors and your non-priority creditors.

You should work out offers to priority creditors first. This is because they have stronger powers to get their money back. You must deal with them first before you work out what to do about your non-priority creditors.

Working out what to pay towards your priority debts

Once you have worked out what to pay your priority creditors, you will need to contact them to make an arrangement. Visit Deal with your priority debts for advice on how to negotiate with your priority creditors.

When you have agreed a priority debt repayment, go to the Your debts section of My Budget and update the debt with details of the arrangement you have in place. My Budget will add up all your priority debt repayments for you. If you have no money available to pay your priority debts, contact us for advice.

Decide on the best way to deal with your non-priority debts

Now you have worked out your income and outgoings and any payments that you need to make to your priority creditors, you need to look at all your options for dealing with your non-priority debts.

If you decide the best option for you is to try to come to a payment arrangement with your creditors yourself, the next section explains how to work out your offers of payment.

Working out offers of payment to non-priority creditors

Once you have worked out how much you can afford to pay off your priority debts, see what money you have left over for your non-priority debts. My Budget will work this out for you. If you have some money left, My Budget will divide up the money between your non-priority creditors. This is worked out on a pro-rata basis. This is how the court would do it and means all your creditors get a fair share of the money you have available.

Small offers

Don't worry if your offers look very small. Your creditors would rather you pay a small amount regularly than make promises you can't keep to.

What to do next

If you are not sure about what to do next, or about the best option to deal with your debts, contact us for advice.

No money left to pay your priority debts?

If you have no money left to pay your non-priority creditors, you still have options.

What if I already have a county court judgment?

You should include this debt with your non-priority debts and work out the offer of payment in the same way. When you add a debt to My Budget, you can select if there is a county court judgment (CCJ). If there is a CCJ, you can enter the amount the court has ordered you to pay. If you do not enter details for what the court has ordered you to pay, My Budget will show you how much a pro-rata offer would be to this debt. If the pro-rata offer is less than the amount the court has ordered you to pay, you may need to apply to the court to reduce the amount. This will mean you are treating all creditors fairly and you are not paying one creditor more than you can afford.

If you need to reduce the amount that you have to pay on a CCJ, contact us for advice.

Are your household outgoings more than your household income?

If your outgoings are more than your income, you should look to see if you can increase your income or reduce your outgoings.

If your outgoings are still more than your income after doing these things, contact us for advice.

Help with managing your money and budgeting for your household

This section gives some useful hints and tips to help you make the right decisions.

Planning ahead

When money is tight, it is very hard to stick to repaying debts when an important bill needs paying or the car or house needs an urgent repair. You can spread out these payments and make budgeting much less stressful if you regularly put a bit of money aside to pay for expenses such as these.

Christmas, birthdays and holidays also put a big strain on your personal budget. Think about opening a savings account or joining a credit union. If you join a credit union and start saving with them, you will also be able to apply to borrow money once you have proved you are a reliable saver. Check the MoneyHelper website for information about credit unions.

Think about opening a budgeting account

Sometimes it is easier to cope with paying bills if you open a separate bank account. You can pay regular amounts into this account to help you plan ahead and keep up with your regular bills. Setting up direct debits or standing orders will mean that regular payments you have to make can be automatically taken out of your account.

Find the easiest way to pay your TV licence

Paying for your TV licence is a priority. This is because you can be fined in the magistrates’ court for not having
a licence. If you don’t pay the fine set by the magistrates’ court, this can lead to bailiffs calling, or you could even go to prison.

As well as having the fine to deal with, you will still need a TV licence. You will get 50% off your TV licence if you are registered blind. If you are over 75, check if you can get a free TV licence. There are different ways of paying for a TV licence. Work out which one will suit you best.

  • You can use the TV Licensing savings card to save towards your next licence. You can pay in small, manageable amounts, online, by text or at PayPoint outlets in shops. To apply for a TV Licensing savings card, call 0300 555 0281.
  • You can pay for your TV licence by instalments either every three months or every month by direct debit from your bank account. Contact TV Licensing on 0300 790 6115.
  • A TV Licensing payment card allows you to make payments towards your licence weekly or monthly. You can only use the scheme for colour licences. Contact the payment card helpline on 0300 555 3456 or see the TV Licensing website.

Help with gas and electricity bills

It is very important to budget for gas and electricity bills. Your energy company should offer you different payment options and budgeting schemes to suit you. You can ask to pay your bills every week, every two weeks or every month.

If your heating bills are very high, call 0800 098 7950 or see GOV.UK’s Find ways to save energy in your home website for information on how to reduce your bills and make your home more energy efficient . You can also visit the Energy Saving Trust website to get information on grants, help with energy costs and how to save money on heating bills. In Wales, you can also apply for free home improvements through the Nest scheme. Contact Nest on 0808 808 2244 or check what energy grants and help you can get on the Nest website.

Getting the best energy deal

You might be able to save some money by switching to another supplier. This may work out cheaper, particularly if you have both gas and electricity from the same supplier. If you owe money to your energy supplier, you may not be accepted by a new supplier but you should be allowed to switch if you have a prepayment meter and owe less than £500. There are a number of independent price-comparison websites that can help you find the best deal. Contact the Citizens Advice consumer helpline for a list of authorised companies, or check the list on Ofgem's website.

Complaining about your energy supplier

You can complain to the Energy Ombudsman about a billing or transfer problem.

Help from gas and electricity companies

Some energy companies have set up trust funds that may be able to help you pay your energy bills  if you are in financial difficulties. Ask your energy company if they run a scheme or contact us for details. Get information about trust funds and support schemes you can apply to for financial help by going to the Auriga Services website www.aurigaservices.co.uk. Click on the link to the Help with Water & Energy booklet at the top of the page. If your supplier does not have a trust fund, you can apply to the British Gas Energy Trust for help, even if you are not a consumer of British Gas.

You may be able to get a grant or loan to help with insulation, draught proofing, central heating and other energy-saving measures through the Affordable Warmth Obligation. Check with your supplier.

Are you paying too much for your phone calls?

Check your phone contract is the best you can find. You may be able to make big savings if you switch phone companies. Another way to cut costs is to use an ‘override provider’. You won’t have to change your phone line. By simply dialling a number before the phone number you are calling, you could cut the cost of daytime calls and calls to mobiles. Even if you don’t want to change your phone company, there are other ways to cut down on your phone bills.

  • Pay by direct debit.
  • Use the internet. If you have access to the internet, you may be able to talk for free using software such as Skype.
  • Check your contract. Are there extras such as voicemail that you don’t really need? If you have an expensive package that allows you to make unlimited calls at any time, do you really need it?
  • See if your phone company has a social tariff. This may be helpful if you are on certain benefits and only use your phone occasionally.
  • See if you can switch to paperless billing. If you agree to get your bills online, you could save some money.

An outstanding bill

If you have a bill that you cannot afford to pay and you want to keep the phone line, ask your phone company if you can pay by instalments. Your phone company may be more likely to agree if you set up a monthly payment plan, perhaps by direct debit. They may also agree to let you have only incoming calls for a short time to help reduce your bills. When you have cleared your debt with the phone company, you may be able to go back to your normal phone package.

Disconnected phone?

If you have been disconnected, treat the bill as a non-priority debt.

Help with your water bills

You may be able to reduce your water bill or get help paying water debts in the following ways.

  • Most water companies have trust funds and may be able to help you pay your water bills if you are in difficulty. Get information about trust funds and support schemes you can apply to for financial help by going to the Auriga Services website www.aurigaservices.co.uk. Click on the link to the Help with Water & Energy booklet at the top of the page. If your supplier does not have a trust fund, you can apply to the British Gas Energy Trust for help, even if you are not a consumer of British Gas. If you do not have access to the internet, contact us for a copy.
  • Water meters only charge you for the water you actually use and this could make your bills cheaper. Ask your water company for advice or use the water-meter calculator on the Consumer Council for Water's website. If you would prefer a water meter, but your supplier tells you that one cannot be fitted, you can ask your water company to be billed for an assessed charge.  This may be cheaper than what you usually have to pay.  Read  more about an assessed charge or contact your water company for more information.
  • If you are on a water meter, receive income-based benefits and meet other conditions, you may be able to get a water bill that is less than you normally pay.  There are two schemes that can reduce your bill: WaterSure and WaterSure Wales. Read more about WaterSure or WaterSure Wales.

Next steps

You are now at the end of Step 2. Working out your budget will really help you deal with your debts, so we hope you found this section easy to follow. Don’t worry if your budget is only rough at this point. If you need any extra help, contact us for advice.

Don’t forget to update your budget after following the advice in Steps 3 and 4. You now need to go to Step 3 Dealing with your priority debts. Use the list at the start of this section to check whether you have any priority debts. If you don’t have any priority debts, you can skip Step 3 and move straight to Step 4 Dealing with your non-priority debts. If you do have priority debts, this section will explain the powers your creditors have to make you pay. It also gives you advice on how to deal with your debts.