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.

Are you worried about the long-term economic impact of the coronavirus lockdown? If you are, you’re not alone.

As the coronavirus pandemic is brought under control and restrictions are gradually lifted, concerns around the health risks are easing. However, taking their place are fears about what the lockdown and ongoing social distancing guidelines mean for the economy in the coming months and years.

A survey from Aegon found those very worried about their own health was just 8%, compared to 15% in March when the lockdown was first brought in. Concern about family members remains higher at 17% but is still significantly lower than the 31% registered in March.

Instead, concerns appear to have shifted to the long-term economic impact and financial security. Some 90% of individuals said they had concerns about the impact of Covid-19 on the economy, with 84% still closely following the news for updates.

Steven Cameron, Pensions Director at Aegon, said: “In the initial period of outbreak, we were all understandably in a heightened state of alert about how we individually, as families and as a nation could navigate the greatest public health crisis in more than a century.

“Whilst remaining vigilant is still key there are some signs that health concerns are coming off their peak and are being replaced by growing concerns about damage to the UK economy and what that will mean for jobs, incomes, taxes and wealth. While the government’s focus rightly continues to be on protecting people’s health and lives, our research findings point to a growing awareness of the difficult balance the government will have to strike as it also seeks to protect livelihoods and the longer-term health of the economy.

Economic forecasts

Economic forecasts vary hugely and offer no certainty about how the economy will recover over the coming months. But the lockdown and ongoing social distancing restrictions will certainly have some impact on the economy.

There are worries that significantly decreased revenue, particularly in sectors like retail, travel and entertainment, over the last few months will mean many businesses and jobs are lost. The Bank of England has warned that the British economy could shrink by 14% this year and unemployment could more than double by spring 2021. Other forecasts paint an even more pessimistic picture.

Whilst forecasts can be a useful indicator, it’s important to keep in mind that they aren’t always accurate, and a huge number of factors will influence how the UK economy performs over the coming months. If you’re worried about economic uncertainty affecting your plans, remember to keep the long term in mind. Historically, markets and economies have recovered when you look at performance over an extended period.

Repaying the cost of coronavirus: Will income taxes rise?

The government has delivered unprecedented support to businesses and individuals during the coronavirus pandemic. This includes the furlough scheme, where the government is paying up to 80% of the salary of workers that are unable to work, which millions have benefitted from.

Whilst it’s hoped these steps have saved millions of jobs, it has come at a cost. As we still battle Covid-19, it’s impossible to tell how big the final bill will be. According to the Office for Budget Responsibility, it could be as much as £298 billion for the 2020/21 tax year.

In order to pay for this, the government will need to raise revenue from somewhere. So, it’s not surprising that people are wondering if manifesto pledges will be broken and taxes will rise. A leaked Treasury document highlighted some of the options the government is considering to balance the books, this includes increasing Income Tax and ending the State Pension triple lock, which sees the State Pension increase by a minimum 2.5% each year.

The Conservatives pledged not to “raise rates of Income Tax, National Insurance or VAT”. These, however, are among the largest contributors of tax revenue and the increasing deficit could mean promises are broken.

We can’t say for certain what will happen over the coming weeks and months, but we do know that the government will need to take action to repay the costs. It seems likely that some tax changes are on the horizon.

Preparing for uncertainty

Predicting what will happen over the coming months and years is impossible. There are a whole host of factors that can influence the economy but there are things you can do to ensure you’re able to weather turbulent periods should they happen.

• Build up and maintain your emergency fund, ideally three to six months of outgoings, to fall back on if needed
• Go back to basics with budgeting and understanding where your income goes
• Have appropriate financial protection policies in place to act as a safety net if it’s needed
• Review your investments and savings with a long-term goal in mind
• Assess your finances and plans as changes are announced.

If you have concerns about your financial goals amid economic uncertainty, please get in touch.

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.

The State Pension is an essential part of retirement planning and provides a foundation to build on. Whilst the basics are simple, it can be far more complex to understand what you’re entitled to and when than you’d think at first glance.

Our Complete Guide to the State Pension is designed to help you figure out how the State Pension will support your retirement goals alongside other income. From how the State Pension age is changing and when you’ll receive it to what the triple lock means for your future income, we look at the crucial things you need to know.

If your retirement date is approaching, taking some time to read our guide and understand the State Pension can help ensure your finances are in order. Click here to grab your free copy of the guide.

We are here to help answer your questions. Get in touch with one of the Ashworth Financial Planning team to start planning your retirement.

Sadly, the market news for April continues to be pessimistic as economies around the world continue to grapple with the impact of Covid-19. The good news is that some of the short-term volatility seen in March has calmed. However, when looking ahead for the next few months and beyond, there’s still a lot of uncertainty.

With countries in Europe and further afield in lockdown for much of April, it shouldn’t come as a surprise that recession fears continue. The World Trade Organisation suggests world trade could shrink by 30% in 2020, a bigger drop than the one that followed the banking crisis in 2008. The International Monetary Fund has also warned the world faces the greatest recession since the 1930s. The organisation now expects that global economy to shrink by 3% in 2020, rather than the 3.3% growth predicted at the beginning of the year.

As of the end of April, governments are looking at ways to begin lifting lockdown measures in many countries. How countries respond in the following weeks could give a better indication of what’s to come for the rest of 2020.

UK

The headline figures from the UK highlight how many businesses are struggling to continue operations amid the lockdown restrictions.

Figures from the Office for National Statistics revealed that one in four firms have temporarily closed amid the coronavirus pandemic. Of those firms still operating, many are using the government scheme to furlough staff, with the government paying up to 80% of wages. The scheme is due to close at the end of June but could be extended.

In a bid to support businesses getting back on their feet once restrictions are lifted, Chancellor Rishi Sunak unveiled the Bound Back Loan Scheme, which will help SMEs borrow between £2,000 and £50,000. The government will guarantee 100% of the loan.

The UK composite PMI slumped to just 12.9 in April, down from 36 in March. Anything below 50 indicates a contraction and the latest figure is worse than even pessimistic forecasts expected. Other readings show:

• UK factories cut jobs at their fastest pace since 2009 after both output and new orders fell, according to Markit
• Construction activity fell at its steepest pace since 2009, with an IHS Markit reading of 39.3 in March, down from 46

With the travel sector among the hardest hit, airlines have been lobbying the government. There has been growing pressure to bail out Virgin Atlantic, and Airbus and Rolls-Royce are among those calling for greater support.

As the vast majority of shops are shut, retail is another sector that’s suffering due to the restrictions. According to Springboard, UK retail footfall fell sharply by over 80% in the last week of March. Focusing on individual companies, Debenhams, which has been struggling for some time, filed for administration. Well-known high street brands Oasis and Warehouse also collapsed into administration in April.

Europe

The picture across Europe is broadly similar to that in the UK, with businesses struggling and fears of a deep recession growing.

Germany, often seen as the stalwart of the continent, is expected to see GDP shrink by 9.8% in the second quarter. This would be the biggest decline since records began in 1970. With this in mind, it’s not surprising that business confidence in the country is falling. The monthly IFO survey slumped to 74.3 from 85.9, a record low and the biggest monthly fall on record.

Looking at the eurozone as a whole, the PMI data indicates a sharp contraction, similar to the one experienced in the UK. The indicator hit an all-time low of 13.5 in April, down from a prior record low of 29.7 in March.

Once again, the airline industry has been one of the hardest hit in Europe. Iata, the European industry body, has stated that 90% of flights in Europe have been cut, placing 25 million aviation jobs at risk. One of the challenges facing the industry is handling refunds for cancelled flights. The body estimates airlines have £28 billion in tickets that are eligible for refunds.

US

One of the statistics from the US highlighting the situation is the unemployment figure. As jobless claims increased to exceed six million, unemployment reached 4.4%. With the Trump administration often using employment figures to indicate success, it comes as a blow. As restrictions start to be lifted in the US, it’s hoped the job market will begin to recover but how long it will take remains to be seen.

Mimicking other economies, US factory production also slumped. According to Markit, last month experienced the fastest rate of decline since the 2008 financial crisis a decade ago.

Asia

As Asia was the first area to be hit by coronavirus and lift lockdown restrictions, the region could indicate how other economies will fare in the coming weeks and months.

Trade data from China shows tentative signs of recovery. The figures for March show exports fell 6.6% and imports shrank by 0.9% year-on-year. Whilst still in decline, it’s a marked recovery when compared to January and February, providing some light at the end of the tunnel.

In a bid to get the economy moving, China announced it was slashing the amount of cash SME banks have to hold in reserve. It’s hoped this move will pump more liquidity into the economy and release around 400 billion yuan (£46 billion) into the market.

Japan has also announced a stimulus package worth 108 trillion yen ( £811 billion) in cash payouts to households and small businesses, as well as deferred social security and tax payments.

Whilst the market news paints a gloomy and uncertain picture, it’s important to remember that you’ve invested with a long-term goal in mind. Portfolios have been stress-tested and chosen in line with your risk profile and aspirations. If you have any concerns about your investments, 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.

Restrictions on travel and concerns about the coronavirus pandemic may have affected your holiday plans for the summer months. There’s been a lot of contradictory information about what you’re entitled to and if you must cancel. So, we take a look at what your rights are and what your next steps should be if you’re affected.

Most people with travel plans in the next few months have had to abandon them. The Foreign Office currently advises against all non-essential travel, whether you’d been planning to visit a destination in the UK or abroad. On top of this, several countries have also, in effect, closed their borders and have stringent restrictions in place.

Even if the borders are open at your chosen destination, it’s likely restrictions and social distancing measures are still in place. It may mean that whilst you’d be able to get there, the activities you’d been looking forward to are no longer possible.

If you’ve yet to book a summer holiday but had hoped to, it’s strongly advised that you delay for a few months whilst the uncertainty remains.

So, if you already have a holiday booked, are you entitled to a refund? This will depend on how you’ve booked your holiday, where you’d planned to go and the travel insurance you’ve taken out.

Package holidays

If you booked a package holiday, you are entitled to a refund under current rules if it’s cancelled due to coronavirus. However, the Travel Association ABTA is calling on the government to make temporary changes as it argues the protection wasn’t designed to cope with current demands.

Whilst you should be issued a refund if your package holiday has been cancelled due to coronavirus, some consumers are finding they’re being refused. This is because, in the wake of thousands of holidaymakers asking for refunds, many companies are going to struggle. They may offer you a voucher or credit note instead. You don’t have to accept this; you’re legally entitled to a refund if you want it.

Keep in mind that some firms aren’t cancelling holidays far in advance. If your holiday isn’t for a few months, you’ll likely have to wait to see how the situation develops before a travel company will issue a refund. Some firms are cancelling holidays just three weeks in advance.

Flights

Flights are a little more complicated and will depend on the airline.

The good news is that all flights, on any airline from an EU country, as well as Iceland, Norway, Switzerland and the UK, and any flights on any EU carrier from any airport are liable for a refund. If this applies to you, contact the carrier directly, to start a claim. Some firms are dealing with this better than others, but delays in responses and getting through to a customer service team should be anticipated.

As with package holidays, some airlines that should be offering refunds under the EU rules are refusing to give them or insisting customers accept vouchers. Again, you are entitled to a refund by law.

Outside of the EU, refunds will likely depend on the individual airline and travel agent’s, so check their terms and conditions and get in touch.

Accommodation

If your hotel has closed and is unable to deliver the service promised, you’ll be entitled to a refund.

However, if you need to cancel accommodation due to not being able to reach the destination or for other reasons, a refund will be reliant on the goodwill of the hotel or website you have booked with. Many major hotel chains and booking platforms, such as Booking.com and Airbnb, have waivered their cancellation fees but there’s no obligation to do so.

Travel insurance

Finally, if you already had travel insurance in place before the coronavirus pandemic, you should be protected if you’re acting in line with advice given by the Foreign Office. Be sure to check what your individual policy covers and seek a refund from providers first. However, as a last port of call, travel insurance may cover the costs that can’t be refunded, this may also include the costs of transfers and excursions. If your travel operator tells you to claim on insurance, ask for this in writing.

If you don’t have travel insurance, it’s too late to get a policy that will cover you for coronavirus-related claims as providers have updated their terms and conditions.

Your next steps

If your holiday is being cancelled or you’d like to cancel it, your first step should be to get in touch with the providers. Many travel companies are offering the opportunity to postpone trips and are not taking bookings until later in the year or until 2021 in some cases. Speaking to them directly can help you understand what your options are.

However, this may be easier said than done. Unsurprisingly, customer service teams are dealing with large numbers of enquiries, whilst also managing with fewer staff due to social distancing measures. So, expect to be waiting a while for a response, whether you call or email. Many companies are working through the bookings in date order, so those with holidays in a few months may be forced to wait several weeks whilst the situation is assessed.

If you don’t have much luck with the provider, then contact your travel insurance company. Again, expect long delays before your query is resolved.

Chargeback also offers an alternative solution if you paid for parts of your holiday by credit card. Paying by credit card gives you added legal protection if the company you’re buying from doesn’t deliver what’s promised, in this case, a holiday. Section 75 of the Consumer Credit Act covers goods or a holiday costing over £100 and up to £30,000. You don’t need to pay the full price by credit card, paying the deposit is enough to get your legal protection.

To receive a chargeback, you should try to contact the travel company first. If they don’t respond or refuse a refund, write to your credit card company, stating what you bought, along with proof of purchase, and that you’d like to refund the purchase price into your credit card account.