Cutting Your Household Bills: A Practical UK Audit

Cutting your outgoings has one large advantage over earning more: nobody taxes a saving. Knock £40 a month off your bills and that is £40 in your pocket. To get the same result from a pay rise on the basic rate you would need roughly £59 more gross, once Income Tax and National Insurance have taken their share.

The trouble is that bill-cutting advice is usually a list of things you already know. So here is a different approach: work through the household in a fixed order, one sitting, with the actual documents in front of you. Two hours, once a year, and the same two hours pay for themselves every time.

Before you start, get three things: your last full year of bank statements, the renewal letters for anything that renews, and a note of your energy meter readings.

1. Find the Direct Debits you forgot about

Start here because it is the fastest win and it needs no negotiation. Every bank app has a list of your standing orders and direct debits. Read the whole list, line by line, out loud if it helps.

You are looking for anything you do not recognise, anything you have not used in three months, and anything where a free trial has quietly become a paid subscription. Cancel the direct debit and cancel with the provider, in that order only if you are certain you are not still under contract, because cancelling a direct debit on a live contract creates a missed payment rather than an ending.

A related check: duplicated cover. Plenty of people pay for mobile phone insurance, travel insurance and breakdown cover that are already included in a packaged current account or a home insurance policy. Paying twice for the same cover is common and gets you nothing.

2. Energy: meter readings before tariffs

Energy advice usually starts with switching. Start instead with whether your bill is based on real readings, because a bill built on estimates can be wrong by hundreds of pounds in either direction, and the direction that feels good now is the one that produces a large catch-up bill later.

Submit a reading, check it appears on the next bill, and look at the standing charge and unit rate separately from the total. The standing charge is a fixed daily amount you pay regardless of usage, and it varies by region. It is worth knowing what yours is, because a tariff that looks cheap on unit rate alone can be more expensive overall for a low-usage household.

If you are on a standard variable tariff you are on the price cap, which Ofgem resets every three months. The cap limits the unit rate and standing charge, not your total bill, so "the cap is £X a year" is always shorthand for a typical household rather than a limit on what you personally can be charged. Check the current cap figures and the period they cover on Ofgem's own site before making a decision based on them, because a figure quoted in an article is out of date within the quarter.

Two things that are worth doing regardless of tariff:

• Check whether you are eligible for the Warm Home Discount. It is a one-off deduction from your electricity bill for eligible households, and for many people it is applied automatically rather than claimed.
• Ask your supplier about their hardship fund if you are behind. Suppliers are obliged to agree an affordable repayment plan based on your ability to pay, and several run grant schemes that write off arrears entirely.

3. Council Tax: bands, discounts and instalments

Council tax is one of the few bills where you might simply be in the wrong band. Bands in England and Scotland were set on 1991 property values and a fair number were assigned quickly and roughly. You can check what band your neighbours in identical properties are in through the Valuation Office Agency (or the Scottish Assessors in Scotland), and challenge yours if it is out of line.

Be careful with this one. A challenge can move a band up as well as down, and it can affect neighbouring properties. Only pursue it if comparable homes are genuinely in a lower band.

The discounts are safer ground and widely missed:

• 25% single person discount if you live alone, or if everyone else in the home is disregarded.
• 50% off if everyone in the household is disregarded.
• Disregarded people include full-time students, under 18s, 18 and 19 year olds in full-time education, certain apprentices, student nurses, live-in carers and people who are severely mentally impaired.
• Disabled band reduction moves the bill to the next band down where a property has an extra bathroom, an extra kitchen or space for a wheelchair because of a resident's disability. A band A property gets a 17% reduction instead.
• Council Tax Reduction is a separate means-tested scheme run by each council for people on low incomes. You have to apply.

You can also ask to pay over 12 months rather than the default 10, which cuts the monthly figure by about a sixth without changing the total.

4. Broadband and mobile: the out-of-contract penalty

This is where households routinely lose the most for the least reason. Broadband and mobile deals are priced to win new customers, and the price you pay after the minimum term ends bears no relation to the price a new customer pays for the same service.

Find your contract end date. Most providers now have to tell you when your contract is ending and what you would pay if you did nothing, so check your emails and your account page. Then compare what you are paying to the current new-customer price for the same speed.

When you call, ask for the retentions or cancellations team and be specific: name the competing deal and the price. Being willing to actually leave is what makes this work, so have the alternative genuinely lined up before you ring.

On mobile, the single biggest saving is usually separating the handset from the airtime. If you have finished paying for a phone on a bundled contract and have not switched, you may still be paying the handset portion for a phone you already own. A SIM-only deal on the same network is often less than half the price.

Also read what your contract says about annual price rises. Providers have to set out any in-contract increase clearly before you sign, and the way that is expressed varies between providers and between contracts signed at different times. Check the specific wording in your own agreement rather than assuming, and if a rise is applied that was not set out in the way your contract requires, you may have the right to leave without an exit fee. Ofcom is the regulator to check the current rules with.

5. Insurance: never auto-renew

Auto-renewal is convenient and it costs money. Insurers are no longer allowed to quote existing customers a renewal price higher than they would offer an equivalent new customer for the same policy, which removed the worst of the loyalty penalty, but the market is still competitive and the cheapest insurer for you changes year to year.

Practical points that make a real difference to the premium:

• Quote about three to four weeks before renewal. Prices tend to rise the closer you get to the start date.
• Pay annually if you possibly can. Paying monthly is credit, and it carries an interest rate the insurer must disclose. On a £420 policy, monthly payment can add £40 or more over the year.
• Check your job title wording. Different but equally accurate descriptions of the same job can produce different premiums. Never describe your job inaccurately, as that invalidates the policy.
• Do not over-insure contents. Many people insure for a replacement value far above what they actually own.

6. Water: the bill most people never question

If you are on an unmetered bill based on rateable value and there are fewer people in your home than there are bedrooms, a meter will usually save you money. Water companies in England and Wales must let you try one and switch back within a set period if it turns out to be worse. Scotland and Northern Ireland work differently, so check with your own supplier.

There are also social tariffs. Every water company in England and Wales runs a scheme for customers on low incomes, and there is WaterSure, which caps bills for metered customers who receive certain benefits and either have a large family or a medical condition requiring high water use. These are not advertised well and they are applied for, not given.

What this adds up to

Not every household will find all of that, and someone who did this last year will find far less. But the exercise is worth an afternoon precisely because the savings repeat every month with no further effort, which is not true of almost anything else you can do with an afternoon.

Diary it for the same week every year, ideally a month before your largest insurance renewal. Then put the saved amount somewhere it cannot be absorbed, because a saving that stays in your current account is a saving you will spend without noticing.

The expense tracker will show you what is actually leaving the account each month, which is usually the fastest way to find the direct debits nobody remembers setting up.