Income

Learn how to adapt when the money you have coming in goes up or down.

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Introduction 1. Changes to your income 2. Managing income drops

Introduction to 'Income'

A sudden change in income can happen to anyone, at any time. These can be for the better, giving you more to spend, save or invest. But if your income drops , this can make it harder to pay for day-to-day expenses and still take care of future needs.

In this lesson, you’ll learn about income and the kind of changes that can happen to it. We'll share tips and ideas on how to prepare for and manage these changes.

What you'll learn

  • How to prepare for sudden changes to your income.
  • What to do when these changes happen.
  • Where to find help and support.

How long it takes

5 minutes

Chapter 1 - Changes to your income

Changes to your income

Chapter 1

How long it takes

2 minutes

Your income

Your income is any regular payment you receive. 

 

This could be from:

Wages

The regular amount of money you get from your employer.

Pension

Paid by the government and / or your employer when you retire.

Benefits

You may get these if you're on a low income or have specific needs.

Investments

Assets you buy in the hope they’ll increase in value – like stocks and shares.

How can your income change?

Your income can rise or fall for many reasons. Some of these will be down to your personal circumstances. For example, your working hours may change, or you may need to retire for health reasons. Others will be due to external factors. Like increases in income tax or a change in the state pension age.

When your income rises

When we talk about a sudden change in income, many people think of the money going down. But sometimes we get an unexpected boost in our funds.

It's great to get a sudden boost to your income. It may be tempting to spend it all, but it's worth taking time to think about.

A good starting point is to look at your budget and work out the impact of this extra money. This will help you see how much extra you really have. For instance, a wage increase may affect the benefits you get. Or you may decide to delay your pension for tax reasons. 

What you do can depend on how much you have and whether it's a single payment or something that will boost your regular income. 

Type of income boost

Examples

Think about:

Type of income boost

One-off payment

Examples

  • A work bonus or one-off benefit payment.
  • An insurance claim or investment that pays out.
  • Money or property you inherit.

Think about:

  • Are there debts you could clear?
  • You may decide to save or invest.
  • It's good to get expert advice.

Type of income boost

Regular extra money

Examples

  • An increase in wages or a better-paid job.
  • A benefits increase or a new one you can claim.
  • You start to receive a pension.

Think about:

  • Check your budget to see what this means.
  • You may be able to adjust your outgoings.
  • Think about saving or reducing debts.

More on this topic

Want to save or invest? The Money Helper site can get you started.

Go to the Money Helper site Opens in a new tab
Introduction - Income
Chapter 2 - Managing income drops

Managing income drops

Chapter 2

How long it takes

3 minutes

When your income falls

A sudden drop in income can be due to personal, family or external changes.

 

Personal

Like accidents or ill-health. This may lead to reduced working hours, taking unpaid leave or giving up your job. 

 

Family

This includes having a baby, taking on caring responsibilities or the loss of a partner or family member.

External

Like an increase in income tax, or changes in the rules around benefit payments or pensions.

Preparing for a drop in income

Think about these examples. What could you do to reduce the effect to your income?

It always helps to know what the impact is likely to be. To find this out, first create a budget. This can be a simple list of your regular income and outgoings each week or month. Once you've written these down, it's easier to see how a drop in income can impact your finances.

More on this topic

Want to learn how to create a simple budget?

Our Budgeting lessons have got you covered.

Visit our budgeting topics Opens in a new tab

Other ways to prepare

A drop in income due to external changes is sometimes harder to prepare for. There are some actions you can take to reduce the impact of  personal or family changes, though. 

You may decide to take out insurance. Protection policies are types of insurance, which give cover for you and your family. They cover you in the event of death, illness, or loss of job.

 

Some examples are:

  • Life cover will pay a lump sum in the event of your death.
  • Critical illness cover can give you an income should you be too ill to work.
  • Income protection pays a portion of your regular salary, for example, 70% each month.
  • Mortgage protection will cover your mortgage payments if you can't work because of an accident or sickness.
  • Payment protection will cover some or all your loan or card repayment.

More on this topic

Being made redundant? Money Helper's redundancy calculator can help you work out what you need to do.

Go to this Money Helper tool Opens in a new tab

Tips to manage a drop in income

If your income unexpectedly drops, don’t panic. Help and support is available. There are also steps you can take yourself, to help.

Sources of help include:

  • Most high-street banks have lots of ways to contact them if you’re concerned about income loss. They have specialist teams to offer help and guidance. You can contact your bank online through their website. If you have a mobile banking app, you may be able to use this to speak to someone from the bank. Some banks may have an email address you can use to get in touch.

    Your bank may also be able to tell you about charities and other services that can help.

  • Charities offer free advice to help you. Some can help you set up agreements with your creditors. They can help stop or reduce fees and charges and make affordable payments towards any debt you have.

     

    Charities who can help in this way include:

    • Turn2Us – Their website gives free financial support, including help with checking and claiming benefits.
    • Citizens Advice – In-person and online free advice on debts and managing your money.
    • StepChange Debt Charity – Free advice on your money and a range of debt solutions.

  • These organisations give advice and support on how to manage your money.

     

    They include:

    • Moneyhelper – Offer advice and articles to help you deal with debt.
    • National Debtline – A free confidential service, available by phone or online.

  • You can check whether you can claim benefits using one of the free calculators.

Activity

Check to find out if you have any income protection policies in place.
Read the terms and conditions to see if you can make a claim, and how to do this. 

Chapter 1 - Changes to your income

Want to learn more?

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Lloyds Bank Academy is committed to providing information in a way that is accessible and useful for our users. This information, however, is not in any way intended to amount to authority or advice on which reliance should be placed. You should seek professional advice as appropriate and required. Any sites, products or services named in this module are just examples of what's available. Lloyds Bank does not endorse the services they provide. The information in this module was last updated on 3rd December 2025.

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