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Eastbourne Citizens Advice BureauFinancial Literacy

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This unit covers the main areas of expenditure that can be incurred by an average household.

Living independently means managing your finances and dealing with the possible complications.

It is useful to have an insight into how bills and expenses function and the consequences of not keeping your finances in order.

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RENTUsually the largest single expense is housing costs which take the form of either rent or, when buying your home, a mortgage.

Rent is normally a fixed amount paid at a set time either weekly or monthly. Most landlords will expect rent to be paid in advance. Also, when you first move in you may be asked to provide a deposit which is held by the landlord as a security against any possible damage done to the property. The amount varies and is often one month’s rent.

You can rent a house or a flat (or other type of home) from a private landlord, housing association or local authority.  

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When renting you should be given a tenancy agreement which spells out your rights and also states the amount of rent and arrangements for payment.

Not paying your rent can result in your landlord evicting you from the property.

If you are having difficulty paying the rent you should discuss it with your landlord and seek advice. You may be entitled to some financial assistance such as Housing Benefit. Citizens Advice Bureaux can help you find out more about this.

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MORTGAGEA mortgage is a loan taken out to buy a home. There are many different types of mortgages available from banks and building societies and other lenders. The amount you are allowed to borrow will depend on your income and your ability to pay. Mortgages are often taken out over a long period such as 25 years. Interest is paid on the money borrowed and the amount of interest can vary.

If you fail to keep up your mortgage repayments the lender can repossess your home, leaving you without somewhere to live.

Mortgage protection insurance is a way of protecting yourself against sudden loss or reduction of income such as ill health or redundancy.

If you are having difficulty making mortgage repayments you should discuss this with your bank or building society.

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Electricity supply was privatised during the 1990s which now means there are a number of companies who can provide your electricity.

Your home should have an electricity meter which shows the amount of electricity you use.

When you move into a home you set up an account with a supply company and they will take a reading from the meter. From then on you pay for the electricity you use.

Most homes have a meter which records the amounts used and a bill is sent to the customer on a quarterly basis i.e. Once every 3 months. The customer can either pay these amounts in full or arrange for a repayment scheme. Various schemes are available from each supplier and these can help spread the costs.

Utilities Most homes have an electricity, gas, telephone and water supply. These are known as utilities.

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Gas supply works along similar lines as electricity. Some companies offer both gas and electricity.

Some homes are fitted with Prepayment meters. The customer has a key or card to which they can add credit at a local shop or post office. The key or card is then inserted into the meter and this gives credit to maintain the supply. When the credit runs out the supply is cut off and more must be obtained. Most prepayment meters offer an emergency supply of around £5 which enables the customer to continue using until they can recharge their key or card.

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Gas and Electricity meters are usually located somewhere in the home and the company will send someone to take the current meter reading. The bill is calculated based on the difference between the current reading and the previous reading.

Single rate digital metersTo read a single rate digital meter, write down the numbers shown from left to right. Ignore the last figure marked 0.1. When you next read your meter, take away the previous reading from the new one. This will give you the number of units you have used.

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Dial meter

Dial metersWhen reading your dial meter, always remember that dials next to each other go round in opposite directions. Ignore the red dial at the bottom. It is there for testing.

Read the other 5 dials from left to right and note the following points:Always write down the number which the pointer has just passed - this is not necessarily the nearest number to the pointer. If the pointer is anywhere between, say, 4 and 5, write down 4. If the pointer is directly over the figure, say 5, write down that figure and underline it: 5. If one of those numbers in the sequence is followed by a 9, reduce the underlined figure by 1.

Note - Before you read your dial meter, check the direction of the dials. As with the digital meter, when you have worked out the new reading, take away the previous reading shown on your bill or on your records to find the number of units of electricity used.

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Prepayment meter

Prepayment meters do not need to be read to calculate charges. No bill is sent to you and you do not need an account with the supply company. All you need is a prepayment key or card.

You can buy credit in shops or post offices and this is added to your key or card. When you insert the key into the meter the amount is added to the credit in the meter.

The meter slowly counts down as you use electricity or gas. Most meters will sound an alarm when the credit is beginning to run out. Also you can insert the key or card to receive an emergency credit of around £5 which is useful at times when it would not be possible to visit a shop.

It is a good idea to keep receipts given for credit in case anything happens to your key or card.

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Economy 7 meter

Economy 7 meters

With the special Economy 7 meter there are 2 rows of figures. One is for the lower priced night-rate electricity in the top line - it is marked LOW. The other is for the day rate - it is marked NORMAL.

When you read this meter, always check both rows of figures. Remember to take away the previous top line reading from the new top line reading. Do the same for the bottom line. This will give you the number of night and day rate units you have used.

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Sometimes companies estimate the amount of gas or electricity used based on what you normally use. These will be indicated on your bill with an ‘e’. You can pay these amounts or you can take your own meter reading and give this to the company who will send you a new revised bill.

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Some companies will charge you an amount to use their service, regardless of how much you use. This is called a standing charge and will be indicated on your bill.

Non-payment of Electricity and Gas bills can lead to the supply being disconnected. If you are having difficulty paying these bills contact your supply company and /or seek advice.

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This is an electricity bill

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Here are your Name, Address

and Account number.

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The lower column shows the meter readings and the amount of electricity used.

This account is on a dual tariff so the bill is calculated in two parts.

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The current meter readings are shown here.

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The previous meter reading is subtracted from the current reading to give the

amount of units used.

Notice that the previous reading was estimated as it is marked by an ‘e’

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The number of units used is multiplied by the cost per unit shown in pence to give

the total charge.

This tariff charges 12.19 pence for the first 219 units and 7.48 pence for the rest.

Notice there is no standing charge.

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The total for this quarter is £116.21.The total for this quarter is £116.21.

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The left column shows the amounts paid so far by Direct Debit and the dates when they were paid.

Because the last bill was only 68 pence the account is now in credit by £44.32.

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VAT (Value Added Tax) at 5% is added to the total charge.£116.21 + £5.80 = £122.01

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The amount in credit is subtracted from the current total to give the amount due.

£122.01- £44.32 = £77.69

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What is VAT?

VAT stands for Value Added Tax. It is a Government tax that people delivering goods and services are sometimes obliged to charge for.

VAT is often already included in the price but it may be an extra added to your bill when you buy some goods.

You will also see items advertised at a price excluding VAT so at first glance they appear cheaper than elsewhere. Look closer and you will usually see the price including VAT written in smaller print.

Often when you have services done in your home, for example, plumbing, building or electrical work VAT will be charged.

You should ask about this when you get a quote or an estimate for work to be done, as you may end up paying more than you think.

At the moment VAT is charged at 20% on most things, but for gas and electricity bills it is only 5%.

£349 (excluding VAT

£199(excluding VAT)

£75(excluding VAT)

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TELEPHONE

There are a number of telephone companies which offer both mobile services and landline services in the home.

Competition between phone companies is very strong and it is worth comparing their schemes to find the best deal for you.

Mobile Phone Companies either offer pay-as-you-go deals or monthly subscriptions.If you have a landline you will normally be charged by the minute as well as an amount for line rental – however many companies now offer deals whereby you can get free or cheap calls at certain times of the day.

Broadband is also often included as a package with your landline deal..You can ask for an itemised bill which shows every call made from your phone. This can help you keep a track of the calls being made. If you notice any calls which you do not recognise you can contact your phone company and ask them to explain.

Not paying your telephone bill can result in the service being disconnected.

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This is a telephone bill from an online billing service. It looks very similar to a paper copy.

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Here are your name, address, phone number

and account number

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The total charge for phone calls is £27.36. You can ask for an itemized list of

all the calls made and how much each call costs. This is sent to you with the bill.

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There is a standing charge for line rental which is £26.80 each

quarter.

Added to that is VAT at 20%

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The total bill for this quarter comes to £63.63 but as the customer is paying a set monthly

amount they are ahead with their payments.

Therefore the balance due is £60.18

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Water and Sewerage Rates

Like the other utilities water and sewerage are run by private companies. Most homes have two bills – one for the water coming in and the other for the waste water going out.

For some, the bill is a set amount per year and this can also be divided into monthly repayments.

Other homes have a water meter which measures the amount of water coming in. The waste water also uses this reading to set its annual amount.

You can be taken to court if you do not keep up with water charges. Water companies cannot disconnect your supply for non payment of bills.

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This is a water supply bill. It is for a flat with a water meter.

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Name, address and account number are

shown here

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The previous meter reading is subtracted from the current meter reading to show the amount of water used this

quarter.135 – 119 = 16

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The account is in credit by £23.88 because regular

payments have been made.

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The amount of units used (16) is multiplied by the price per unit (£1.02) to give the quarterly

charge. A standing charge of £7.50 is added totalling £23.82

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Therefore, as the account is £23.82 in credit and this bill

comes to £23.88 the amount due this quarter is 6 pence.

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Council Tax is a system of local taxation collected by local authorities. It replaced the community charge (poll tax). It is a tax on domestic property. Generally, the bigger the property is, the more tax will be charged.

Any dwelling in which all the people who live there as their main residence are students (or students and people aged under 18) is exempt from Council Tax

The amount of Council tax payable on a property is decided by the sale value of determined in 1991. The value is placed within banding and this gives the Council Tax amount.

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All Council Tax payers are entitled to pay their current year's bill by a maximum of ten monthly instalments. The number of instalments will be reduced depending on the time of year in which the bill is issued.You can pay yearly, monthly or twice yearly.

Further details on Council Tax, how it is calculated and where it is spent can be found on your local authority website, which for Eastbourne is www.eastbourne.gov.uk

Council Tax arrears can result in court action leading to bailiffs being instructed to seize possessions which are then sold to recover the amount owed. A deduction from wages or benefits can be imposed or if these fail, you can be sent to prison for non-payment of Council Tax.

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This is a Council tax Bill from June 2012.

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Here are your Name, Address and Account number

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This area shows your Council Tax band and a breakdown of the

annual amount

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The full bill for the year is £852.69

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This bill starts from June (because that’s when the

person moved in) and runs to the end of the financial

year in March.

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A single person gets a reduction of 25%…

…so the total bill for the year is £501.10

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The lower part of the bill shows the payment

instructions. It tells you when the first payment is due and

how much…

…and how many further payments

are needed.

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TV licence

Everyone who uses a television set, video recorder or computer, which is capable of receiving authorised broadcast programmes (that is, the BBC, ITV, Channel 4, Channel 5, cable television or Sky TV), needs a television licence.

A licence allows the person named on it and any member of her/his household to use one or more television sets, a TV-enabled computer or a video recorder. A television licence is not needed if the TV set cannot receive television programmes and is only used for closed circuit monitoring, for watching pre-recorded videos or as a computer monitor.

If you don’t have a TV licence you can be prosecuted and fined up to £1000.

A colour TV licence currently costs £145.50 (Apr 2013) and this can be divided up and paid in instalments either by direct debit or at a post office.

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This is a TV licence bill from August 2011. The customer has

chosen to pay by direct debit.

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Your personal details are shown here and your unique licence

number.

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The dates and amounts paid so far are shown, followed by

the amounts due.

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How to pay

On the reverse side of most bills you will find details of how to contact the company in case of any queries or problems. The reverse will also show ways to pay. These will include:

• Direct debit

• Debit card over the phone

• At a Paypoint. Many shops offer the facility for you to pay by cheque at the till.

• At the Post Office by cash or cheque

• By posting a cheque – the bill will tell you who to make the cheque payable to.

• By phone or internet banking

• At a bank or building society using a giro slip – shown in the next slide

Electricity and Gas companies offer prepayment meters as a way to pay your bill. Most offer a card scheme which can be used at a paypoint outlet.

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A Girobank payment slip. You will often find these attached to the lower part of a

utility or bill.

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You sign, enter the date and the amount due and present it at

your bank counter with cash or a cheque

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Council Tax can be paid by

• Direct Debit or Standing Order

• Debit or Credit Card

• By post sending a cheque

• At a Post Office by cash using a special payment card supplied by the Council

• By personal visit to pay by cheque

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If you don’t pay a bill on time you will usually be sent a reminder within a couple of weeks. This will often have print in red ink. If you think you will have difficulty paying your current bill it is a good idea to contact the company and discuss this with them. They may be able to offer you a repayment plan to spread the cost.

If you ignore the reminders the company may then pass the bill to a debt collection agency who will write to you. They will add their own charges to the bill. They may phone you or visit in person in order to try and get the money from you.

If you ignore a Council Tax reminder the Council can take action against you at Magistrate’s Court

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If you ignore the debt collection agency the bill can be passed to the County Court

where a decision will be made on how the money will be recovered, depending on the

amount and type of debt.

At each of these stages the amount you owe will increase. Therefore, it is better to pay the bill at the earliest opportunity or contact the company if you can’t pay.

Ignoring the bill and hoping it will go away will only make the situation worse.

Citizens Advice Bureaux regularly help people contact companies to sort out

debts. If you need assistance, seek advice.

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Here is a list of the possible consequences of not paying your debts:

Debt Possible Consequences

Mortgage arrears Repossession / Eviction

Rent Eviction

Council Tax Items taken / Deduction from Wages / prison

Gas or Electricity Bill Supply cut off

Income Tax Items taken / bankruptcy

TV licence Fine / Items taken / prison / bankruptcy

Telephone Bill Disconnection

You will always be given warning before any of these consequences and if you act quickly you should be able to prevent them.

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Activity

Consider the advantages and disadvantages of various ways to pay monthly bills.

For the following list of bills list the pros and cons of each means of payment. Not all options are available for each bill. Decide which way seems best to you.

Bills Means of Payment

Gas

Council Tax

Weekly food shopping

Rent

Electricity

TV licence

Credit Card

Telephone

Cash

Giro slip at Bank or Building Society

Direct Debit

Standing Order

Post Office cash or cheque

Phone or Internet banking

Posting a cheque

Credit card

Debit Card