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Just a few months after delivering his first Budget as Chancellor, Rishi Sunak delivered a Summer Statement, dubbed a ‘mini-Budget’ on Wednesday 8th July 2020.

Back in March, some of the measures announced in the Budget focused on supporting people and businesses as the Covid-19 pandemic was taking hold. Five months later, the focus has now shifted to recovery as lockdown and social distancing restrictions ease.

Rishi began by saying the government had taken decisive action to protect the economy earlier this year but acknowledged people were now worried about unemployment rates rising and economic uncertainty. This is against a backdrop of a global economic downturn, with the International Monetary Fund (IMF) predicting the deepest recession since records began. With this in mind, the Summer Statement set out the measures the government will be implementing.

It was also confirmed there will still be a full Budget and spending review delivered in the autumn.

Job Retention Bonus

With the furlough scheme set to end in October, which has supported nine million jobs, the Job Retention Bonus aims to encourage firms to re-employ staff. Any employer that brings back an employee that earns at least £520 each month from furlough, and keeps them in a job until January, will receive a £1,000 bonus.

If everyone on furlough were to benefit, the scheme would cost £9 billion.

Kickstart scheme

Noting that young people are around 2.5 times more likely to have been affected by Covid-19, Rishi announced the Kickstart scheme.

The Kickstart scheme will pay young peoples’ (aged 16 to 24) wages for up to six months, as well as some overheads. The employee must work a minimum of 25 hours a week and be paid the national minimum wage. It will amount to a grant worth around £6,500 per young person. Employers can apply to benefit from the Kickstart scheme next month and there will be no cap on the number of places funded.

In addition to this, there will be more funding for careers advice, more traineeships, and a new £2,000 payment for firms to take on young apprentices and £1,500 for apprentices aged over 25.

Stamp Duty

Property prices and transactions have fallen during the pandemic. In light of this, Rishi announced he was abolishing Stamp Duty on homes worth up to £500,000. This will take effect immediately and continue until 31st March 2021.

VAT rate

Over 80% of businesses in the hospitality and tourism sectors were forced to close during lockdown. VAT on tourism and hospitality will be cut from the current 20% to 5% until 12 January 2021. This will include eating out, accommodation and attractions, such as the cinema, theme parks and zoos.

Discount for eating out

The ‘eat out to help out’ scheme also aims to support the hospitality sector. Throughout August, customers will be able to take advantage of a discount up to 50%, worth up to £10 per head, including children, when they eat out from Monday to Wednesday at businesses that have applied to be part of the scheme.

Green homes grant

A new £2 billion green homes grant was announced. This will allow homeowners and landlords to apply for vouchers to make their homes more efficient and support local green jobs. The vouchers are expected to cover at least two-thirds of the costs up to £5,000 per household. For low-income households, the full cost will be covered, up to £10,000. It’s estimated energy efficiency could save families £300 a year.

A further £1 billion of funding has also been designated for improving energy efficiency in public buildings.

Questions?

If you have any questions about how the Summer Statement will affect your finances and plans, please get in touch. 

When investing, we all know that capital is at risk. We’ve often talked about understanding your risk profile and the level of risk you should take when investing. But what affects how risky an investment is?

Understanding the risk of an investment can help you gauge if it’s the right investment for you and how it’ll change the balance of your portfolio. Numerous factors affect how risky an investment is, fund managers will use multiple ways to analyse each investment. However, one of the simplest places to start is by looking at the asset class.

The four main asset classes of investing

When reviewing investment portfolios, there are usually four main asset classes:

1. Cash: This is the least risky asset, but also delivers low returns. As returns are often lower than inflation, the value of money can decrease over time in real terms.

2. Bonds: Both government bonds and investment-grade corporate bonds are considered relatively low risk. With a bond, you’re effectively lending money in exchange for a fixed rate of interest. While a lower risk than stocks, if a company defaulted on payments you could still get back less than you invested. Bonds with a higher yield are riskier as they have a higher risk of default.

3. Property: Investing in property is often seen as a sure way to deliver returns, but it still comes with risks. An investment portfolio may hold commercial property and rise in value either from rental income or rising property prices. Property can be harder to sell should you need access to capital.

4. Shares: Finally, shares are the riskiest asset class of the four, as markets are unpredictable. However, the risk of different shares varies hugely. As with bonds, those with higher potential yields are typically the riskiest. The unpredictability of stock markets means a long-term time frame is essential when investing.

A well-balanced portfolio will typically include a mix of these assets. This helps to spread the risk and limit short-term volatility. For example, if stock markets are experiencing volatility, holding some of your capital in bonds can reduce the impact. This is why when you read headlines claiming stock markets have fallen by a certain percentage, an individual portfolio is unlikely to have experienced a fall to the same scale.

Even ‘high risk’ portfolios will invest some of their capital in bonds and property to create balance, likewise, a ‘low risk’ portfolio is likely to have some exposure to stocks.

Specific risk vs market risk

When looking at individual assets, there are numerous risks to consider, these can be broadly split into two areas: specific risk and market risk.

Specific risk refers to the risks within a company and the volatility their shares experience. All companies will experience some volatility, but, once again, this can vary significantly. Established and mature businesses, for instance, are less likely to have severe bouts of volatility than firms that are still in the growth phase. Specific risk can be analysed by looking at the profits, areas of investment, sector it operates in and more.

On the other hand, market risk affects the whole market and can be far more difficult to track. For example, in March this year, whole markets fell as a result of the Covid-19 pandemic, even when the prospects of some companies within those markets remained unchanged. This is why we not only spread investments across companies but different sectors and geographical locations too, helping to reduce exposure to volatility.

Building a diversified portfolio that matches your risk profile

When you review your investments, you should start by looking at your own risk profile. This allows you to build a portfolio that suits your goals, investment time frame and overall attitude to risk. Diversifying investments, across asset class, sector and geographical locations helps to create a balanced portfolio that’s linked to your risk profile. When we work with you when investing, this is why we start with your aspirations.

Please contact us to discuss your investment options, including how risk can be managed within your own portfolio.

Please note: The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Whether you’re an employer that is considering offering group insurance to employees or a worker than benefits from group cover, it’s important to understand what it is, how it provides security and when it can be used.

Group Life Insurance is a popular benefit that’s usually offered by employers. It acts in a similar way to a Life Insurance policy, which an individual takes out. In the case of Life Insurance, the individual will pay regular premiums and should they die during the term of the policy, their loved ones will receive a lump sum. It’s a step that can provide peace of mind that your family will be taken care of financially should the worst happen.

As the name suggests, group insurance covers a group of people rather than just one and the ongoing premiums are usually paid in full by the employer. It’s a benefit that’s sometimes referred to as ‘death-in-service’ as rather than a fixed-term, employees will typically be covered while they remain employed with the company.

What would group insurance cover?

First, it’s important to note that group insurance policies can vary.

If you’re currently covered by a group insurance policy, you should review your employee handbook or talk to your employer to fully understand what’s covered. If you’re thinking about putting group cover in place at your business, there are different options to consider and weigh up how they’d suit your employees.

Typically, a group insurance policy will pay out if you die while employed, to either your family or a nominated beneficiary. The benefit amount is often linked to the employee’s income, such as two or four times their annual salary. So, an employee earning £40,000 with group insurance equivalent to four-times their annual salary would leave their loved ones a £160,000 lump sum if they were to pass away whilst employed with the firm.

This lump sum is usually paid free of Income and Capital Gains Tax. They also may be written into a trust, which will ensure the sum is considered outside of your estate for Inheritance Tax purposes. However, this isn’t always the case.

In some cases, group insurance provided by an employer may be extended to cover your spouse or civil partner and provide other benefits, such as bereavement counselling to loved ones. Again, this isn’t guaranteed for all group insurance policies so you should check your policy first.

The lump sum loved ones receive can help provide financial security while they grieve. It could, for example, be used to pay off an existing mortgage debt or ensure children’s school fees will continue to be paid even as household income is reduced or stops.

There are benefits to group insurance whether you’re an employer or employee.

Benefits of group insurance for employees

The key benefit of group insurance is knowing that your loved ones will be financially secure should something happen to you, without having to set up your own policy. However, it’s worth assessing if the policy offered by your employer would be enough and if other individual policies should support it.

Depending on your loved ones and plans, you may find that further Life Insurance is needed to cover the expenses they would face, such as the mortgage. However, with group insurance covering part of the necessary sum, the policy you take out can be for a smaller amount, lowering premiums. It’s also an opportunity to think about if you and loved ones would benefit from potential extras some policies offer.

While considering Life Insurance, you should also take the time to assess other forms of financial protection. This includes Income Protection, which would pay out regular amounts if you’re unable to work due to illness or injury, and Critical Illness Cover, which would pay a lump sum on the diagnosis of a specified critical illness.

You may not need all types of financial protection, for example, if an employer has a strong sick pay package, Income Protection may not suit you. However, understanding how these policies have the potential to provide security can help you choose the most appropriate ones.

The benefit of group cover for employers

As an employer, group insurance can form part of your benefits package to attract and retain key members of staff. During the recruitment process, it’s a benefit that can make your firm more attractive than competitors as a place to work. It’s a benefit that can help drive your business forward.

Group cover can supplement other benefits you may offer employees, such as a competitive pension scheme or sick pay policy. Taking steps to ensure that your employees’ loved ones would be taken care of should they die in service can help ensure employees know they’re valued and the company does the ‘right thing’. Although the scenario of an employee dying is rare, it can happen. By taking out group insurance now, you know that should something happen, the processes and support are already in place.

In addition, the premiums paid for the group insurance usually qualify as an allowable business expense for Corporation Tax purposes. 

If you’d like to discuss group insurance, whether as an employee or employer, please get in touch.

Pensioners transferring out of their Final Salary pensions, also known as Defined Benefit pensions, have made headlines recently as retirees seek more flexibility. But using other assets to create a flexible income throughout retirement can mean security and the ability to create an adjustable income to suit retirement plans.

Final Salary pensions are often referred to as ‘gold plated’ as they provide retirees with security. The amount you’ll receive at retirement and the age at which you’ll receive it are pre-defined when you become a member. This is usually dependent on the number of years you’ve been a member and either your final salary or a career average. The pension you receive isn’t linked to investment performance, it’s a guaranteed income for life.

While this is valuable, retirement lifestyles have changed enormously over the last few decades. Today, many retirees want a flexible income to suit their lifestyle, where income needs may change significantly over time. As a result, some retirees have chosen to transfer out of a Final Salary pension in return for a lump sum that can then be deposited in a Defined Contribution pension scheme, which can be accessed flexibly. However, this isn’t in the best interests of most people.

The benefits of a Final Salary pension

The key benefit of a Final Salary pension is the level of security it offers. You don’t have to worry about investment performance or ensuring pension withdrawals are sustainable. You know that you’ll have a regular income for the rest of your life.

What’s more, many Final Salary pensions have auxiliary benefits too. This could include paying a pension to a spouse or dependent should you pass away. Depending on your personal situation, these can be valuable in providing peace of mind and play an important role in your overall financial plan.

While a Final Salary pension does provide security, you may also want income flexibility in retirement. Assessing and using your other assets means you may be able to have the best of both worlds. Three options for creating flexibility with a Final Salary pension are:

1. Defined Contribution pensions

First, you may also hold a Defined Contribution pension. These types of pensions are more common than Final Salary pensions and if you’ve worked for several companies, you may have a mix of Final Salary and Defined Contribution Pensions.

With a Defined Contribution pension your contributions, along with employer contributions and tax relief, are added to a pension pot which is then invested. The value of the pension is dependent on contributions and investment performance. Once you reach age 55, this pension becomes available to access in a range of ways, including taking a flexible income as and when you need it.

Using a Defined Contribution pension to supplement the income of a Final Salary pension when you need it can create flexibility without having to sacrifice security. One thing to keep in mind with a Defined Contribution pension is that you’re responsible for deciding how it’s invested and that withdrawals are sustainable with your plans in mind. Having a regular income through a Final Salary pension can relieve some of this pressure but it’s still important to assess how you’re using pension savings.

2. Depleting savings

After decades of diligently saving, some retirees are reluctant to start depleting their savings, even if providing financial freedom in retirement has been what they are saving for.

It’s natural to worry about accessing savings. You may be concerned that you don’t have enough or that an unexpected expense will need to be covered. Having a strong financial plan in place can help put your mind at ease here. Using a range of tools, including cashflow planning, we can show you how your wealth will change over time, including if you begin to access your savings to add to your Final Salary pension income at certain points in retirement.

3. Using investments

Finally, investments held outside of a pension can also provide a useful boost to your retirement income when you need it. These may be investments that are held within an ISA or an investment portfolio.

Selling investments can provide you with a cash injection when you want it, for example, if you’re planning a once in a lifetime experience or big-ticket purchase that your typical Final Salary income wouldn’t cover. As with savings, it’s important to understand how accessing your investments at different points in retirement will affect your wealth and financial security to provide peace of mind.

Please contact us if you have a Final Salary pension and want to understand how it can fit into your retirement plans. By looking at your lifestyle goals and priorities during retirement, we can help you create a plan that matches your aspirations, including creating income flexibility where needed.

Please note: The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Transferring out of a Defined Benefit pension is not in the best interest of the majority of pension savers.

A Defined Contribution pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income will also be affected by the interest rate at the time you take your benefits.

The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulations which are subject to change in the future.

Coronavirus has affected many aspects of our lives and research shows that savings are one area that may have been affected. Whether you’ve had to dip into savings or have been able to put away, it’s important to look at your financial plan to ensure you’re getting the most out of your money.

According to research from Aegon, six in ten peoples’ savings have been affected by the pandemic in some way. These people are split into two distinct categories:

  1. 31% of savers reported they have increased savings during lockdown as other costs, such as commuting to work and entertainment were cut. On average these savers increased the amount they put away by £197 per month.
  2. In contrast, 28% of savers said they’d been forced to reduce the amount they were saving each month or stop saving altogether. On average, savings were decreased by £159 per month.

Steven Cameron, Pensions Director at Aegon, said: “While coronavirus is first and foremost a health crisis, it is having a big impact on the nation’s wealth. Our consumer research shows six in ten of the population have changed their savings levels since the start of the crisis with a stark divide between those who have been able to save more because their expenditure in lockdown has reduced and those who have had to cut back or stop regular savings. If this divide in savings patterns continues for any length of time, it will have a big impact on the future financial security of different groups.”

Unsurprisingly, employment status had a big impact on whether savings were cut or boosted. Those needing to cut back are more likely to have been furloughed, potentially meaning taking home just 80% of their normal salary, or self-employed as income may also have been affected. While support is available for self-employed workers, they’ve typically had to wait longer for this to come through.

On the other hand, those that have remained working throughout the lockdown, either as keyworkers or from home, are likely to have maintained their income while seeing other outgoings decrease.

If your saving habits have changed, it’s important to review this in line with your financial plan. What steps you should take will depend on which of the categories you fall into.

Saving more during the pandemic

If you’ve been in a position to save more during lockdown, it’s worth looking at where your savings are going and if it’s the most efficient place.

Interest rates are low at the moment, which can mean your savings are losing value in real terms over the long term. If you already have an emergency fund established, ideally with around three months’ worth of outgoings in a readily accessible account, you should look at the alternatives. This may include a fixed-term savings account, where your money is locked away for a defined period, or investing if appropriate for your goals.

When looking at where to place your increased savings, it’s important to keep your goals and overall financial plan in mind. While investing can be a way to increase value over the long term, it’s not appropriate if you’ve decided to save for a holiday next year, for example.

Saving less or using savings during the pandemic

If your saving habits have been negatively affected by coronavirus, it’s important to understand the impact.

You may have been forced to dip into your emergency fund, for instance, depleting your usual safety net. First, you shouldn’t feel guilty about doing this, after all, you’ve put that money aside to help you weather unexpected events. However, you should keep track of what is being used and how you’ll replenish savings once you’re in a financial position to do so.

Where your regular savings have been reduced or halted, the long-term impact is something that should be considered. In many cases, a few months of lower saving contributions are unlikely to have a huge impact on financial security in the long term. But it’s worth assessing if goals are still within reach to provide peace of mind. You may find that increasing savings once you’re able to or delaying plans for a while is necessary.

While lockdown restrictions have eased, some workers are finding their routine will remain disrupted in some way in the coming months. It’s important to review your financial plan in light of personal changes if needed, it can help keep you on the right track.

It’s not just savings that Covid-19 may have affected in terms of finances either. The pandemic caused short-term volatility in stock markets which may have impacted investment portfolios and pensions, for example. If you have any questions about your financial plan and goals, please get in touch.

Please note: The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Building a nest egg for a child can help set them on the path to a financially secure future and highlight why saving is important. One of the most popular ways to save for a child or grandchild is using a Junior Individual Savings Account (JISA). During 2017/18, money was added to over 900,000 JISAs.

Money held in a JISA isn’t accessible until the child turns 18, making it an excellent way to save for the milestones they’ll reach in early adulthood. You may choose to save with the hope that it will be used to fund further education, learn to drive or get on the property ladder. Having a lump sum to use can make it easier for children to achieve goals and create a secure foundation as they become independent.

JISAs: The basics

JISAs operate in much the same way as adult ISAs do.

You can use a JISAs to save in cash, earning interest on deposits, or to invest and hopefully deliver returns over the long term. JISAs are also a tax-efficient way to save, interest or returns earned are tax-free.

One area where the JISA does differ is the subscription limit, the amount you can deposit each tax year. In this year’s budget, Chancellor Rishi Sunak significantly increased the JISA subscription limit from £4,368 in 2019/20 to £9,000 in 2020/21. The new limit means parents and grandparents can build a substantial nest egg for children.

The JISA annual allowance can’t be carried forward and if it’s not used during the tax year, it’s lost.

A parent or legal guardian must open a JISA on the child’s behalf, however, other family and friends can then contribute as long as the annual limit isn’t exceeded.

The money placed within a JISA belongs to the child and can’t be withdrawn until they’re 18, apart from in exceptional circumstances. However, when the child reaches 16, they will be able to manage the account, for example, transferring to a different provider to achieve a better interest rate. 

If you’re considering open a JISA on behalf of a child, one of the first things to do is decide between a cash account and a stocks and shares account.

Cash JISA vs Stocks and Shares JISA

As with adult ISAs, you have two key options when saving through a JISA: cash or invest.

Both options have pros and cons, which one is right for you will depend on goals and time frame.

Cash JISA: The money deposited within a Cash JISA is secure and operates in a similar way to a traditional savings account. Assuming you stay within the limits of the Financial Services Compensation Scheme (FSCS), the money would be protected even if the bank or building society failed. The deposits within a JISA will then benefit from interest, helping savings grow. While JISA interest rates are typically more competitive than the adult counterparts, you still need to consider inflation. When interest rates don’t keep pace with inflation, savings lose value in real terms, reducing spending power. Over several years the impact can be significant.

Stocks and Shares JISA: Rather than earning interest, the money deposited within a Stocks and Shares JISA is invested with the aim of delivering returns. The key benefit is that it offers an opportunity to create higher returns than interest would offer. However, all investments involve some level of risk and in the short-term, it’s likely volatility will be experienced at some points. This means the value of savings can fall based on the performance of investments. However, historically, investments have delivered returns over a long-term time frame.

So, which option should you pick?

How you feel about investment risk should play a role in choosing between a Cash JISA and a Stocks and Shares JISA. However, the time frame is also important. Typically, you shouldn’t invest with a short time frame (less than five years) as this places you at a higher risk of being affected by short-term volatility. In contrast, longer time frames give you a chance to smooth out the peaks and troughs of investment markets.

If you’re unsure whether building a nest egg through cash or investing is right for you, please get in touch.

You don’t have to choose between a Cash JISA and a Stocks and Shares JISA either. If your goals mean you want a mix of cash savings and investments when building a nest egg, it is possible to open both types of JISA in your child’s name. The total contributions to JISAs must not exceed the annual subscription limit.

If you’d like to start saving for your child or grandchild, please contact us. Whether you want to invest through a JISA or discuss alternative options, we’re here to help you create a plan that meets your goals.

Please note: The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

When you retire, there are a lot of financial decisions that need to be made as you start accessing the savings and investments you’ve built up. It’s natural to have lots of questions about your financial security at this point, such as:

  • How much income will I receive from my pension?
  • How long will my savings last for?
  • How should I access my pension?

But one important question is often overlooked: How much tax will I pay? 

How and when you access your pension, savings and investments can have an impact on your tax liability. Planning your retirement income with tax in mind can help reduce the amount of tax you pay, helping your savings go further. It should be one of the areas you consider as you approach retirement and that financial planning can help you understand with your circumstances in mind.

In some cases, it’s possible to create a tax-free retirement income or reduce liability greatly. So, what should you consider when assessing retirement income?

1. The Personal Allowance

The Personal Allowance is the amount of income you’re entitled to receive tax-free each year. For the 2020/21 tax year, the Personal Allowance is £12,500 for the majority of people. As a result, it’s important for planning your retirement income.

The Personal Allowance covers all forms of income, including your State Pension and income from investments, for example. Once you factor in all income sources in retirement, the total will likely exceed the Personal Allowance, but it provides a base for building a tax-efficient income. As the allowance resets with each tax year, spreading out or delaying taking an income at times can help you fully make use of the tax benefit.

It’s worth noting that if you’re married or in a civil partnership, the marriage allowance allows one person to transfer up to £1,250 of their Personal Allowance to their partner too.                                                                                                                                           

2. Pension withdrawal tax-free allowance

If you’ve been paying into a Defined Contribution pension during your working life, it will usually become accessible when you turn 55. This includes 25% available to withdraw tax-free. You can choose to take a 25% lump sum, tax-free, when you first access your pension, or you can spread the tax-free benefit over multiple withdrawals.

How and when you access your pension can have an impact on your income and lifestyle for the rest of your life. So, it’s important to understand the long-term impact of taking the tax-free lump sum.

3. Withdrawing from ISAs

ISAs (Individual Savings Accounts) offer a tax-efficient way to save and invest. Each tax year, adults can add up to £20,000 to ISAs, either contributing to a single account or spreading it over several. Through an ISA you can either save in cash, earning interest, or invest to hopefully deliver returns. The key benefit of ISAs is that interest or returns earned aren’t taxed.

As a result, you can make ISA withdrawals to supplement your pension income and other sources in retirement without increasing your tax liability.

4. Capital Gains Tax allowance

Selling certain assets for profit can result in Capital Gains Tax, this includes personal possessions worth more than £6,000 (excluding your car), a second home, and shares that aren’t held in an ISA or PEP (Personal Equity Plan).

However, there is an annual Capital Gains tax-free allowance, for individuals it is £12,300. In retirement, this can be a useful way to increase your tax-free income. It’s important to understand your assets, their value and how they can create an income.

5. Dividend Allowance

If you’re invested in companies that pay a dividend, the Dividend Allowance can boost your income without affecting the amount of tax you need to pay. This is on top of any dividend income that falls within your Personal Allowance.

For the 2020/21 tax year, the dividend allowance is £2,000. Carefully planning your investments and expected dividend allowance can help you boost your retirement income by £2,000 without facing additional tax charges.

If your dividend income exceeds the allowance, you will need to pay tax. The tax rate is linked to your tax band and may be as high as 38.1% if you’re an additional rate taxpayer.

Depending on your circumstances and goals, there may be other allowances and reliefs you can take advantage of too. Using a combination of saving products, such as personal pensions, stocks and shares ISAs and general saving accounts, it may be possible to achieve the retirement income you want while reducing tax liability. Whether you’re nearing retirement or are already retired, it’s worth considering how much tax you’ll pay and whether there are allowances that apply to your situation.

Planning for taxation changes

While the above information is accurate for the moment, allowances, levels of taxation and reliefs do change. As a result, it’s important that your retirement plan and income are reviewed at regular points. This allows you to take advantage of any changes and adjust how and when you take your income if necessary. If you’d like to discuss your tax liability during retirement, please get in touch.

Please note: The Financial Conduct Authority does not regulate tax planning.

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Levels, bases of and reliefs from taxation may be subject to change and their value depends on individual circumstances.

Whilst the last few months have been unusual for many businesses, there are key dates that still need to be penned into diaries of business owners to ensure they stay on track and meet financial commitments.

Business is gradually getting back to normal and there is government support available for many businesses that are struggling with the impact of the coronavirus lockdown. Understanding the key dates and what help is out there can help keep firms on track during 2020 whilst uncertainty continues for many.

If you’re a business owner, here are six dates to consider when measuring cash reserves, planning the coming months and seeking support.

1. Corporation Tax payment

With most businesses having December or March tax year ends, the upcoming Corporation Tax payment will be based on earnings before the coronavirus pandemic took hold. As a result, the tax bill may be larger in proportion to current cashflow if capital has been depleted in recent months.

If you work to a December year-end, Corporation Tax payment will be due on October 1 2020, moving to January 1 2021, if your year-end was in March.

2. VAT payment

If your business pays VAT quarterly, like the majority of business in the UK, the next due date is November 7, covering the third quarter. With many businesses expecting to get back to normal working operations over the summer months, it’s important to plan for your next VAT payment when assessing cashflow and capital in the coming months.

The government previously announced that VAT payments due between March and June could be deferred in a bid to help businesses manage cashflow during the worst of the lockdown restrictions. If this is an option that you took, your next VAT payment may be higher than usual if you choose to repay the deferred amount. However, you do have until 31 March 2021 to make this payment.

3. Income Tax payment

On 31 January 2021, income tax payment is due, which may affect business owners taking an income from the business. On this date, the tax liability for income earned during the 2019/20 tax year will be due. As a result, it may be significantly higher than your earnings over the previous 12 months if operations were affected by coronavirus. Some business owners may have found they’ve dipped into savings allocated to income tax amid stagnant cashflow too. Being aware of the date in January can help build up the sum you need to pay.

If you choose to defer an income tax bill due on 31 July 2020, this will now also be due on 31 January 2021.

For businesses and owners that will struggle to pay the next income tax payment due to the effect of lockdown, there may be an option to discuss a Time to Pay arrangement with HMRC. This doesn’t clear the amount owed but can spread out the cost.

4. Delayed VAT payment

As mentioned above, businesses did have the option to delay making VAT payments amid the coronavirus crisis. If this is an option you took advantage of, the deferred VAT payment must be made by 31 March 2021. At a time when you may have other financial commitments, it’s important to keep this additional payment in mind.

Hopefully, as lockdown restrictions begin to ease, the majority of businesses will be able to get back to ‘normal’ in the coming weeks, setting them on the right track to meet repayments next year.

5. Start of repayments for coronavirus loan schemes 

The government introduced several schemes designed to help business during the uncertainty of the pandemic. These included the Coronavirus Interruption Loan Scheme and the Bounce Back Loan Scheme. These offered favourable lending terms to eligible businesses. If you’ve taken advantage of these schemes, it’s important to keep in mind when repayments will need to be made.

The Coronavirus Interruption Loan Scheme provides support to SMEs that lose revenue due to coronavirus. Through the scheme, a lender can provide up to £5 million in the form of term loans, overdrafts, invoice finance and asset finance. The lending is backed by the government in order to encourage more lending. The government will make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied changes. As a result, interest payments may be due from April 1 2021.

The Bounce Back Loan Scheme gives the lender a full government-backed guarantee against the outstanding capital and interest. Businesses can borrow from £2,000 up to 25% of a business’ turnover, up to a maximum £50,000, over a six-year term. The borrower doesn’t have to make any repayments for the first 12 months, with the government paying the first 12 months of interest payments.

If your business has been affected by the lockdown restrictions, getting to grips with the finances now can help put you on the right path. Don’t delay seeking support if it’s needed. We’re also here to offer advice if your personal finances have been affected by Covid-19, please get in touch if you have any questions.

Men and women often take different approaches to financial issues, including investing. The market volatility experienced during the last few months as a result of the Covid-19 pandemic has highlighted some of these differences. But is one way ‘right’?

As governments around the world took action to stem the spread of coronavirus, stock markets reacted with increased volatility. Lockdowns and social distancing meant many businesses were forced to adjust how they operate and in some cases close altogether. As the virus was named a global pandemic, uncertainty for businesses and economies continued. As a result, it’s not surprising that stock markets experienced sharp falls.

Whilst some gains have since been made on stock markets, uncertainty and volatility continue to be a feature of investing.

The recent fluctuations have highlighted how men and women view investing and the risk it entails different. Research from Aegon has tracked how some investors have responded, with the three key areas demonstrating different approaches to investing.

1. Keeping an eye on stock market movements

The stock markets have been making attention-grabbing headlines in recent months. However, the survey suggests that men are far more likely to closely follow the movements. Seven in ten men kept track of what was happening in the stock markets, compared to half of women.

Whilst it’s important to understand the wider economic and business picture when investing, stock market movements can be unpredictable. Short-term volatility can also cloud the bigger picture. When investing, you should have a long-term goal in mind. It can be difficult to ignore short-term movements and focus on a goal that’s years away. Historically, peaks and troughs in stock market performance smooth out when you look at the long term and this is what you should focus on.

When looking at your portfolio as a whole, it’s unlikely stock market movements give a full picture of performance either. As well as stocks and shares, you may also be invested in bonds and property, as well as holding cash. As a result, whilst the stock markets may have fallen sharply in recent months, the impact on your portfolio may not be as severe.

2. Tracking investment performance

It’s important to keep track of how investments are performing, after all, how else will you know if you’re on track to meet goals?

However, there is such a thing as checking too often. It can be tempting, especially during times of market volatility, to check your investments frequently. Linking to the above point, this can lead to you focusing on short-term movements rather than a long-term goal.

The research suggested men are more likely to check how their investments have performed. More than half of men (55%) said they had done so compared to only 33% of women.

Reviewing your investments is clearly important, there may be times due to your circumstances or wider economic situation when adjustments are necessary. However, these changes should consider your goals above short-term shocks. If you’ve felt worried or nervous after checking your investment performance recently, it’s important to keep this in mind.

For most investors, sticking to a carefully crafted long-term investment strategy, which has been stress-tested, is the best course of action.

3. Believing now is the right time to invest

Should you invest now? It’s a question investors often ask their financial advisers. When stock markets dip, you may be wondering if you should invest now in order to maximise the benefit of investing when the market is at a bottom.

It’s a process that’s more likely to appeal to men, the research found. Some 46% of men said they believe now is the right time to invest in their pension, compared to 33% of women. It suggests that women are more averse to taking investment risk at times of volatility. So, which gender is ‘right’?

The truth is there’s no universally right time to invest. It depends on your financial goals and means. If you’re already contributing regularly to a pension, it’s likely in your best interests to keep making the contributions over your working career, including during times of volatility. But should you increase pension contributions now? That will depend on when you plan to retire, what assets you hold and risk profile among other factors.

The ‘right’ time to invest should be about your circumstances rather than stock market movements.

We’re here for you if you’d like to discuss your investment portfolio, whether you’re concerned about risk or looking for opportunities. Contact us to set up a meeting and look at your long-term investment goals.

Please note: The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

How much of your wealth do you hold in cash? Whilst it’s often viewed as the ‘safe’ option, there is a danger of your assets losing value in the long term and holding too much in cash too.

It’s easy to see why people choose to hold large sums in cash. As it’s something we handle every day, whether physically or digitally, it can seem more tangible than other assets. The Financial Services Compensation Scheme (FSCS) also protects up to £85,000 should a bank or building society fail per individual. The combination of these factors may mean you view cash as the most appropriate way to hold wealth.

However, cash does lose value and this is particularly true in the current low-interest climate.

Interest rates have been at a historic low for more than a decade following the 2008 financial crisis. The Bank of England has recently cut rates even further. In March, as it became apparent Covid-19 would have an economic impact, the central bank slashed the base interest rate to just 0.1%, the lowest level on record.

Whilst potentially good news for borrowers, the rate cut isn’t positive for savers. It means your savings likely aren’t going to deliver the returns they once were, especially if you compare the current rates to the pre-2008 ones. Before the financial crisis, you could expect to enjoy interest rates of around 5%.

At first glance, lower interest rates can seem frustrating but don’t mean there’s any need to change how you hold assets. After all, your money is secure and whilst it might not be growing very fast, it’s not going down, right? This is true if you’re just looking at the amount that’s in your account. However, in real terms, the value of your savings will be falling.

Inflation: Affecting the value of savings

The reason the value of cash savings falls in real terms is inflation. Each year the cost of living rises and if interest rates fail to keep pace with this, your savings are gradually able to purchase less and less.

The Consumer Price Inflation (CPI), one of the measures for calculating inflation, for April 2020 suggests the inflation rate was 0.9%. This figure was down on long-term averages due to coronavirus restrictions, however, it’s still higher than the base interest rate. As a result, the spending power of cash savings will have fallen.

Year-to-year, the impact of inflation can seem relatively small. Yet, when you look at the impact over a longer period, it highlights the danger of holding too much in cash.

Let’s say you placed £30,000 in a savings account in 2000. Following almost two decades of average inflation of 2.8% a year, your savings in 2019 would need to be £50,876.75 to boast the same spending power. With low-interest rates for more than half of this period, it’s unlikely a typical savings account would help you bridge this gap.

When is cash right?

Whilst inflation does affect the spending power of cash savings, there are times when it’s appropriate.

If you need ready access to savings cash accounts are often suitable, for example, if you have an emergency fund. When you’re saving for short-term goals (those less than five years), a savings account should also be considered. Over short saving periods, inflation won’t have as much of an impact and can preserve your wealth for when you need it.

However, when setting money aside for long-term goals, investing may be a better option that’s worth considering.

Investing: When should it be considered?

Investing savings means you have an opportunity to beat the pace of inflation with returns, therefore, preserving or growing your spending power.

However, investment returns can’t be guaranteed and short-term volatility can reduce values. For this reason, investing as an alternative to cash should only be considered if your goals are more than five years away. This provides an opportunity for investments to recover from potential dips in the market.

If you’d like to talk to one of our financial planners about the balance of your assets, please contact us. Our goal is to align aspirations with financial decisions, helping you to strike the right balance.

Please note: The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.