Addressing the long-term impact of inflation

Brexit Impact on UK Businesses: Expert Analysis and Insights

Greetings to our clients! We present to you our latest business news roundup. Please do not hesitate to contact us if you wish to discuss how these updates may affect your business. We are here to provide support.

Addressing the long-term impact of inflation

Due to the persistent inflation in the United Kingdom, many of us and our businesses have experienced short- to medium-term setbacks. Despite the recent turmoil in the banking industry, the Bank of England has raised interest rates by 0.25% to 4.25%. This increase was anticipated by economists, considering the latest figures, which indicate that inflation rose to 10.4% in February, with food prices surging by 15% annually last month.

Last week, Andrew Bailey, the governor of the Bank of England, stated that the recent financial turmoil would not hinder the central bank’s ability to control inflation through higher interest rates.

Inflation is a problem that affects most people. Those who save money often see the value of their savings diminishes rapidly. For instance, at an inflation rate of 10%, £100 saved today would only be able to buy goods worth £90 after a year. Many individuals also face difficulties managing their household budgets due to inflation.

You must consider the issue if you struggle to keep up with your mortgage payments. A wealth of assistance is available, including Money Helper’s budget planner and a 5-step guide for managing mortgage arrears and payment issues.

Even borrowers, who might ordinarily benefit from inflation when the value of what they owe decreases, can be adversely affected by inflation if it triggers a rise in interest rates.

So, how can you safeguard your long-term finances and counter inflation?

Safeguard your retirement income

The impact of inflation on retirement savings is significant. The income that appears more than sufficient during the early years of retirement may seem less generous after ten years of inflation and become a recipe for misery after 20 years. With a basic level annuity, the buying power of your income will erode every year. In contrast, an inflation-linked annuity will offer a smaller income initially but will keep increasing over time. A drawdown pension, where your pension pot remains invested, and you withdraw income as required, is more flexible but requires caution to avoid running out of cash.

Avoid locking up your cash savings

Higher inflation leading to an increase in the Bank Rate by the Bank of England should benefit savers. However, savings providers have yet to raise their rates sufficiently to match inflation. As the Bank Rate is expected to rise further, and savings deals are also expected to follow suit, better offers may be available in the coming months. Shop around for the best deal and avoid locking your savings into a long-term one, as it could mean missing out on much better rates soon.

Review your investment strategy

Investing in something that could appreciate may be more beneficial than saving in an inflationary environment. While inflation decreases the value of cash savings, it increases the value of some investments.

However, choosing how to invest can be tricky. Bond investment becomes less appealing during inflation as bond income is vulnerable to inflation. Index-linked bonds protect investors by increasing the interest rate in line with inflation.

During inflation, some business sectors, such as oil and mining, tend to perform well as commodity prices rise, while others, such as retailers and supermarkets, struggle to increase prices. Luxury goods may also become less prevalent when households are tightening their belts.

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Lock in a low-rate mortgage before rates rise

Inflation has led to rate hikes, making mortgages more expensive than last year. This trend may continue, as hinted by the Bank of England. To avoid increasing interest costs, which could make buying a home difficult or impossible, it is wise to secure the lowest possible rate for your mortgage, fixed for the longest possible term.

Seek expert advice

Managing money during inflation can be challenging, but it becomes much more manageable if you have an expert to assist you. Therefore, book a free consultation with our financial adviser for help.

The UK and the EU have officially adopted the Windsor Framework.

During the Withdrawal Agreement Joint Committee meeting in London, the Foreign Secretary, James Cleverly, and Vice President of the European Commission, Maroš Šefčovič, met to approve the agreement.

This meeting followed the House of Commons vote on the Stormont Brake legislation, which introduces a democratic safeguard allowing Northern Ireland institutions to decide whether new goods rules should apply in Northern Ireland once they are restored. During a Council of the EU meeting, the EU also formally agreed to the Windsor Framework’s key elements.

See: UK and EU to formally adopt the Windsor Framework – GOV.UK (www.gov.uk)

UK Employer taxes update – Online P11D reporting

As the new tax year approaches, we highlight significant employer developments, changes to legislation and allowances relating to UK employer taxes, particularly online P11D submissions.

Spring Budget 2023

The Chancellor of the Exchequer, Rt Hon Jeremy Hunt MP, announced the Spring Budget on 15th March.

The main tax changes include modifications to capital allowances, adjustments to pension allowances, and a series of rate modifications.

The Budget Red Book contains all the details of the measures announced, and an overview of the tax legislation and rates can also be found.

Reporting expenses and benefits for the tax year ending 5 April 2023

Any changes will not affect employers who currently submit their original P11D and P11D(b) returns online. From 6th April 2023, employers who have submitted paper returns in previous years must submit their original P11D and P11D(b) returns online.

HMRC has changed the legislation to mandate the submission of these returns online through one of the following:

HMRC will no longer accept paper P11D and P11D(b) forms, including lists. Employers can use HMRC’s free PAYE online services to submit up to 500 P11D and P11D(b) returns, but for more than 500, third-party software is required.

HMRC will publish electronic versions of the P11D and P11D(b) forms on GOV.UK, which will enable employers and agents to submit amended forms electronically from 6th April 2023. No software changes are required as this electronic form is not part of the current online services.

Paper P11D and P11D(b) (original or amendment) forms submitted from 6 April 2023

If an employer submits a paper P11D or P11D(b) (original or amendment) from 6th April 2023, the form will be rejected as it has yet to be submitted in the prescribed manner. The employer or agent will be notified of the rejection and directed to the correct process.

Please contact with us if you require any assistance regarding the legislative changes or submitting your return.

UK FTSE 100 Boards See Significant Increase in Female Representation with Nearly 40% Women on Top Table Roles”

The UK has made impressive strides in promoting gender diversity in FTSE 100 boardrooms, as nearly 40% of top table roles are now held by women, up from 12.5% a decade ago.

According to the FTSE Women Leaders Review report, the country has also climbed to second place in global rankings for women’s representation on boards, which monitors the presence of women in 24,000 positions across FTSE 350 boards and leadership teams in major UK companies.

The report notes a significant shift in attitudes towards women’s leadership, with increased representation across FTSE 100 (39.1%), FTSE 250 (36.8%) and FTSE 350 (37.6%) in 2021. The UK’s voluntary, business-led approach to setting targets for women’s board participation is a success, propelling the country from fifth to second place in international rankings, overtaking countries such as Norway, which enforce mandatory quotas.

See: Sea-change in UK boardrooms as women make up nearly 40% of FTSE 100 top table roles – GOV.UK (www.gov.uk)

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UK Space Agency Partners with Secure World Foundation to Host Summit on Space Sustainability and Debris Management”

The UK Space Agency has announced that it will co-host the 4th Summit for Space Sustainability in partnership with the Secure World Foundation. The global summit, taking place in London on June 22 and 23, aims to explore new approaches to ensure a secure, sustainable, and safe space environment, including tackling the problem of space debris that threatens the satellites crucial for our daily lives.

The summit will bring together experts from government, industry, and academia worldwide to discuss the pressing challenge of sustaining space operations. The accumulation of space debris is one of the space industry’s most significant concerns. Approximately 30,000 pieces of debris are currently being tracked from Earth, including old satellites, discarded rocket bodies, and even tools dropped by astronauts.

Furthermore, an estimated 130 million pieces of smaller debris pose a significant risk to new satellites launched each year, which provide vital services such as communication and climate change monitoring. Space debris can remain in orbit for hundreds of years, presenting a real danger to space missions and the sustainability of space activities.

See: UK Space Agency to co-host Summit for Space Sustainability – GOV.UK (www.gov.uk)

UK Business Leaders Appointed as Chairs of Employment Advisory Boards in Resettlement Prisons

The Co-op, Greggs, Iceland, and Oliver Bonas are among the UK industry leaders chosen as chairs of Employment Advisory Boards in all 92 resettlement prisons. These boards aim to assist prisoners nearing the end of their sentence by preparing them for release into the community and helping them find work.

The initiative aims to gather insights on the skills, qualifications, and training needed to help ex-offenders successfully re-enter the workforce by linking prisons with leading business figures. This will enable prisons to tailor their training and workshops to match local labour market demands, ensuring ex-prisoners have the skills necessary to find employment.

Launched in March 2022, the initiative is designed to enhance the UK economy while addressing the £18 billion annual cost of reoffending. Studies show that employed ex-prisoners are nine percentage points less likely to re-offend, making steady employment an essential factor in reducing reoffending rates.

See: Leading UK bosses join the mission to get thousands more prisoners into work – GOV.UK (www.gov.uk)

Expanding the Use of Income Tax Cash Basis for Self-Employed Individuals

Expanding the Use of Income Tax Cash Basis for Self-Employed Individuals

The HM Revenue & Customs (HMRC) is seeking feedback and opinions on proposals to extend the eligibility and use of the income tax cash basis for self-employed individuals. These proposals aim to simplify the regime, making it easier to understand and apply and allowing more businesses to take advantage of its benefits. This will help businesses save time and effort in filing their tax returns.

What is the Income Tax Cash Basis?

The cash basis is a simplified method of calculating taxable profits for businesses with straightforward tax affairs. Under this regime, businesses can calculate their taxable profit by subtracting their expenses from their income based on the actual cash received or paid out. This simplifies the reporting process by eliminating complex accounting and tax calculations such as accruals and most capital allowances.

The Four Policy Proposals

The consultation will focus on the following four policy proposals, although additional ideas are welcome:

  • Increasing the turnover thresholds for businesses to use the cash basis
  • Making the cash basis the default option, with an option to opt out of accruals
  • Increasing the limit on interest deductions to £500 on the cash basis
  • Relaxing restrictions on the use of relief for losses made on the cash basis

Who Should Respond to This Consultation?

The HMRC invites feedback from businesses, particularly self-employed individuals who are either currently using or eligible to use the cash basis, their advisers, representative bodies, software providers, and other interested parties.

See: Expanding the cash basis – GOV.UK (www.gov.uk)

Revision of HMRC Late Payment Interest Rates after Bank of England Increases Base Rate

On 23 March 2023, the Bank of England Monetary Policy Committee announced an increase in the Bank of England base rate from 4% to 4.25%. As HMRC interest rates are linked to the base rate, there will be an increase in the interest rates for late payments and repayment.

The changes will take effect on:

  • 3 April 2023 for quarterly and
  • 13 April 2023 for non-quarterly instalments payments.

The late payment interest rate will be the base rate plus 2.5%, while the repayment interest rate will be the base rate minus 1%, with a minimum floor of 0.5%.

See: HMRC late payment interest rates to be revised after Bank of England increases base rate – GOV.UK (www.gov.uk)

Consumer Warning on Pre-Paid Probate Plans

The Financial Conduct Authority (FCA) has warned that the UK has unregulated pre-paid probate plans. Customers should consider carefully whether these products meet their needs and offer value before purchasing them.

There are no regulatory protections for customers as the FCA does not regulate pre-paid probate firms or the pre-payment of probate costs. The Financial Services Compensation Scheme does not protect pre-paid probate plans, and commission is often included in the fee paid, increasing the price of the plan. Additionally, the money paid into plans may not be safe if the firm fails, as no rules require the money to be held in trust or backed by insurance.

You should note in particular:

  • Pre-paid probate plans are not protected by the Financial Services Compensation Scheme. This means that should the company fail, there is no guarantee that you will receive your money back.
  • Commission is often included in the fee you pay. This increases the price of the plan. There is no commission ban on the sale of pre-paid probate plans (as there is for funeral plans).
  • Your money may not be safe if the firm should fail as there are no rules requiring the money paid into plans to be held in trust or backed by insurance. 

See: Consumer warning on pre-paid probate plans | FCA

Bank Holiday Reminder – The Coronation of His Majesty The King

The UK Government has announced an additional bank holiday on 8 May 2023 in honour of the coronation of His Majesty King Charles III. The coronation will take place on Saturday, 6 May.

See: Coronation of His Majesty The King & Her Majesty The Queen Consort

£9.13 Million Awarded to Develop Cutting-Edge Farming Technology

The UK government has awarded £9.13 million in funding to three projects for research and development aimed at boosting agricultural productivity, sustainability, and climate resilience.

The funding will support the development of robotic crop harvesting for horticulture, an autonomous system to change cows’ bedding to improve their health, welfare and productivity, and a more environmentally friendly approach to potato cultivation.

The projects are being supported through the Large R&D Partnership competition, part of the government’s £270 million Farming Innovation Programme. and a second round of the competition is currently open for applications.

The government has committed to spending around £600 million on grants to support farmers’ investment in productivity, animal health and welfare, innovation, research and development over three years, funded from the £2.4 billion annual farming budget. which is being maintained at its current level for the rest of this current Parliament.

Alongside the ongoing roll-out of the Environmental Land Management schemes, the grants will help to deliver long-term sustainable food production and support farmers to halt and reverse the decline of nature as set out in the Environmental Improvement Plan.

See: £9.13 million awarded to develop cutting-edge farming technology – GOV.UK (www.gov.uk)

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