PERSONAL FINANCE:AS THE impact of the latest Budget tax hikes hits pay slips this month, we are all under pressure to make changes to our lifestyle, writes FIONA REDDAN

With a 50 per cent reduction in the early childcare supplement, a doubling of the income and health levies and a reduction in eligibility for mortgage interest relief among the measures implemented this month, everyone’s tax liability has just gotten even greater, leading to an equivalent decline in disposable income.

On top of that, large numbers of private sector workers have swallowed pay cuts of 5 per cent or more and their public sector counterparts are footing the bill for the new pension levy.

However, if you’re loath to cut back your spending, how can you make up the shortfall? While the value of shopping in Lidl or Aldi, or making the trip north of the Border is now clear, there are other ways of saving money without exerting so much effort.

1 Tax refunds

While tax credits may be on the decline – as witnessed by the Government’s recent decision to cut back on mortgage interest relief – there remain many ways in which you can reduce your overall tax liability and benefit from a tax refund.

One simple way is to contact the Revenue and ask for a balancing statement, or a P21, for the past four years. A P21 is a statement of total income, tax credit and tax paid for a particular tax year, and by requesting one the Revenue may discover that you have not fully claimed all your tax credits and may therefore be due a refund.

One common reason behind a refund is that people often don’t claim full credits for the year in which they were married. Of course, the risk in inquiring is that you may discover you have actually underpaid tax and are therefore liable for more tax – but it generally works out in favour of the taxpayer.

Most people should also be entitled to a refund on medical expenses incurred during the year that have not already been reimbursed by a private health insurer. Almost all expenses, apart from routine dental or opthalmic services, are eligible to be claimed against, and there is no longer a disallowance of the first €125, or €250 for spouse and dependents.

For example, if you spent €5,000 on your health in 2008, and received only €2,000 back from your private health insurer, you can claim a refund on the remaining €3,000. If you paid tax at the higher rate of 41 per cent last year, then your refund will be €1,230, while you can claim €600 back if your marginal rate of tax was 20 per cent.

As 2008 is the last year in which expenses can be claimed back at the higher rate of tax of 41 per cent, now is the time to get your receipts together and send off your Med 1 form, which can be downloaded from www.revenue.ie

You should also check other entitlements such as tax relief on refuse charges, tuition fees, union fees and health insurance. The Revenue will only review claims for the past four years, so if you think you may be due a refund for any year from 2005 on, get working on your claim.

2 Reduce the term of your mortgage

With interest rates at historic lows in the euro zone – the most recent rate cut means that mortgage holders on tracker or variable rate mortgages will soon pay an average rate of about 2 per cent – savings of some €23,000 can easily be made.

For example, a person on a 30-year mortgage owing €400,000 will pay about €132,000 in interest to the bank over the life of the mortgage at the current rate of interest. At first glance you might think that reducing the term of your mortgage is actually costing you more money – in the above example monthly payments would increase by about €200 if the mortgage was cut by five years – but you would actually make overall savings of more than €23,000, as a shorter term means less interest owed to the bank, and you also have the benefit of being mortgage-free five years earlier.

3 Look for discounts

With everyone from restaurateurs to retailers feeling the pinch, consumers should not be shy about asking for discounts.

Rising unemployment and a glut of unsold properties is putting pressure on the rental market, which means that major savings can be found for those in rented accommodation. The latest Daft rental survey indicates that rents have fallen by almost 20 per cent in the year to February, while some 22,000 properties remain unlet. As such, most landlords are now willing to cut the cost of rent for fear of losing a tenant, and one phone call could save you more than €3,000 a year, based on a 20 per cent decrease on a monthly rent of €1,400.

Discounts can also be easily found in entertainment options. For example, you can attend a preview rather than waiting for a play to open. Tickets for the Gate’s forthcoming production of Present Laughter cost from €30, but you can save 30 per cent by attending a preview.

For frequent cinema-goers, Cineworld’s unlimited monthly pass is a must, as it entitles the holder to unlimited entries at the chain’s cinema on Parnell Street in Dublin for just €19.99 a month. If you go more than twice, you’re already saving money.

For those who prefer watching a movie from the comfort of their own home, considerable savings can be made by joining an online DVD club, rather than making the trip to a rental shop. Screenclick.ie’s most popular package is its silver option at €17.99, which entitles the user to borrow an unlimited number of DVDs each month, and to request two movies to be delivered together.

With the average price of a new release costing more than €5 from a rental chain, DVD clubs can be very cost-effective for movie buffs.

Shopping around for cheaper petrol can also pay dividends. A simple way of checking prices before setting out to refuel is to log on to www.pumps.ie, which gives petrol prices throughout the country. For example, according to the website, consumers can save about 12 cent a litre by shopping around in Wexford.

Shopping around for groceries can also be worthwhile and a burgeoning price war between the major retailers, as they fight back against the volume of shoppers going North, is good news for consumers.

Shoppers located in Border counties are so far faring best. For the past eight weeks, SuperValu and Centra have been running a promotion to offer the 400 top-selling products at the sterling price equivalent. More recently, Tesco Ireland announced major price reductions in its 11 Irish Border stores, with prices falling by about 22 per cent. The retailer was already offering certain items, such as children’s clothes, at euro for sterling price parity throughout Ireland, but the latest reductions are more significant. And if Tesco rolls them out nationwide, Dunnes Stores and Superquinn will have to respond with similar price cuts.

Discount supermarkets Lidl and Aldi are also committed to further reducing their prices, and there will soon be an Aldi close to almost everyone in the country, as it is planning to open 35 new stores over the next three years.

4 Make more money on your savings account

Although interest rates are at historic lows, the banking crisis means that financial institutions are keen to attract more deposits, hence the relatively attractive rates currently on offer. By taking a proactive approach to your savings and shopping around for the best deposit rate, you can earn more each year.

For example, if your savings of €100,000 are languishing in AIB’s demand account, which is paying just 1.24 per cent in interest, you will earn only €1,240 a year. By contrast, if you switch to Anglo Irish Bank’s 12-month fixed rate account, which pays 4.4 per cent, you can quadruple your earnings.

Another option for savers comes from UK building society Nationwide, which has just started offering services to the Irish market, and has some decent rates for deposits. For those looking to lock away savings, it is offering a rate of 3 per cent for six months for deposits from €3,000 to €2 million, while it also has an easy access account with a variable rate of 3.55 per cent.

5 Get smart when booking your summer holidays

While fares may initially look cheaper with certain airlines, a host of add-ons can drive up costs. If you have children, be aware of the different ways that airlines charge for them. For example, Aer Lingus charges €40 per infant for the pleasure of them sitting on your lap, while it also charges full price for children over the age of two. Ryanair charges €20 per infant per one-way flight and, while it accepts a buggy free of charge, there is a fee of €10 per flight for additional items such as a travel cot or car seat. Children aged over two must also pay the full fare.

Air France, on the other hand, offers a 90 per cent discount for babies up to the age of two, while the airline also grants an additional 10kg baggage allowance for parents travelling with a baby, in addition to a folding buggy or car seat. For children aged 2-11, the airline offers a 33 per cent discount.

Baggage charges are also much cheaper when included before travelling – for example, a 20kg bag costs from €12 each way with Aer Lingus when booked online, but €18 at the airport.

For those booking package holidays, tour operators have looked to maximise revenues in recent years by charging extra for a host of services, so be careful when booking your holiday.

Travel insurance is another extra which holiday operators and airlines try to sell at the point of purchase, but it is usually much cheaper to arrange this through a separate insurance company.

Another add-on cost frequently imposed by tour operators is a charge for sitting together on flights. While unavoidable for families with small children, older travellers should consider packing a good book and sitting alone.

Lifestyle therapy: ways to save

• Reduce the term of your mortgage
• Ask your landlord for a rent reduction
• Attend a preview of a play rather than wait for opening night
• Buy a monthly cinema pass
• Use pumps.ie before you buy petrol
• Change your savings account
• Join an online DVD club
• Bring your own in-flight snacks
• Choose a family friendly airline when going on holiday