Business Matters – Issue 19


Weathering the storm:

On the money:

Higher taxes are on the horizon:

Earning over 100k?

Reclaim your personal allowance:

How businesses are navigating rising costs

Getting ahead of spiralling wage costs

Consider your pension and ISA plans now

Mind the 60% tax trap

Case study

Weathering the storm: How businesses are navigating rising costs

Amid the perfect storm of rising interest rates and inflation, and costs set to soar even further later this year, we explore how companies are dealing with these challenges.

Normality, what’s that? Small business owners might be looking back at any sighs of relief breathed earlier in the year with a wry smile, as they tackle a fresh wave of challenges.

Indeed, just as the choppy economic waves caused by the pandemic had begun to subside, runaway inflation and high interest rates have begun to loom large. In March, the Bank of England’s Monetary Policy Committee (MPC) increased interest rates to 0.75% – its third consecutive increase.

At the same time, the Bank warned that inflation measured using the Consumer Price Index (CPI) is expected to reach 8% by June, a level not seen for decades and one that’s far above the target rate of 2%.1

Rough waters

The combination of sharply rising prices with successive increases in interest rates has put pressure on business owners for a multitude of reasons. The cost of doing business has soared – for instance, buying raw materials, the cost of overheads and spiralling wage costs, which we cover in more detail in our next article.

On the note of overheads, companies also have surging energy prices to contend with. Unlike consumers, businesses don’t have a price cap to protect them. The average small business spends more than £3,000 a year on energy, and 70% of small-business owners believe that the cost of their energy bill impedes the growth of their business, according to research.2

What’s more, interest rates being on the up means the cost of business loans will also rise, which restricts financing options for companies, especially those already in debt.

Mike Cherry, National Chair of the Federation of Small Businesses (FSB), commented:

“The interest rise[s]…will pile yet more stress on small-business owners struggling with debt. The hope, against a backdrop of spiralling utility bills and surging inflation in the round, is that it goes some way to putting the brakes on rising prices. The back-to-back rate increases will mean more pain for all those with personal and professional debt that carries a floating rate.”

The seas are far from calm, and the Bank of England has even added that inflation could go even higher later this year, potentially hitting double-digits before it begins to settle.

Such raging inflation is having an immediate impact on Britain’s small companies. One such business is Fantastic Services – a sustainability focused provider of cleaning and maintenance services. Chief Executive Rune Sovndahl explains that the company has had to switch to different detergents to save costs – but on the plus side, this has allowed it to choose a product that is better for the environment. He says:

“Inflation has had quite an impact on our business. We are now using tablets that dissolve in water when a particular job needs to be completed. This has actually led to using less transportation and water.”

Soaring inflation means that, as a fast-growing business, Fantastic Services must reconsider how it funds its expansion plans. Sovndahl adds:

“We do have cash reserves, and we’re also looking for different ways to fund our biggest spending. Our focus at the moment is going green and supplying our teams with electric vehicles. We are still at the very beginning of planning this, and we are already encouraging our franchisees to invest more in them.”

Domino effect

So, what else can you do if your business is facing rising prices? Inflation is a hot topic among entrepreneurs, and many have already taken action to mitigate its impact, which in turn create ripples for consumers. According to a survey published in February by the British Chambers of Commerce, 73% of firms say they are increasing prices in response to rising costs.3

Going forward, entrepreneurs must be agile enough to make the best of whatever the circumstances might be. Remember: you’ve successfully navigated the pandemic down to your leadership and guidance – your business can adapt to these new challenges.

If you’re looking again at your financial planning to mitigate rising costs, speak to us for advice.

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.

Where the opinions of third parties are offered, these may not necessarily reflect those of Wellesley or St. James’s Place.


1 Monetary Policy Summary, Bank of England, March 2022, 17 March 2022
2 Tyl survey of 500 UK SME owners, September 2021
3 3 in 4 Firms Raising Prices as Chancellor warned of ‘Cost of Doing Business Crisis’, British Chambers of Commerce, 10 February 2022, from a survey undertaken between 17 January and 4 February; question answered by 985 businesses

On the money: Getting ahead of spiralling wage costs

With job vacancies at record highs and inflation running riot, many candidates’ wage expectations are higher than ever. To secure the top talent, you need to offer something special. But is it all about the money?

With businesses setting their sights on a brighter future, it’s an opportune moment to consider expanding your workforce as you look to achieve your objectives for expansion and increased profitability.

But it’s not the easiest market in which to find new talent, and finding the person you want to employ is just the beginning, as the next steps towards hiring them are more complex than ever. With vacancies at record highs and rampant inflation – as discussed in the preview article – many candidates are demanding significantly higher wages than they did before the pandemic.

Here, we explore how to secure that key hire without busting your bottom line.

Wage worries

So, how fast are wages rising? According to the Office for National Statistics (ONS), the rate of annual pay growth (including bonuses) among employees was 4.8% in November 2021 to January 2022, an increase from 4.6% in the previous three-month period.

That said, real wages are actually falling when you consider the current environment of rising inflation and exclude bonuses. Inflation isn’t going away any time soon – in fact, the Bank of England has forecast it could hit 8% by the end of June and potentially be in double digits later this year.2

This is likely to force businesses to increase wages to help their employees cope with rising prices. It’s a perfect storm, with the number of job vacancies in the period December 2021 to February 2022 rising to a new record of 1,318,000 – an increase of 533,000 from the pre-coronavirus level in January to March 2020.3

This shortage of candidates has been compounded by the Great Resignation, when tens of thousands of people left their jobs during the pandemic to work remotely or in a completely different industry.

Tempting top talent

The large number of vacancies mean the best candidates have more choice of where to work – and will often go to the employer who offers them the highest pay. So, how can you find the best staff in such a difficult jobs market?

James Lloyd-Townshend, Chief Executive and Chairman of Tenth Revolution Group, which helps develop talented workers for cloud-computing companies, said:

“Increasing the salaries you’re offering will help bring in talent right now. While you’ll take a financial hit in the immediate term, you could end up saving money in the long run, as you’ll have the talent you need to expand and improve your business. Plus, that talent will be more satisfied, so you’ll be able to spend less money and time trying to find new staff.

“When you’re working within a candidate-driven market, finding the right talent can be incredibly difficult. They have more choice than ever, and sheer scarcity means some organisations are being ‘priced out’ of the people they need to conduct business-critical tasks, such as digital transformation.”

Behind the pound signs

But does it have to all be about the money? While it’s important during the current climate, there are other ways you can attract top talent – for example, convincing a candidate that your business culture or mission fits with their values.

Indeed, maintaining a healthy workplace culture will ensure employees remain engaged, productive and focused on customer happiness – as well as being an effective way to avoid wage inflation.

Liz Sebag-Montefiore, Career Coach and Co-founder & Director of 10Eighty, an employee engagement platform, commented:

“The Great Resignation is affecting the marketplace. It’s very much an employee’s marketplace and most people turning up for interviews have another five or six roles they’re interviewing for.”

Liz adds that providing new talent with clear direction as part of their onboarding process is hugely important when looking to hire new staff. 10Eighty has recently launched a coaching app that can help individuals settle into their new organisation and support them to deliver their best as quickly as possible. Liz asks:

“What’s going to stand you out as an employer? For me, it’s not about the pay or the benefits. I believe it’s around making things employee-centric – giving them freedom with accountability.

“Candidates will have different preferences, especially when they could be working in a hybrid way, so job descriptions need to be tailored. Employers have to be flexible in what they offer – it’s all about providing an agile working environment.”

Not only that, but it’s worth remembering that more and more people want to work flexibly, so if you consider remote/hybrid employees, the business and geographical talent pool will become much wider.


The right person is out there

If you stay positive and true to your beliefs, it’s possible to find the perfect new team member for your business.

Lina Barker, Co-founder of Aaron Wallace, a market-leading grooming brand for Black men that is sold in ASOS, Sainsbury’s, Saks Fifth Avenue, Zalando and Liberty, said:

“In the past three months, we have hired three brilliant people and have grown our team to a total headcount of six. The job market is interesting – there are so many moving parts. I am hearing of lots of opportunities and the increased competition between companies to attract and retain talent, but in some sectors I also see a lack of job opportunities available.

“As more and more of what we do moves online and becomes possible to do remotely, I think we are seeing more tech-based jobs become available and less service-based work.”

As the future brightens and we emerge from the pandemic, businesses need to reassess their hiring practices while considering all options. If you want to discover more ways to attract new talent while protecting your bottom line, speak to us today!

Where the opinions of third parties are offered, these may not necessarily reflect those of Wellesley or St. James’s Place.


1 Average weekly earnings in Great Britain: March 2022, Office for National Statistics, 15 March 2022
2 Monetary Policy Summary, March 2022, Bank of England, 17 March 2022
3 Vacancies and Jobs in the UK: March 2022, Office for National Statistics, 15 March 2022

Higher taxes are on the horizon: Consider your pension and ISA plans now

As the tax burden on Britons is set to reach its highest level since the 1950s, it’s increasingly important to consider how to use your tax-efficient pension and ISA allowances together to prepare for your financial future.

In the preview articles, we’ve discussed the issue of inflation and the rising costs of living – but there’s more bad news. Following the news that Britons will soon face the highest level of tax since the 1950s1, it’s time for entrepreneurs to start seriously thinking about how you can involve both pensions and ISAs in your financial plan, to maximise available tax allowances and options.

As we saw in the March and October 2021 Budgets, Chancellor Rishi Sunak sought to repair the nation’s finances – consequently hiking taxes at the fastest yearly rate since 1993.2 And, despite proposing future Income Tax and Inheritance Tax cuts, it seems individuals will still face a significant tax burden over the next few years.

Savers were faced with some rather shocking news in March, announcing that the pension lifetime allowance has been frozen until 2026 – already impacting thousands, and likely affecting millions, including middle-earners, over their lifetime.

More unsettling news followed in the autumn, with the government announcing a Dividend Tax increase of 1.25%, meaning investors will have to pay more on their earnings.

Though unsettling, these changes have kick-started business owners to make the most of their pension and individual savings account (ISA) allowances before the end of this and future tax years. Savers may need to invest more to achieve their financial goals.

And, it’s important to remember – combining pensions and ISAs is not just for those affected by the lifetime limit. It’s time for all savers to begin thinking carefully and taking the initiative to seek out advice about how much to save into your pension or ISA following rising tax bills.

Why you should use pensions and ISAs together

Pensions and ISAs are two of the most attractive savings options available to Britons.

A pension allows basic-rate taxpayers to make an immediate 20% gain on their investment, making it the most tax-efficient vehicle available to UK savers. Plus, for members of workplace pension schemes, employers will also contribute at least 3% of their qualifying earnings.

Getting your hands on savings in personal pensions can be done so from age 55 onwards, rising to 57 in 2028. For Inheritance Tax planning, be aware that this includes pensions that fall outside of your estate, and meanwhile, those savers will also have the option to choose who receives their pension fund after they die.

Looking for tax-efficient investing, simplicity, accessibility and flexibility? You’ll probably know that ISAs are a great – and hugely popular – savings option. Did you know that round £75 billion was invested in adult ISAs in 2019/20? That’s £7.1 billion more than the previous year.3 What’s more, you don’t need to wait until you’re 55 to take money out of an ISA – you can access it anytime!

You can also personalise your savings further with various types of ISA, including cash, investment (or stocks and shares), lifetime and innovative finance. And, as you don’t pay tax on interest, income or capital gains on any of these ISAs, you don’t need to declare them on your tax return.

Considering the above, it’s clear that combining pensions and ISAs is a good way to plan for short-, medium- and long-term goals.

How to balance pensions and ISAs

With many complementary benefits available, choosing whether to save into a pension or ISA is rarely complicated. A flexible and tax-efficient retirement plan will normally involve a combination of savings, which could include other investment types as well.

Seeking advice to create the optimum, balanced mix of pensions and ISAs – dependent on your personal situation and preferences – will ensure you follow the right financial plan for your future financial well-being.

So, where do you start?

Using a pension to reduce tax

Personal pension contributions reduce your taxable income, meaning you can avoid losing certain benefits and allowances – and have more money to save or spend.

Unfortunately, payments into an ISA don’t provide these potential benefits as they come from your taxed income.

How does it work? For example, if your net income is £125,140 or more this tax year, you’ll lose all your entitlement to the personal allowance. But, by making a pension contribution of £25,140, you could reduce your taxable income to £100,000 and get your whole personal allowance back.

Using a pension to reclaim allowances

Pension contributions can also help families keep their Child Benefit, which would be lost if one partner or parent in the household earns more than £50,000.

How does it work? For example, someone earning £52,000 would have to repay 20% of any Child Benefit they receive via self-assessment. But, if they contributed £2,000 into a pension, they could retain their full Child Benefit payment and avoid a tax charge.

Getting more from your money

Investing into a pension can help higher-earning individuals bring their income below the additional-rate tax threshold of £150,000.

Also, in addition to the 20% basic-rate relief, higher or additional-rate taxpayers can claim an extra 20% or 25% relief on pension contributions via their annual tax return.


Options for income in retirement

The retirement income you take from a pension is taxable; however, funds from an ISA can be accessed anytime, without any tax liability.

You will benefit from considerable tax savings on income taken from ISAs in retirement, but unlike pensions, the money you put into your ISA has had Income Tax applied before you invested it.

As you can take 25% of your pension fund tax-free, it may be wise to use that together with your personal allowance, and take pension income tax-efficiently.

Pensioners typically pay lower Income Tax rates than that paid while they were working. This means that, for many people, the tax relief gained when putting money into a pension is more than the tax rate on the money taken out!

It’s also worth taking time to consider how most pensions are not subject to Inheritance Tax when you die. ISAs are, however, subject to IHT – except when left to spouses or civil partners. For this reason, you’ll need to think about whether you want to prioritise income from your ISA savings, as it would leave more of your pension benefits intact for beneficiaries when you die.

Getting your ducks in a row and using your pension together with ISA income gives you the most beneficial tax-planning options.

Act now

Effective tax planning is more important now than ever, and especially since the 2021 Budgets sent a clear message that using pensions and ISAs together is one of the best ways to prepare for your financial future.

For everyone, not just those affected by the lifetime allowance, it’s wise to make full use of the allowances you’re entitled to when considering pension and ISA contributions. It’s important individuals pay the appropriate amount of tax – not too much, not too little – while families could pool their resources to get the maximum value from their wealth.

The end of this tax year and the beginning of the next provides the perfect opportunity to seek advice and plan ahead for your financial future, and take care of your own financial well-being.

To ensure you’re getting the most out of your money, seek advice from a financial adviser. Together, you can confidently plan for your financial future.

The value of an investment with Wellesley Wealth Advisory will link directly to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

The tax levels and reliefs can change at any time and depend on individual circumstances.


1,2 Overview of the October 2021 economic and fiscal outlook, Office for Budget Responsibility, October 2021
3 Commentary for annual savings statistics,, June 2021

Earning over 100k? Mind the 60% tax trap

When formulating your retirement savings plan, choice and flexibility are key to achieving your life goals. With a range of income options available on reaching this life stage, it’s important to maximise on the range of tools at your disposal.

Taxing issues

Depending on your annual salary, Income Tax is charged at either 0%, 20%, 40% or 45%. While rates may vary in Scotland, you’ll be hard-pressed to find a published rate of 60% – no matter how much you earn.

Yet if we were to try and sum up the UK tax system, the word ‘complicated’ might feature – with ample opportunity for misinterpretations and costly blunders.

One such example is the 60% tax trap – and the reason why you can’t find it published in any HMRC guidance is due to the fact that it’s an unsubstantiated effective rate of Income Tax, created by the tapering of the personal allowance for higher earners. The result? Individuals earning between £100,000 and £125,140 can find themselves paying 60% tax.

Fortunately, not many people are caught up in this specific snare. However, it’s useful to have it on your radar, as it emphasises the wider issue of taxes that can crop up unexpectedly and in different places.

Melloney Underhill, Marketing Insights Manager at St James’s Place Wealth Management, warns:

“What the 60% rate represents is that sinkholes can appear anywhere – tax allowances change frequently and those changes can affect you. For anyone earning more than £80,000 or so, the Chancellor has the opportunity every tax year to amend the threshold and the rules in a way that might have a big impact on you.”

Rest assured, however, that this particular problem can be avoided or mitigated, given the right advice and some careful (and fully legal) planning.

How the 60% tax trap occurs

As an earner of £100,000 or more, the rate of Income Tax you pay will be affected by the gradual removal of the £12,570 personal allowance – in other words, the amount of income you can earn each year without paying Income Tax. It’s currently tapered away at a rate of £1 for every £2 you earn above £100,000.

As such, for every £100 of income between £100,000 and £125,140, you get to take just £40 home – £40 is deducted in Income Tax, and another £20 is lost due to the tapering of the personal allowance. This equates to a 60% tax rate on earnings within this range – once you earn £125,140 or more, you don’t benefit from any personal allowance whatsoever.

Some might be happy paying 60% tax – perhaps looking on it as a philanthropic gesture during hard times. However, if this doesn’t align with you and, in fact, you’d rather not pay tax at 60%, don’t worry – there’s a way of beating it.

Top up your pension pot

“The quickest and simplest way to reduce this proportional tax rate is to consider paying more into your pension to reduce the earnings that fall into that bracket,” proposes Underhill. This gives you the dual benefits of an Income Tax saving and a boost to your retirement fund.

For example, if you get a £1,000 pay rise – taking your taxable income to £101,000 – and you pay that £1,000 into your pension, you won’t stray into the 60% tax zone. You will, in fact, benefit from a 40% top-up on your contribution, thanks to tax relief.

That £1,000 may also be boosted further with additional employer contributions, depending on your scheme.

As things stand, you can pay up to £40,000 into your pension each year and still enjoy tax relief on your contributions.

Other ways

Boosting your pension can reduce the amount of tax you pay in a number of different ways. The reason for this is that pension contributions deducted from your earnings will lower your taxable income.

  • Middle-income households can increase pension contributions so as to avoid going into the higher-rate tax band.
  • The high-income Child Benefit charge is a tax charge that’s imposed on households receiving Child Benefit, where one partner has a net adjusted income of above £50,000. Again, this charge uses tapering, with an extra 1% deduction of the amount of Child Benefit for every £100 of income above £50,000. Nevertheless, you can impair its impact by upping your pension contributions.

Advice is essential

This article aims to bring some awareness around the ways that tax allowances can catch you out – not to mention the costly consequences should you be unprepared. As mentioned, tax rules are indeed complicated, and they’re prone to change frequently. That said, you can be confident that a financial adviser will always be au fait with the latest legislation.

In case of any doubt, open up the conversation with your Wellesley adviser, as you can likely side-step any tax traps or legally mitigate them.

As Underhill says:

“You are on your own career and earnings path, driven by so many other factors, not just tax, but you still need to be mindful of how the Chancellor can affect your journey. Advisers are there to work with you and help you navigate the ever-changing landscape.”

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

The levels and bases of taxation and reliefs from taxation can change at any time.

Tax relief is generally dependent on individual circumstances.

Reclaim your personal allowance: Case study

One of the major tax implications of earning over £100,000 is that this triggers the beginning of the loss of your personal allowance, pound by pound, meaning that once your salary exceeds £125,140, it’s reduced to zero.

We understand that tangible examples are sometimes easier to understand, so we’ve put together a working example of an individual to demonstrate the importance of protecting your income.

*Please note that this case study is based on a fictional individual, but accurately reflects how advice might be given.



Sarah is employed and her annual income is £130,000.

This means that, as her earnings exceed £125,140, she has lost all of her personal allowance – therefore, more of her income is taxable. She will pay income tax of 20% on the first £37,700 and 40% on the rest of her income.


If Sarah has a personal pension or is a member of her workplace pension, she can make a personal pension contribution and will receive tax relief on said contribution. If she makes a net contribution of £24,000 (£30,000, including the tax relief that’s added to the contribution), she will restore her full personal allowance, thereby reducing tax liability. In other words, the first £12,701 of her income is now tax-free, and she reduces the income that’s subject to 40% tax.

As Sarah is a higher-rate taxpayer, she can also claim an additional £6,000 in tax relief on the contribution via her Self Assessment tax return.


Therefore, the effect of her £30,000 pension contribution is as follows:

  • Restores Sarah’s £12,700 personal allowance.
  • Net cost (after all tax relief) is £18,000.
  • Reduces the amount of income that’s subject to 40% tax.
  • Sarah has boosted her retirement savings.

The same process can help individuals to bring their income below the additional rate tax band – which starts at £150,000. What’s more, it can also help families avoid losing Child Benefit, which is lost if one parent or partner in the household earns £50,000 or more.


Sarah approached us as a successful employee on a high salary, but with no clear strategy of how to maximise her earnings while mitigating her tax liability. The above action plan reduces Sarah’s tax liability while allowing her to retain her personal allowance, as well as supporting her retirement savings.

This case study is for example purposes only and is not a recommendation to follow any one particular of action. Full, professional advice should always be sought.