Step 1Increasing your income

Lots of people are in debt because they don’t receive all the money they are entitled to.

Before you work out your budget, use this section to see if you can increase your business income and household income.

You may be able to claim benefits, tax credits or Universal Credit, get help from grants, get help with energy costs or find other ways of boosting your business and household income. We have divided this section up so you can see the different sorts of help available.

Checklist

Use this simple checklist to make sure you have done all you can to increase your income.

Look at ways to increase your business income: Make sure you have looked at ways you can increase the amount of money coming into your business. There may also be loans, grants and funding you can apply for.
Are your business customers paying you on time? It is important that your customers pay you on time to make sure you can pay your own bills and debts for your business and your home.
Get benefits and tax credits or Universal Credit: Make sure you are getting all the benefits, tax credits or Universal Credit that you should. Can you get help with your rent or mortgage payments, or a reduction on your council tax? Do you need extra help because of illness or disability?
If you are also employed, is your employer paying you at least the minimum wage? Not all employers pay what they should by law. Check you are being paid the right amount.
Are you paying too much tax? Are you getting all the tax reliefs and tax allowances that you can? Check this with HM Revenue & Customs.
Are others paying you enough? Should a former partner be paying child maintenance but they are not? If people are staying with you, are they paying enough to cover their keep? Check how much they are really costing you and ask them to pay more if necessary.
Do you have payment protection insurance? Have you taken out payment protection insurance to make payments to your creditors if you are unemployed or in financial difficulties?
Can you rent a room out? Do you have a spare room you could rent to a lodger to make some extra income?
Can you get an advance, a budgeting loan or help from your local council? Could you get a short-term advance, a budgeting loan or a budgeting advance from the Department for Work and Pensions (DWP) to help you pay for an essential item? Could you get help from your local council?
Staying on at school? You may be able to get help with the costs of your children staying on at school or college.
Can you cut your energy or water bills? Can you save money by using less energy or by switching to a different energy supplier? Can a trust fund help you with your energy or water bill or other costs? Can you cut your energy bills by adding insulation and heating improvements to your home?

Ways of increasing your business income

Enterprise agencies

Your local enterprise agency may be able to provide help with preparing a business plan or ways of improving your business. Search online for details of agencies in your area.
If you are a member of your local Chamber of Commerce, you can contact them for business advice.

Funding and grants

You can search for business finance, support, grants and loans using the Business funding and support finder. This will search for the help you need based on what your business does, the size of your business and where your business is located.

Enterprise Finance Guarantee

The Enterprise Finance Guarantee (EFG) can help your business get funding, for example when you can’t get a business loan because you have no business assets for it to be secured on.
You can use this money to invest in your business so it can grow and expand, helping to increase your business income. The lender you apply to will assess whether to give you a loan based on their own lending criteria.

Improving turnover and sales

You could call existing customers or target new ones to increase the amount of money coming into your business. Check to see whether it is worth paying for advertising to help do this.
A sale or a reduced rate may bring in new customers. A ‘loss leader’ can help to do this. A loss leader is when you offer goods or services without making a profit (or even making a loss) to help bring in more customers. The idea is that they will take other goods and services in the future, so you can make a profit.
If you have other businesses close by, you could consider working together to provide a ‘deal’ for customers. For example, if your business is a restaurant, you could offer a discount on meals if someone sees a film at the local cinema.

Review your prices

Regularly check that you are making enough profit on the goods and services you provide. You need to make sure that you are making enough money to pay your business outgoings and have enough left over to live on. Your prices should be set at a reasonable rate. They should be able to compete with any services and businesses in your area, but still make you enough profit.
Think about discontinuing certain lines or services which do not bring in much profit. This will help you concentrate on the things which have a higher profit margin. This could be existing goods or services, but you could also think about offering new ones.
Think about your trading hours. There may be certain times when you are usually busy and certain times when you are quiet. It may not be helpful to trade during quiet periods, but you could extend your trading hours when you are busier.
There may be whole parts of your business which are not as successful as other parts. Think about concentrating on the more profitable parts of the business. This may include stopping doing things that are not successful.

Professional advice

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

Late payments and bad debts

It is important to make sure all the money that is owed to you is paid on time. When customers buy goods or services from you but pay for them at a later date, this is known as getting ‘credit’ from you. ‘Credit control’ is a term used to describe how your business:

provides credit; and
collects money from your customers.

Good credit control procedures will make sure your business income is more stable, can help you plan better for the future and can help the business make a profit.

If someone owes you money and they are not paying you, you should speak to them to try to work out a solution. This may include:

arranging for them to pay in instalments; or
coming to an agreement if they are not paying the debt because they have a dispute with you about the invoice or the goods or services they bought.

If the person is only disputing part of an invoice, you should ask them to pay the part they are not disputing immediately. The rest of the money can be sorted out separately. Be careful not to harass the person who owes you money.

If you want more advice about recovering debts from other people or businesses, contact us for advice.

If you have not been paid money you are owed, and you are registered for value added tax (VAT), you may be able to claim back the VAT on the debt. You can do this when the debt is more than six months old and you have written it off in your accounts (decided you won’t ever get the money back).

Benefits, tax credits and Universal Credit

There are different types of benefits and tax credits which you might be entitled to. Universal Credit is now the main income-based benefit for people of working age and making a new benefit claim . Whether you can claim any of these benefits will depend on your circumstances.

You can see more information about many of these benefits at GOV.UK.

Some benefits are based on the National Insurance contributions you have paid. New Style Jobseeker’s Allowance and New Style Employment and Support Allowance are contribution based benefits that can be claimed along side Universal Credit. There are also contribution based pensions and maternity benefits. However, as a self-employed person, you may not have paid the correct type of National Insurance contributions to qualify for contribution-based benefits. Contact us for advice.

Other benefits including Universal Credit are means-tested. This means the amount of help you get depends on how much money you already have coming into your home. There are also limits on how much you are allowed to have in savings and still claim. These benefits are designed to ‘top up’ any income you already have. You do not need to have paid National Insurance contributions to claim them.

Universal Credit

Universal Credit has replaced the following means tested benefits and tax credits.

Income-based Jobseeker’s Allowance
Income Support
Income-related Employment and Support Allowance
Child Tax Credit
Housing Benefit
Working Tax Credit

Most people who make a new claim for these benefits will get Universal Credit. The only exceptions would be if you are entitled to receive a Severe disability premium (SDP) or meet the SDP conditions.

Universal Credit is made up of a standard allowance and additional amounts for things such as, having children, paying your housing costs or having a disability.

The amount of Universal Credit you receive will depend on your earnings.

You can use an online benefits checker such as the benefits calculator at www.turn2us.org.uk.

Universal Credit and being self-employed

If you are self-employed and claim Universal Credit (when you previously would have claimed Working Tax Credit), the Department of Work and Pensions (DWP) will assume you earn a minimum amount from your business. This amount depends on your circumstances and will affect the amount of benefit you can claim. You will also be expected to give the DWP details of your business income and outgoings each month. If you are not sure how this will affect you, contact us for advice.

New Style Jobseeker’s Allowance (JSA)

New Style Jobseeker's Allowance is for people working less than 16 hours a week who are looking for work. To claim you will need to have been credited with enough Class 1 National Insurance contributions in the last two full tax years. Unlike Universal Credit, New Style is not means tested so your savings and capital are not taken into account. You can claim New Style JSA on its own along side Universal Credit. Any New Style JSA you receive will be taken into account as income for Universal Credit.

New Style Employment and Support Allowance (ESA)

New Style Employment and Support Allowance has replaced Incapacity Benefit and Income Support for people who may be unable to work due to illness or disability. Unlike Universal Credit, New Style is not means tested so your savings and capital are not taken into account. To claim you will need to have been credited with enough Class 1 National Insurance contributions in the last two full tax years. You can claim New Style JSA on its own along side Universal Credit. Any New Style ESA you receive will be taken into account as income for Universal Credit .

Pension Credit

You can claim Pension Credit once you have reached the qualifying age. The amount you are entitled to depends on your income. There is an extra payment called Savings Credit if you or your partner are 65 or over. This rewards you for having modest savings. The amount you get will depend on how much money you have saved. You may also be able to get help towards your mortgage.

The Savings Credit part of Pension Credit will end for people who reach State Pension age on or after 6 April 2016. Some protection will be given to couples who were already getting Savings Credit on 6 April 2016.

Housing costs and Universal Credit

If you claim Universal Credit, the DWP will normally pay at least some of the interest on your mortgage if you took the mortgage out to buy your home. The rules about how much help you can get from Universal Credit are complicated. If you are not sure about whether you can claim, contact us for advice.

Our Mortgage arrears fact sheet has more information about how to deal with mortgage arrears.

This fact sheet covers the following areas.

Coming to an arrangement with your lender.
What to do if you can't afford your mortgage.
What if my home is worth less than the mortgage?
Second mortgages or secured loans.
What if my mortgage lender takes me to court?

Loan for Mortgage Interest

If you claim Income Support, Pension Credit, income-related Employment and Support Allowance or income-based Jobseeker’s Allowance, the Department for Work and Pensions (DWP) will normally pay at least some of the interest on the mortgage if you took the mortgage out to buy your home. This is called a Loan for Mortgage Interest. This is a loan and not a benefit. The rules about how much help you can get are complicated. Different rules apply depending on when you took out your mortgage and when you made your claim for benefit. If you are not sure about whether you are eligible, contact us for advice.

Housing Benefit

Most people who look to claim help with their rental costs will now receive Universal Credit. If you aren't able to claim Universal Credit, you may be able to get help with your rent by claiming Housing Benefit from your local council if you are on benefits or a low income. In certain situations, your Housing Benefit can be paid directly to your landlord. Contact us for advice.

The benefit cap

The Government has put a cap on how much you can receive in benefits if you and your partner are of working age but not working. This is known as the benefit cap. This applies if your combined income from certain benefits is over a set amount and means that the amount of Housing Benefit or Universal Credit you receive may be reduced.

This cap will not apply if anyone in your household receives particular disability-related benefits and some other pensions.

If you are paid Housing Benefit, the benefit cap will not apply for nine months if you (or your partner) have lost a job which you have held for a year or more and you have not been on certain benefits during that time. The cap will also not apply for nine months to people getting Universal Credit whose earnings have been over a set amount during the previous year. Contact us for advice.

If you are of working age and you rent your home from a council or housing association, your local council may reduce the amount of Housing Benefit they will pay you if they decide that you have more bedrooms than you need. This is commonly known as the ‘bedroom tax’. This does not affect some properties and people in certain situations. Contact us for advice.

Working Tax Credit

Working Tax Credit is paid to people who are in work but are on a low income, unless they are being paid Universal Credit instead. It is paid on top of your wages or drawings from your business, and is dealt with by HM Revenue & Customs (HMRC). You can claim whether you have children or not, but the hours you must work to be eligible will depend on your circumstances and age. For information, ring the Tax Credit Helpline on 0345 300 3900. Any new claim for Tax Credits will be usually mean that you receive Universal Credit instead.

Child Tax Credit

Child Tax Credit is paid to people with responsibility for children (under 16 or under 20 if the children are in full-time education or certain kinds of approved training). It can be paid whether you are in or out of work, unless you are being paid Universal Credit instead. The amount you will get depends on your income. Special rules apply to new arrivals in the UK. Contact us for advice. For information, ring the Tax Credit Helpline on 0345 300 3900. Any new claim for Tax Credits will be usually mean that you receive Universal Credit instead.

Support for council tax

Your local council runs a Council Tax Reduction scheme. Contact them for details of how to apply. If you live on your own you may qualify for a single person discount.

Questions about benefits

Working out which benefits to claim can be complicated. There are different ways of getting answers to your questions about benefits.

If you would like to speak to someone, contact your local Jobcentre Plus office or the Jobcentre Plus helpline on 0800 055 6688.

You can ask a local advice centre for help or you can contact us for advice.

You can use an online benefits checker such as the benefits calculator at www.turn2us.org.uk.

Other benefits

Some benefits are not means-tested and you don’t need to have paid any National Insurance contributions to claim them.

These include Child Benefit if you have dependent children. The amount of Child Benefit you receive may be affected by the High Income Child Benefit charge if you or your partner earns over £50,000 a year. If either you or your partner earns over £60,000 a year, the charge equals the amount of taxable Child Benefit. Special rules apply to new arrivals in the UK. Contact us for advice or call HMRC's helpline on 0300 200 3100.

People with disabilities can claim benefits such as Disability Living Allowance, Personal Independence Payment and Attendance Allowance, and their carers may be able to claim Carer’s Allowance.

If you are under 16, you can apply for Disability Living Allowance.
If you are between 16 and 64, you can apply for Personal Independence Payment.
If you are 65 or more, you can apply for Attendance Allowance.

If you currently get Disability Living Allowance, this will eventually be replaced by Personal Independence Payment. The DWP will let you know when you need to make a new claim.

If you are under 16, you can continue to claim Disability Living Allowance until you reach your 16th birthday. You will be invited to apply for Personal Independence Payment before your 16th birthday if you are living in an area where Personal Independence Payment is being rolled out. If you are not, you will be checked to see if you are still eligible to receive Disability Living Allowance.

Whether you can claim any of these benefits will depend on the nature of your illness or disability and the effect it has on you.

The new State Pension

You'll be able to claim the new State Pension if you're a man born on or after 6 April 1951 or a women born after 6 April 1953.

How much money you get in your State Pension depends on your record of making National Insurance contributions (NICs). You’ll usually need at least 10 qualifying years on your National Insurance record to get any State Pension. .In some cases it also depends on the NICs record of your husband, wife or civil partner.

You can get information about your own record by going to the GOV.UK website www.gov.uk.

Ask for a pension statement to find out how much State Pension you can get by going to the GOV.UK website www.gov.uk.

If you reached State Pension age before 6 April 2016, you’ll get the State Pension under the old rules instead.

If you need more help to find how much State Pension you might get, contact us for advice.

Help with health costs

You may be able to get help with the cost of prescriptions, dental treatment, sight tests, glasses and contact lenses, travel to hospital, wigs and fabric supports. The rules are different depending on whether you live in England or Wales.

Prescriptions are free for everyone in Wales. If you live in England, you may have to pay. Contact your local advice agency, your local Jobcentre Plus office or the Low Income Scheme helpline on 0300 330 1343 to see if you qualify for free prescriptions and help with health costs. If you cannot claim free prescriptions, you may be able to reduce the cost by buying a prepayment certificate.

Minimum wage

If you are also employed, check that you are being paid at least the national minimum wage. This usually goes up every year in October. The minimum wage you are entitled to depends on your age. If you think you are being paid too little, ring the Government’s Pay and Work Rights Helpline on 0800 917 2368 for further advice.

Tax

Everyone is entitled to a personal tax allowance (or tax-free amount), but there are all sorts of tax allowances and tax reliefs available. These depend on your age and personal circumstances.

You can still ask for tax allowances to be given to you for earlier years, even if you do not qualify now. Make these claims as soon as possible as there are time limits. If you think this might apply to you, check with your tax office or contact us for advice.

Read more about your entitlement to tax allowances and reliefs on the Low Incomes Tax Reform Group website. If you are still in doubt, contact HM Revenue & Customs on 0300 200 3300. Contact us if you have any questions.

Backdated tax allowances

Ways of increasing your household income

Money from other people

If you have grown-up children or other relatives living in your home, make sure they are paying enough towards the household expenses. Contact us for advice.
If you have children from a former relationship, you may want to claim child maintenance or see whether the maintenance you are getting can be increased. You will be able to keep all the child maintenance you receive, even if you are on benefits. You can find more information about child maintenance options on GOV.UK or by calling Child Maintenance Options on 0800 953 0191.

Money from insurance

Check whether your mortgage or any other loans are covered by payment protection insurance. If so, this may cover your payments if you have been made redundant or you are off work due to illness. If you are turned down by the company when you claim on your policy, you may be able to complain. Contact us for advice.

Renting out a room

Do you have a spare room in your home that you could rent out? You will need to check to see how this would affect any benefits you are claiming. Also check your tax position. Ask your tax office about the rent-a-room scheme. This allows you to receive rental income, up to a certain limit, tax-free. You will usually need your landlord’s or mortgage lender’s permission to do this, as your tenancy or mortgage agreement may not allow you to rent rooms out.

Working as a childminder

You may be able to work as a childminder in your home and still claim Income Support or Employment and Support Allowance. Some of your earnings are ignored and you are not treated as working full-time. The rules are different if you are on Jobseeker’s Allowance. Check with the Department for Work and Pensions (DWP) or contact us for advice.

Help from grants, advances and loans

Turn2us

Turn2us is a charity that helps people in financial need get access to benefits, charitable grants and other financial help. Check what benefits you may be able to get using the Turn2us benefits calculator and other advice about benefits, as well as a grants search tool, or ring the helpline on 0808 802 2000.

Check with your local council to see if you can get help with home improvements or a disabled facilities grant. This will depend on your income, whether you have a disability and what repairs need doing in your home.
If you are on Universal Credit, you may qualify for a short-term advance or a budgeting advance. Payments depend on your circumstances and there are guidelines on the type of items you are allowed to buy and who will qualify for help. Contact us for advice. If you are on Income Support, income-based Jobseeker’s Allowance, income-related Employment and Support Allowance or Pension Credit, you may qualify for a short-term advance or a budgeting loan from the Department for Work and Pensions (DWP).
The Social Fund provides maternity grants or funeral expenses payments for people on qualifying benefits. Contact us for advice.
If you are pregnant or have a child under four and you are on certain benefits, or you are pregnant and under
18, you may qualify for help with the cost of milk, fruit, vegetables and vitamins under the Healthy Start scheme. Contact the Healthy Start Issuing Unit on 0845 607 6823 to find out if you qualify for this scheme.
If you have no income or there is an emergency or disaster, you can apply for help from your local council’s welfare assistance scheme. See www.gov.uk to find your local council. In Wales, this is called the Discretionary Assistance Fund. Call 0800 859 5924 for more information. You do not have to be on benefits to apply but you can only get help with certain items. Contact us for advice.
Foodbanks: the Trussell Trust has set up foodbanks where you might get emergency food, if you can’t afford to buy what you need. See if there is a foodbank in your area on their website www.trusselltrust.org. Use the Find a foodbank near you search box. Other foodbanks have been set up, linked to the Independent Food Aid Network. You can get contact details for these foodbanks on their website www.foodaidnetwork.org.uk. Click on the link to the Map of Independent Food Aid Network Members. People at foodbanks may be able to suggest other kinds of help too.

The 16-19 Bursary Fund (if you live in England)

If you have children who are aged between 16 and 19 and are staying on at school or college, they may qualify for a bursary of up to £1,200 a year. This is only in limited circumstances, for example, if they are claiming Income Support or Universal Credit in their own name, or are disabled and on certain benefits. The school or college can also help with a bursary if the child is in financial hardship. For more information, contact the school or college.

Education Maintenance Allowance and the Assembly Learning (if you live in Wales)

If you have children who are aged between 16 and 18 who are staying on at school or college, they may qualify for an Education Maintenance Allowance (EMA) of £30 a week, depending on your household income. If your child is 19
or over, they may qualify for an Welsh Government Learning Grant if they stay on at college. Contact Student Finance Wales on 0300 200 4050.

Help with gas, electricity and water costs

If you are a pensioner or are on a low income, you may be entitled to a Warm Home Discount. This is a one-payment of £150 to help with your winter energy bills. You may be eligible to get the discount automatically if:
- you or your partner receive the Guarantee Credit part of Pension Credit; or
- you or your partner receive another qualifying benefit or Tax Credits, and you are identified by the government as living in a property with high heating costs.
See GOV.UK for full eligibility criteria and further information on the Warm Home Discount Scheme.
If you have reached pensionable age, you may be entitled to a lump sum each year called the Winter Fuel Payment. Contact the Winter Fuel Payments Centre on 0800 731 0160.
Can you cut down on the energy you use? For information on how to reduce your bills and make your home more energy efficient, see GOV.UK’s Find ways to save energy in your home website or call the helpline on 0800 098 7950.
Contact your supplier to find out what help they can provide.

Turn2us

Turn2us is a charity that helps people in financial need get access to benefits, charitable grants and other financial help. See www.turn2us.org.uk, which has a benefits calculator and other advice about benefits, as well as a grants search tool, or ring the helpline on 0808 802 2000.

You may be able to save some money by switching to a different energy 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 service for a list of authorised companies, or check the list on Ofgem's website.
If you have a closed energy account with an amount of credit still in it, contact the supplier to get this credit back. See the page Closed account balances - advice for consumers on Ofgem's website for more information.
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.
Can you make your water bill easier to pay? If you pay your water bill monthly, but over less than 12 months, ask your water company to reset your payments over the full 12 months. This will reduce the amount that you have to pay each month.
Can you get a cheaper tariff? Some water companies have a special tariff which can reduce the amount of your current water charges. Check with your supplier what types of tariff they offer.
Some energy and water companies have trust funds and support schemes that may be able to give you help to pay your 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.
If you are a single person, it could be cheaper to go on a water meter. If your water bills are already high on a water meter and you are on certain benefits, you may be able to get help through the WaterSure scheme. In Wales, you may be able to get help through the WaterSure Wales scheme.

Next steps

You are now at the end of Step 1. We hope this section has helped you get all the extra money and other help you can.

Your next step is Step 2: Your business and household budget. Doing a budget will help you decide what your options are for dealing with your debts. This section will give you lots of useful guidance and tips on working out your budget.