The Chancellor’s update to the House of Commons yesterday made pretty grim listening. It’s not going to surprise anyone to hear that due to two national lockdowns and a myriad of local lockdowns, the economy has shrunk in 2020 by 11.3%. The economy is forecast to recover back to pre-pandemic levels in 2022.
You can look at this two ways. Either let it get you down. Or remember that after the Spanish Flu pandemic finished in 1920, Britain enjoyed the roaring 20s. In other words, better times are coming ahead. And we are here to help you get to those better times and enjoy the fruits of your labours.
Apart from gloomy economic figures, the chancellor did announce some changes you need to be aware of:
- The minimum wage (now rebranded as the National Living Wage) will increase in April to £8.91 an hour for people 23 and over. 16 and 17 year olds will see their pay go up to £4.62 per hour.
- People with a defined benefit retirement scheme will see their pensions reduced from 2030. This is due to the pension payments, from 2030, which increase with the cost of living using a new cost of living calculation. Currently the cost of living is calculated using various measures, including the Retail Prices Index. Whereas from 2030, the cost of living will be calculated using the CPIH: The catchily titled “consumer prices index plus housing costs”. These changes will not impact the state pension.
Given that the country has its highest borrowing levels outside of war time, it is fairly certain that we will see in the next year or so rising taxation to help the treasury balance the books. We don’t know yet what taxes will be raised and what reliefs will be lowered. But expect – if the media is to be believed all these to be raised; Capital Gains Tax, Inheritance Tax, Income tax, and NI contributions for self-employed people.
We are already seeing some of this happening at HMRC. They are toughening up their stance on ‘time to pay’ agreements, as well as investing very heavily in fraud and tax investigations. As with all these things, if you are concerned about your cash flow or any potential irregularities please get in touch with us sooner rather than later. The earlier we find out about any problems the easiest it is for us to help mitigate the impact for you as a business owner.