Business Matters – Issue 6

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Budget

The backdrop to this year’s Budget was pretty clear:

Digital assets

Why including your digital assets in your Will

Flexible future

We discuss whether working from home will become the norm

Remote recruitment

The pandemic has brought about a revolution in remote working

Budget 2021: Your at-a-glance highlights

Now that the dust has settled on the Budget 2021 and ‘Tax Day’, we take a look at the key relevant highlights from the two announcements, and what these could mean for you and your business.

The backdrop to this year’s Budget was pretty clear: high government borrowing, high government debt, and a Chancellor who is committed to continue supporting the economy, jobs, individuals and businesses. Furthermore, Rishi Sunak’s plans address the need to repair public finances in an honest and open way, and thus begin to build our future post-pandemic economy.

He also clarified that only changes that would be incorporated into the next Finance Bill will be announced at the Budget, with any consultations on future tax being published on 23rd March – more on that later!

As predicted, Sunak’s announcement confirmed a theme of extensions and freezes – read on to get an overview of what these are and how they might affect you.

  • Furlough extension

The Coronavirus Job Retention Scheme (CJRS) – a government wage support measure during the pandemic – has already protected around 11 million UK workers, and had been set to finish at the end of April 2021. Many people will be relieved to know that the scheme will now be extended until 30th September 2021 – there are a few changes and tweaks, but on the whole, this is very positive news that will help millions through the “challenging months ahead”.

The government will continue to cover 80% of furloughed workers’ wages, while employers will need to pay NI and pension contributions. Employers will then be expected to pay 10% towards the hours their staff do not work in July, increasing to 20% in August and September, as the economy reopens.

  • Income tax rates frozen

Your income tax rate – the tax you pay on money you earn from working – all depends on how much of your income is above your personal allowance, and how much of your income falls within each tax band.

The basic personal income tax allowance will increase by £70 to £12,570 from 6th April 2021 and the basic rate limit will rise to £37,700 up from £37,500 – the higher rate threshold will increase by £270 to £50,270. The personal allowance and basic rate and higher rate tax thresholds will subsequently remain frozen at these levels for tax years up to and including 2025/2026.

The Office for Budget Responsibility (OBR), the government’s official and independent forecaster, said this policy would bring 1.3 million more people into paying income tax and one million more into paying at the higher rate – known as fiscal drag. The policy will raise an extra £8 billion a year for the Treasury, compared with what it would have received had it increased the thresholds in line with inflation.

  • Pensions lifetime allowance level frozen

The pensions lifetime allowance – the limit on the value of your pension schemes that can be accumulated without triggering an extra tax charge – is, for most people, £1,073,100. Following the Budget announcement, this level is to be frozen as of 5th April 2021 for five years until 2025/2026.

Although this is not a reduction, for those with pension savings at or over this value, careful planning will be needed to minimise any impact, at least in the short term. Ordinarily, an inflation-linked increase of up to around £1,200,000 would have been expected over the next five years, which is significant. It’s worth knowing that, if care is not taken with your retirement strategy, it will bring more people into the lifetime allowance charge.

  • Stamp Duty extension

Stamp Duty – a tax you might have to pay if you buy a residential property or a piece of land in England and Northern Ireland – has been extended until 30th June 2021. The extension period was originally due to come to an end on 31st March 2021, so this is welcome news for anyone looking to purchase their first (or perhaps another) home, or move.

This rate will not apply if the amount paid for the property (as a main home) is under £500,000. In the instance where additional properties are purchased, an extra 3% in Stamp Duty will still need to be paid in addition to the revised rates for each band. As of 1st July 2021, the starting rate of Stamp Duty will be £250,000 until the end of September, when it will then return to the usual level of £125,000.

The government’s aim in unveiling this extension is to help buyers who might have taken a financial hit because of Covid – it could save them as much as £15,000, if they were buying a property of £500,000 or more.

  • Corporation tax increase

Corporation tax – a tax that is payable from all taxable profits of any company that is based in the UK, no matter where in the world the profit was generated – is set to increase from 19% to 25% as of 1st April 2023.

Business owners should be aware that this tax will only apply once profits reach £250,000. If profits are below £50,000, the current 19% rate will still apply – for all profits that lie in between these limits, a sliding scale will apply that is yet to be published.

Did ‘Tax Day’ set the scene for the Autumn Budget?

Hot on the heels of the Budget came ‘Tax Day’, which saw the government publish more than 30 policy updates, consultations and documents that would traditionally have been circulated at the Budget. The reasoning behind the delay appears to be down to country morale, with Chancellor Rishi Sunak opting to focus on COVID-19 support and the Green future, rather than getting into the nitty gritty of tax.

That said, there were no shocks held within the 17-page summary document – there were only minor changes to the admin behind Inheritance Tax (IHT). The only reference to pensions reform was a review over anomalies that exist in scheme rules, and there were no changes to Capital Gains Tax.

However, Sunak did detail various measures to improve the tax system for both HM Revenue & Customs and for taxpayers. One impact of the tightened tax rules is for second property owners, who can now only register for business rates if their properties are genuine holiday lets.

Experts will be disappointed with the lack of reform to Inheritance Tax (IHT) allowances or reliefs, but the proposed tidy-up to the paperwork side will no doubt be welcome. The government said: “Today’s update will cut inheritance tax red tape for more than 200,000 estates every year, dramatically reducing the amount of paperwork many families fill out.”

Before the announcement, it was expected that ‘Tax Day’ would signpost the government’s future plans, potentially with the Autumn Budget in mind. With no major changes announced thus far, speculation about how the government will seek to recoup the cost of pandemic support will no doubt continue.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

These latest changes to the tax landscape serve as an important reminder of the importance of informed advice in making sound financial decisions. If you feel you could benefit from some support to round off the current year in a tax-efficient way while gaining a steady footing into the new one, our Wellesley advisers will be only too happy to help.

Lock and pass-key: Don’t shut your loved ones out of your digital assets

Why including your digital assets in your Will is essential in helping your loved ones sort out your personal affairs – and your business succession.

You’ll likely have seen the recent headlines about a hapless cryptocurrency investor who’s potentially lost millions after misplacing the password needed to access the funds. While a lost password might not lose you millions, it can still cause a headache for your loved ones after you die. Here’s why!

Although it may seem like a gloomy topic, the fact remains that your death could prove even more distressing for your loved ones if they struggle to track down online bank accounts or access the information they might need for probate, which is stored on your email, such as life policies or legal papers. Not to mention being unable to access those treasured family photos saved on your computer or online accounts/clouds!

If you’ve made provision for your digital assets in your Will, you’re in the minority. According to new research by the Law Society1, only 26% of respondents know what happens to your digital assets when they pass away. What’s more, of those surveyed who have a Will, an overwhelming 93% had not included any digital assets. Law Society of England and Wales President David Greene, said:

“Photos, social media accounts and emails from loved ones are often just as treasured as physical possessions – and yet very few people understand what happens to their digital assets or why it is important to include them in their Will.”

Looking after your loved ones

What happens after your death can be a difficult subject to approach, but keeping a clear record of online passwords ensures that your loved ones are able to access your digital assets, and they therefore aren’t faced with any additional stresses during probate – ultimately, helping ensure your hard-earned assets will be passed on according to your wishes.

This is especially important for the self-employed, as business succession planning in the event of the untimely death of the owner is vital in safeguarding your business’ future. An appropriately drafted Will, including digital assets and passwords, can help avoid any unnecessary fall-out at an already upsetting time.

What’s more, taking stock of your digital assets now will help you value your estate, which will help you with your Inheritance Tax planning, to make sure your family gets the best out of any assets left behind. For example, if you total up all of your assets (including digital ones, such as online bank accounts) and your estate is above the £325,000 nil-rate band, you can start planning early to remove some of the money from your estate each tax year. This can be done by using your gifting allowance, or taking advantage of annual tax allowances, such as ISAs, Junior ISAs and pensions.

The role of Digital Executors

At Wellesley, our clients have access to WealthSafe, our online personal document filing system. When we introduce our clients to this secure digital platform, we insist on having ‘Digital Executors’, so that family members can access important documents and financial papers from anywhere in the world.

This not only helps with digital assets, but also allows you to store all your paperwork securely in one place, such as house deeds, tax returns or even an insurance valuation for jewellery, alongside the information shared by us.

If you’d like to discuss what happens to your digital assets after you die, or any of the other issues raised in this article, such as Inheritance Tax or business legacy planning, please get in touch with a member of the Wellesley team on 01444 244551.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

The writing of a Will and certain aspects of succession planning may involve the referral to services that are separate and distinct to those offered by St. James’s Place. This area of advice is not regulated by the Financial Conduct Authority or Prudential Regulation Authority.

Sources:

1 Lawsociety.org, Don’t Forget Digital Assets When making a will, 6 January 2021. A Populus survey of more than 1,000 members of the public commissioned by the Law Society asked several questions about whether people had made a will. The survey took place in late June 2020.

Is the future flexible?

We discuss whether working from home will become the norm, or if emerging from the pandemic will see businesses head straight back to the office.

Back in March 2020 (23rd, to be exact), five words spoken by Boris Johnson changed the working world as we know it – “you must stay at home.” Before the pandemic transformed the UK into an almost completely remote workforce, around 87% of people already wanted to work flexibly in the hopes of achieving a better work-life balance, reduced stress and higher job satisfaction. The pandemic’s silver lining granted employees their wish – even though employers remained resistant.

Claire Ward, Founder of SME HR consultancy, The HR Hub, explains:

“Companies who previously were not open to such flexibility have had their eyes opened to what’s possible, and a lot of companies are viewing this as an opportunity to change the way they work.”

And it’s not only businesses that it changes, but ‘business’ too. The CIPD says that improved engagement – one of the benefits of flexible working – can account for 43% more revenue generation and 20% improved performance. Normalising and supporting flexible working could even help to reduce an organisation’s gender pay gap and encourage a more diverse workforce, which, according to McKinsey, could add £150 billion annually to the UK economy by 2025.1 And as around 92% of people want to work flexibly, the business and geographical talent pool will become much wider, too.2

Of course, this work style isn’t without its own set of limitations; creative businesses that use brainstorming sessions find it difficult to find the same flow online, and wider disadvantages include increased loneliness and the financial outlay of supporting flexible working for some companies (minimal in the context of the bigger picture). It’s also likely that remote challenges to creativity won’t be there for long. “We’re already seeing technology that helps to break those creativity barriers, which have likely had their development accelerated over the last few months,” says Ward.

“Generally, the advantages outweigh any disadvantages,” explains Claire McCartney, Senior Resourcing and Inclusion Adviser at the CIPD. “Organisations should see a boost in productivity, a more engaged workforce, a diverse workforce and the ability to attract top talent.”

A four-day working week

Before the pandemic made working from home the centre of attention during 2020, the idea of a four-day week – employees working four days instead of five with no effect on their salary – was gaining in popularity.

Pre-pandemic, Henley Business School penned a white paper titled Four Better or Four Worse, which studied the world of the four-day week and revealed that UK businesses that implemented it saw combined savings of £92 billion.3 Professor James Walker, Director of Research at Henley Business School, did, however, point out a notable concern for business owners.

Professor Walker says:

“While 75% believe a less rigid working structure is key to a harmonious and diverse workplace, for some the benefits are either unnecessary or not substantial enough to warrant implementation. The biggest concern for business owners is customer availability.”

The white paper states that it is customer availability that prevents 82% of businesses from offering a four-day week, believing the need for employee availability to the customer outweighs the need for flexible working. Nearly three quarters of businesses – small businesses in particular – also felt it would be difficult to implement.

A year on

Over 12 months since the Prime Minister’s fateful announcement, many of us are still working from home (in January 2021 the percentage of adults working from home during at least some of the time stood at 45%, the highest since June 20204), although we expect to see more people returning to the office in line with the government’s ‘roadmap’.

Many office workers have liked working from home, and are drawn to new “hybrid” arrangements going forward. Sir Cary Cooper, President of the Chartered Institute of Personnel and Development and a professor of organisational psychology and health at Manchester University, recently told i News:

“The evidence pre-Covid was that people wanted to work more flexibly, and work partly at home, partly from a central office. The findings showed it enhanced job satisfaction, there was higher productivity, and less sickness and absence. But what most people didn’t want is what we’ve been doing in the pandemic: remote work 100 per cent at the time.” 5

Companies are reacting accordingly. In February 2021, global music streaming service Spotify announced its ‘Work From Anywhere’ programme, saying it will let employees choose wherever they want to work, whether that’s from home, in an office or a mix of the two, and will even let them move to different cities and countries. At the beginning of March, BP told their office-based employees staff around the world that they will be expected to work from home for two days per week after the pandemic, in a permanent shift to flexible working.

After the pandemic

While remote working has become the go-to for flexible working, it’s important to remember that a global crisis forced it upon us in the first place. As the future brightens and we emerge from the pandemic, businesses need to reassess their working practices while considering all options. “There are many forms of flexible working, from remote, part-time and term-time working to compressed hours, flexi-time and jobs shares,” says McCartney. “Employers will have to look beyond working from home or otherwise risk creating a two-tier workforce of those who have the opportunity to benefit from remote working and flexibility and those who don’t.”

Ward believes, particularly for SMEs, that core office days may be the way forward, which, as with any alternative that doesn’t require a full-capacity office, brings the bonus of reducing a business’s carbon footprint. Before decisions, there must be dialogue, advises Professor Walker:

“There is an imperative to open up conversations between employers and their employees, to trial and evaluate different forms of flexible employment which best suit the contexts and workplace roles.”

Ironically, shifting an entire sector into a particular form of flexible working may not really be flexible at all.

Sources:

1,2 Flexible working: the business case, CIPD, November 2018
3 Four Better or Four Worse, Henley Business School, July 2019

4 ONS data, February 2021

5inews.co.uk, Working from home: Hybrid remote working may be the future, March 2021

The opinions expressed by third parties are their own and not necessarily shared by Wellesley Wealth Advisory or St. James’s Place Wealth Management.

Remote interest: Tips for effective ‘virtual’ recruitment

The pandemic has brought about a revolution in remote working, but how can companies adapt to this new way of working, and how do they integrate new colleagues into the team when they are working from home?

When you’re interviewing a potential new employee, you don’t usually expect your first ‘face-to-face’ meeting with them to be via a screen. But these are strange times, and virtual recruitment has become a reality for many businesses since March 2020.

And it’s not just about the initial recruitment – as we saw in our last article, the shift towards homeworking has led many companies to consider candidates outside their local area, and even country. Indeed, the pandemic might have changed the lives of office workers forever.

Here’s what’s changed, and tips for recruiting remote workers.

Case study: SimpliSafe

Home security business SimpliSafe recently told St. James’s Place about their ‘unconventional’ recruitment process during lockdown. Founded in the US, SimpliSafe’s UK base in Manchester was planning to expand its team when the pandemic forced the country into lockdown. SimpliSafe’s UK General Manager Jonathan Wall explains:

“We already had a few people in the recruitment process and we weren’t going to stop. So, we took on a Senior CRM Manager, a Senior CRM Executive and, of course, a Financial Controller. Those people needed to be inducted and they all started after lockdown. Initially we thought that was going to be our biggest challenge, but we have a headquarters in Boston, Massachusetts, so we were already quite used to remote working and having people on Zoom. It was more about making them feel comfortable and part of the team.”

The company encouraged colleagues from across the business to contact the new team members, welcoming them on board. In addition to regular team meetings, SimpliSafe also arranged virtual social events to make integration easier, including virtual fitness sessions and a Friday quiz. Jonathan finally met his Financial Controller in person in May. They held their first face-to-face meeting on a bench in Salford Quays, but by this time they already felt they knew each other well.

How to recruit remote workers effectively

So, what can companies do to achieve similar recruitment successes?

Firstly, you need to decide whether it’s simply a case of recruiting someone virtually, with a view to having them in the office at least some of the time, post-pandemic, or whether you are happy to recruit a remote worker who lives far away. According to the Chartered Institute of Personnel and Development (CIPD), before the pandemic, just 11% of jobs were advertised as being flexible.1 Having a choice of work environment and location is now a major ‘desirable’ for many job seekers, and there’s a growing sense that employers will miss out on top talent if they don’t offer flexible work options.

As with all recruitment, it’s about finding the right person for the job, and this includes the remote-working aspect. Kristen McNamara, Senior Director of Staff Development & Talent Acquisition at recruitment agency Robert Half, says companies need to identify candidates who are self-directed, motivated, flexible and able to deal with the new ways of working. She says:

“If you hire somebody who is looking for direction, looking to be told what to do and what the next step is going to be, that’s probably not going to end well. So, during the interview process it’s important to interview for that agility and mindset.”

How to integrate your new hires

Claire McCartney, Senior Policy Advisor for Resourcing and Inclusion at the CIPD, says that once a candidate has been chosen, the challenges of onboarding them are two-fold. There’s the practical issues, and the ‘social’ factor of making them feel part of the team.

On the hands-on side, Claire identifies issues such as setting up the new hire with the technology they need and making sure they know how to comply with data protection principles. She also says that HR or payroll documents should be sent via legally binding platforms like DocuSign or HelloSign.

And employers should also make sure that the new hire has checked with their mortgage provider, landlord, local authority or home insurer that they are allowed to work from home. Companies should also check that their insurance covers business equipment in the employee’s home and send new hires an electronic health and safety questionnaire as part of their risk assessment.

Making new employees feel welcome

Think about ways to welcome your new employee into the business. Send them a welcome email or e-card, and set up one-to-one introductions on their first day with managers and people who they will be interacting with on a daily basis. It’s also worth considering assigning your new team member a workplace mentor, outside of their department.

Both Kristen and Claire agree on the value of less formal interactions, such as virtual coffee breaks, that help to integrate new people with their colleagues. Kristen, whose own team work remotely, even has an informal dog walking group and informal chats with staff while they are all walking their dogs.

To conclude, then, with remote and flexible working likely to become much more widespread, business owners should consider how they will integrate new employees, making them instantly feel ‘at home’ and ready to start building a long-term career with your company.

Sources:

1Flexible working: the business case, CIPD, November 2018

The opinions expressed by third parties are their own are not necessarily shared by Wellesley Wealth Advisory or St. James’s Place Wealth Management.