Looking for opinions on how to tackle our debt

TheAble

Kimwp: £4000 to the VM buys you 6 extra months over one of the May ones. So why would you choose a May one over the VM? The cost is the same, yes, but with the VM you get more for your money.

kimwp

@TheAble, I'm not sure what you mean by more for your money?

TheAble

Don't worry about it, it was just a theoretical point. Don't want to derail the thread.

GreyCat

Have you taken into account that your £900 a month from the supermarket job will use up nearly all your personal allowance? So tax will be due on the majority of your self employed income. Apologies if you have already accounted for this, but it sounds like you are only looking at your SE income against the personal allowance. Which could mean a nasty surprise down the line.

BabyStepper

A point about tax, OP is correct that there may be a reduced payment in January 21. Part of your tax bill is a payment in advance on the following year's income (20-21). Given this year is turning into a disaster for many people, there may be reduced tax bills in January and we are all being invited to apply for this reduction nearer the time. Greycat makes an excellent point though, your supermarket job will be using up your tax free allowance, if I were you I'd hang on to your tax cash OP, just in case. You don't want to be in debt to HMRC. 

Regarding the credit card shuffle, I did a few quick sums and this is what I found:

Virgin card 2.4% of £4,800 = £115.20 (balance transfer fee) 
20% interest on £4,200 Nov 20 - Nov 21 = £840 (doesn't include reduced balance from minimum payments, but you get the idea)
Saving - a lot

OH's Virgin cc + MBNA 2.4% of £5,600 =  £134.40 (balance transfer fee)
20% interest on £5080 March 21 - Nov 21 = £677
Saving - less than the previous card (that was the point being made by TheAble) but still worth doing

I've made a few assumptions here. First, your budget looks aspirational and there might be no money at all to overpay (£50 per month to service 2 old cars valued at £2k each looks too low for me, possibly need to double it at least). Your income will drop when OH stops doing odd jobs and gets back to work. Your SE business is more likely to recover in Nov 21 than Nov 20. You can't really use your tax money to pay debt, that bill will still be coming at you. 0% offers are few at the moment, no guarantee one will appear in November. You're basically trying to stay afloat until things improve. If you don't move any of the debt, you'll be paying over £150 per month in interest come Easter. 

There's been some good debate on here and whatever you decide to do, we'll still be here to support you. 

lisastevo

Thanks everyone!! So helpful.

My supermarket job isn’t new. I’m into my third year so I have already accounted for it and paid my payments on account with it in the calculations but I do appreciate the heads up. It automatically now shows when I file my Self Assessment and I keep track in my Personal Tax Account on HMRC.

I got stung by HMRC about 16 years ago. I basically switched a working role from employed to self employed when I was 19 and living away from home. The job stayed the same but the payment terms changed. I was naive and no one told me I had to pay my own tax. I plodded along like this for 4 years, blissfully unaware that I wasn’t paying any tax or NI. It wasn’t until I moved jobs and was told by the new company that I had to declare myself as Self Employed. So off I went, doing what I was told and I got stung with £8k tax bill for the previous 4 years. Needless to say I didn’t earn enough money to pay them back in the time frame they wanted and bankruptcy was what I was told would have to happen at the tender age of 23! So I turned to the bank of Dad at the time and I’m so thankful. He paid £5k off in a lump sum and I paid the remaining balance over a year. I paid him back many years ago.

Basically, I learned the hard way and it scared me to death and from that moment on I have been extremely vigilant with HMRC ever since. Dotted every i and crossed every t as I never want to be in that situation again.

kimwp

BabyStepper said:

A point about tax, OP is correct that there may be a reduced payment in January 21. Part of your tax bill is a payment in advance on the following year's income (20-21). Given this year is turning into a disaster for many people, there may be reduced tax bills in January and we are all being invited to apply for this reduction nearer the time. Greycat makes an excellent point though, your supermarket job will be using up your tax free allowance, if I were you I'd hang on to your tax cash OP, just in case. You don't want to be in debt to HMRC. 

Regarding the credit card shuffle, I did a few quick sums and this is what I found:

Virgin card 2.4% of £4,800 = £115.20 (balance transfer fee) 
20% interest on £4,200 Nov 20 - Nov 21 = £840 (doesn't include reduced balance from minimum payments, but you get the idea)
Saving - a lot

OH's Virgin cc + MBNA 2.4% of £5,600 =  £134.40 (balance transfer fee)
20% interest on £5080 March 21 - Nov 21 = £677
Saving - less than the previous card (that was the point being made by TheAble) but still worth doing

I've made a few assumptions here. First, your budget looks aspirational and there might be no money at all to overpay (£50 per month to service 2 old cars valued at £2k each looks too low for me, possibly need to double it at least). Your income will drop when OH stops doing odd jobs and gets back to work. Your SE business is more likely to recover in Nov 21 than Nov 20. You can't really use your tax money to pay debt, that bill will still be coming at you. 0% offers are few at the moment, no guarantee one will appear in November. You're basically trying to stay afloat until things improve. If you don't move any of the debt, you'll be paying over £150 per month in interest come Easter. 

There's been some good debate on here and whatever you decide to do, we'll still be here to support you. 

Agree with everything here. My points were based on being able to pay all of the debt due to 0% offer expire by April but 4,000. If that's not the case then interest calculations come into play.

BabyStepper

OP, you seem to have a good grasp of this. The fact that you have £4k to pay your tax bill and £1.4k EF tells us that you don't spend every last penny you have and more besides. You'll find a way through this. Do keep us posted though. 

kimwp, we think in similar ways! 

lisastevo

This is another reason why I’m beating myself up over this lingering debt. It’s a lot of money and I acknowledge that. Because we have never missed payments, we have Amex’s that we use and pay off in full for Cashback, our conduct on our credit reports have always been good with good rates and promotions we have plodded along just paying the minimums on the balances because we could at no cost to ourselves and then hopping between cards. About 18 months ago we started overpaying the minimum at set monthly payments for budgeting reasons. We’ve had some big expensive family holidays and new furniture and home
improvements which we saved for and never put on cards. New baby so a year of not working and spending for that. None of that expenditure was paid for by credit but the large balances were still there. In hindsight we should have paid off the large balance cards first but we didn’t because we weren’t getting charged any interest and we wanted to live our best lives. We still aren’t getting charged any interest but with the current climate the way it is I just want rid now. 

The lightbulb moment has hit and I don’t want it there anymore. 

When I’m working at my full Self Employed potential, on average I can get £500 a week sometimes £1000. My work is seasonal so depends. It’s taken me not to have that income to really realise what needs to happen. I feel stupid for not paying them off when I had the available funds, but because it was interest free we were just rolling with it. 

Onwards and upwards as they say. 

kimwp

@lisastevo we all make mistakes and regret decisions we've made, try not to beat yourself up (easier said than done I know). You have a couple of options to get past April in terms of minimising financial impact and driving the debt down, then you can focus on November. It's a great aim to be and remain debt free and I have full faith you will manage it. As BabyStepper says, we're here to support you, so lean on us whenever you need.
@BabyStepper