Many are choosing to wait out the trouble and see what happens rather than selling their home for somewhere new. But with Brexit resolved (at least on paper), and the country coming to terms with lockdown and looking forwards the future, there may be a level of certainty soon returning to the market now could be the perfect time to look into selling again. If you are planning on selling up, here are some key things that you need to know.
The Fallout of COVID-19
It can’t be denied that COVID-19 has been disastrous for the housing market. It is not so much that demand has seen a dip, rather that the market has gone into deep freeze - everyone looking to buy or sell is looking to wait until some sort of certainty returns. However, life goes on and increasingly it will be necessary to understand how to get on with things in spite of the coronavirus.
It seems that lockdown won’t actually have a huge effect on house prices - demand for properties is still there, it is just currently frozen. So if you are thinking of selling, you need to be getting ready in spite of the restrictions of lockdown. Things can change quickly, and it may soon be the case that the market returns to a level of normality.
The Brexit Effect
It might seem like a lifetime ago, but no matter what you think about Brexit, there is no doubting the uncertainty surrounding the UK since the vote to leave. This has created a great sense of trepidation in terms of people being interested in investing their money, and buying property. Now the UK is officially leaving the EU, we can expect to see the market stabilise and confidence return.
Over the course of deciding the terms of Brexit there have been instances of house prices falling and people being reluctant to buy. The return to certainty – whether it is good in the long-term or not – should provide some relief to the property market, and make 2020 a good time to sell.
Now the UK is officially leaving the EU, we can expect to see the market stabilise and confidence return.
Consider a Range of Estate Agent Options
In 2020, the range of estate agent options that you have available is larger than ever. In general, estate agents now fall into two separate categories: those with a physical presence in the form of high street stores, and those who operate purely online.
There is no doubt that online agents generally offer a cheaper service – some, such as Purplebricks, charge a simple one-off fee and do not take commission. However, it is important to understand that you will get less in the way of services from them. Standard estate agents charge more but will typically do more to get your property sold.
Set a Realistic Asking Price
In the past, we have seen many homeowners take a ‘wait and see’ approach to selling their property. This sees them listing it at a very high price, hoping that someone will fall in love with the property and pay over what it is worth.
However, if you are looking to make a sale, this isn’t a wise move. It is a much better idea to set a realistic asking price. The process of selling can be drawn out enough without the challenge of overcoming an overly high price tag.
Kerb Appeal Matters
First impressions matter when it comes to selling a home, so there is no doubt that you need to think about the exterior of your property. Your home needs kerb appeal – when someone sees it for the first time, are they impressed or disappointed? If it is the latter then you need to prioritise making changes.
There are actually many ways to enhance your kerb appeal. But it is important to think about the specifics of your property – what really needs changing? Some homes could do with a new paint job, others would benefit from replacing an old, rusty garage door. Take a look at your home objectively, and ask yourself what is detracting from the overall look.
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Upgrade Your Kitchen
65% of homeowners renovate their kitchen before they sell. There is a good reason for this. The kitchen is seen as the focal point of the home, and it is somewhere that buyers will be drawn to, and will want to inspect. If your kitchen is looking a bit tired, now is the perfect time to make upgrades and improve the value of your home.
If you only have the budget to make home improvements in one area of the house, then it is definitely worth making that area the kitchen. Your budget will go a long way – replacing cupboard doors and handles can freshen up the whole look of the kitchen without breaking the bank.
Final Thoughts
The property market is certainly looking up, so now could be the perfect time to put your home up for sale. Be sure that you present your home in the best possible way – you might be surprised just how much of a difference this makes to the amount of money you can get for it.
The precise shape of the UK’s post-Brexit taxation regime is yet to be decided; however, the indications are that radical changes are unlikely. Much will depend on the terms of the UK-EU trade deal, which is due to be negotiated this year. The EU has been abundantly clear that UK alignment in terms of taxation, labour and environmental regulation is the price for EU market access.
Yet, former Chancellor, Sajid Javid, warned that "There will not be alignment, we will not be a rule taker, we will not be in the single market and we will not be in the customs union – and we will do this by the end of the year." It remains to be seen whether his successor, Rishi Sunak, will be as bold or soften in the face of the economic consequences of losing trade with the EU. Below, Miles Dean, Partner at Andersen Tax UK, offers Finance Monthly his predictions on what we are likely to see in terms of taxation as future trade deals are negotiated.
Given the scale of UK trade with the EU, it appears probable that substantial alignment will ultimately be seen as a wise trade-off in order to retain valuable market access to the EU. The EU remains the UK’s largest trading partner. 44% of all UK exports went to the EU in 2017, with 53% of all UK imports coming from the EU. The efficient operation of cross-border supply chains are vital to the UK’s automotive and aerospace industries. These largely depend on the free movement of goods across the Channel.
The Conservative Party’s clear majority in the 2019 general election makes the UK’s future tax policy somewhat more predictable. While some more excitable commentators feared that the Conservatives would slash corporation tax, deregulate and sell off the NHS, the party’s 2019 manifesto went in rather the opposite direction - deferring a scheduled cut in corporation tax to fund the NHS. Section 46 of the Finance Act, 2016 had pledged to reduce the rate of corporation tax from 19 percent to 17 percent from 1 April 2020. However, Prime Minister Johnson told the Confederation of British Industry’s annual conference on 18 November 2019 that the this planned reduction would be put on hold to fund the NHS and other “national priorities”.
44% of all UK exports went to the EU in 2017, with 53% of all UK imports coming from the EU.
To offset this disappointment to UK business, the Conservative Manifesto announced other business-friendly measures, including a review of business rates, an increase in the R&D tax credit rate from 12% to 13% and an increase in the structures and buildings allowance from 2% to 3%. Yet none of this amounts to anything resembling dramatic reform. Indeed, this cautious approach rather suggests that the government is heeding the EU’s bottom line in terms of alignment, and that it does not intend to radically alter the UK’s taxation regime.
The idea of the UK becoming a giant Singapore-style tax-haven after Brexit also appears to be on hold. Indeed, the government is even promising additional anti-tax avoidance measures and a new digital services tax, showing a commitment to maintaining and even expanding the UK’s tax base.
The new digital services tax may yet be influenced by trade negotiations – this time those with the United States, as regards a US-UK trade deal. The Government’s plans to introduce a 2% digital services tax from April 2020 would disproportionately affect US tech companies such as Google and Facebook. The US treasury secretary Steven Mnuchin has warned of retaliation by new US taxes on UK car imports, saying “If people want to just arbitrarily put taxes on our digital companies we will consider arbitrarily putting taxes on car companies.” Downing Street replied in turn, saying that such tariffs would “harm consumers and businesses on both sides of the Atlantic. We feel [the digital tax] is a proportionate step to take in the absence of a global solution. We made our own decisions in relation to taxation and will continue to do so.”
Despite the Government’s declaration of independence in terms of taxation policy, this incident illustrates that any greater independence in trade and taxation policy brought by Brexit has limits. There will inevitably be trade-offs and constraints. UK decisions on taxation do not operate in isolation, but can have broader political and economic consequences. The UK exports some £8.4 billion worth of cars to the US each year. The early agreement of a UK-US trade is a priority for the government. US pressure may well yet influence the government’s digital taxation plans.
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Nobody can predict the future. When it comes to Brexit, events are notoriously unpredictable. However, the actions of the UK government have been moderate – even if the rhetoric is sometimes less so. Mr Johnson came to power with the promise of keeping the credible threat of no-deal on the table, as a negotiating tactic. However, his aim was not to end up with no deal, but with a more favourable one. Having made the compromises required to achieve a withdrawal agreement, we can hope that a similarly reasonable approach will prevail in the UK-EU trade negotiations. No doubt the threat of no-deal will also remain on the table, for tactical reasons, as before. Therefore, while it is possible that the talks will collapse, resulting in a no-deal Brexit at the end of 2020, that outcome appears unlikely.
Even in a no-deal scenario, the Government’s no-deal Brexit tariff regime means that 88% of imports would not be taxed. The Confederation of British Industry estimates that 90% of the UK’s goods exports to the EU, by value, would face tariffs averaging 4.3%.
While the UK could theoretically abolish VAT after Brexit, the technical guidance for a no-deal Brexit indicated that the current VAT system would continue. Since it raises around £125 billion per annum, it is inconceivable that it will be abolished let alone restructured to any significant degree.
While the UK could theoretically abolish VAT after Brexit, the technical guidance for a no-deal Brexit indicated that the current VAT system would continue.
A no-deal Brexit would disproportionately impact sectors such as agriculture and manufacturing. Likewise many EU sectors would be badly affected. Since a deal is in the interests of both sides, it’s reasonable to hope that one will be achieved, even if it is imperfect.
The broad shape of a UK-EU agreement that would facilitate market access is already known. It will require sufficient UK alignment on key matters, including taxation. While the detail is undecided, in broad terms it means little change to the UK’s taxation regime. Perhaps, the government may seek some wriggle-room on VAT or corporation tax. Yet the fact that the government has shown no appetite for radical change in taxation is telling. Maintaining the status quo on taxation helps to keep a UK-EU trade deal within the government’s sights.
Miles Dean is Head of International Tax at Andersen Tax in the United Kingdom. He advises privately held multinational companies, entrepreneurs and high net worth individuals on a wide range of cross border tax issues.
Andersen Tax provides a wide range of UK and US tax services to private clients and businesses, helping them achieve their personal and commercial objectives in a tax efficient manner.
Fintech is one of the most recognisable terms in the financial services industry but sits aside its lesser-known compatriots, RegTech and InsurTech. Put simply, these terms represent the evolution and revolution of financial services globally, and the UK has firmly embraced the use of such advances. Evolution relates to the giants of the UK financial services industry who have been around for over a hundred years and revolution reflects the large number of start-ups who have not had to adapt old systems to new ideas but have had a clean sheet from which to design a process and solution using the latest technology. Simon Bonney, Partner at Quantuma and member of IR Global, explains to Finance Monthly how fintech has transformed the industry.
Background to the UK Fintech Industry
The UK fintech industry is worth around £7 billion and employs over 60,0000 people. It now has banks that only communicate with their customers through an online platform and have no physical branches.
The UK thrives as a leading global fintech hub for a number of reasons. As a world leader in the financial services industry, there is an imperative to ensure that we invest in, and utilise, the latest technology to facilitate our competitiveness. As well as a deep homegrown pool, the UK attracts a wealth of entrepreneurial and tech talent because of its status (42% of workers in UK fintech were from overseas in 2018), and also its investment. Investors put more money into UK fintech than any other European country in 2018 ($3.3 billion). In addition, the UK recognises the importance of striking a balance between the promotion of entrepreneurialism and the regulation of new ideas to provide confidence to businesses and consumers the world over through the Financial Conduct Authority (FCA). The FCA’s regulatory sandbox, the framework to allow live testing of new innovations, has become a blueprint for fostering innovation around the world.
The Opportunity
The UK Government has recognised that fintech engenders a significant opportunity to create jobs and economic growth and also facilitate the birth of new start-ups in other industries which are able to utilise new technology to make their costs quicker and cheaper. In 2019, 79% of UK adults owned a smartphone and on average they spent over two hours a day on their phones. Access to financial services by smartphones, coupled with a loss of confidence in the traditional financial services industry following the Global Economic Crisis in 2008, has meant that consumers embrace the relative ease and convenience of fintech.
Technology generally has changed the way that consumers expect to engage with financial services and the UK financial services industry has recognised that it cannot operate the same way it did 10 years ago if it hopes to keep pace with the demands of customers. Fintech has changed and will continue to influence the experience and speed of transactions. It has had a significant impact on the cost of operations. For those businesses with legacy systems, there is a huge challenge in ensuring that fintech is embraced and implemented. In order to cope with this challenge, it is likely that banks will seek to further outsource their operations and hand over management of their legacy systems so they can focus on serving customers and finding new routes to market.
Potential Challenges
Growing opportunities do not come without hurdles. The sheer speed of change in fintech means that regulation is generally trying to catch up, and in a number of instances, such as cryptocurrency, regulators are required to learn about the technology and the way it encourages people to behave before being able to effectively regulate it. However, that regulation will have an impact on development, as the costs of ensuring that new products are compliant will provide a barrier to entry. In addition, fintech is inextricably linked with data and the use and regulation of data will continue to feature in the spotlight.
A Note on Fintech Bridges
It is hoped that through the use of fintech bridges, the UK’s best and brightest fintech ideas and businesses will be able to thrive internationally, with automatic recognition by the regulators in those partnering countries. Collaboration has been a feature of the success of fintech, with open source solutions being made available to enable the improvement of all aspects of the industry for the greater good with blockchain being a prominent example. Collaboration on an international level should only provide a more stable platform for that innovation. However, Brexit has raised questions regarding the future of the UK as a behemoth of the financial services industry, and the nature and mobility of fintech and the use of fintech bridges means that competition has been increased across the world.
The UK has been able to remain at the forefront of fintech due to its history in financial services and its depth of talent and investment. Importantly it recognises the importance of remaining at the forefront and will strive to ensure that innovation and regulation continue to go hand in hand.
The coronavirus pandemic is affecting every sector of the economy in a manner not witnessed since the 2008 financial crash. However, not every sector is equally vulnerable, and there are still plenty of reasons to be optimistic that UK property will remain a viable asset throughout this current global crisis. Despite the now-quashed hopes that a ‘housebuilding revolution’ would be well underway this year, the government is still showing that it understands the needs of property investors and that it will support them through these dire times.
Paresh Raja, CEO of Market Financial Solutions, outlines the implications for the UK property market.
The economic repercussions of COVID-19 have hit the UK at an interesting time for our sector. Although Brexit uncertainty led house prices to fluctuate throughout most of the last half-decade, the election of a majority government in December 2019 facilitated an impetus of new-found confidence in the market. This was reflected by the increase in UK property prices in January 2020 of 1.9%, which was seen as part of the ‘Boris Bounce’.
Alongside this, the shifting value of the pound also resulted in international investors capitalising on UK property as a result of their increased purchasing power. Mention of a future stamp duty surcharge for such buyers in the 2019 Conservative party manifesto led to further activity as individuals rushed to complete deals to avoid this potential added cost.
All of these factors contributed to market which was showing good signs of recovery – but has this growth been entirely stilted by COVID-19?
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Understanding the Resilient Nature of the Property Market
As it stands, not yet. Property deals that were scheduled to close in the last week have, for the most part, still gone through according to reports. From this, we can assume that we will not be witnessing a massive knee-jerk backing out of such purchases as a result of pandemic scare.
The question, then, becomes to want extent the industry will suffer due to the ‘social distancing’ measures installed by the government. House viewings, agent meetings, and contact signing all require a level of physical presence – so some fear a lack of ability to accomplish such face-to-face meetings will lessen sales completed, and therefore dampen the market resurgence many had hoped for.
In reality, property has shown remarkable resilience in the face of economic uncertainty before, and I am confident that it will continue to do so. During the global financial crisis, market activity did decrease but there were still over 898,000 UK property transactions in 2009, and 876,000 in 2010. Even when banks were adopting stringent lending practices, people still endeavoured to buy and sell property. This is also when demand for specialist finance providers began to rise significantly, with investors looking to take advantage of fast finance solutions.
In reality, property has shown remarkable resilience in the face of economic uncertainty before, and I am confident that it will continue to do so.
Putting COVID-19 in Context
The last two UK property corrections, namely the 2008 financial crisis and the early 90s recession, were both the result of purely financial pressures. One could argue a pandemic-related issue may not hit the markets as hard. This is of course a speculation and should not downplay the seriousness of the issue at hand.
Importantly, we are also seeing the industry adapt to these challenging conditions. The Financial Times reports that estate agents are already beginning to offer remote, online-only house viewings to prospective buyers to ensure there’s no delay in matching customers with their ideal home.
The government has also announced a three-month mortgage ‘holiday’ for those whose income has been affected by COVID-19, and interest rates are now at a record low of 0.25%. It is positive to see lenders also addressing the needs of their clients by offering online meetings and consultations, particularly in the bridging sector. It is this type of creative thinking and resilience that makes me confident that the UK property sector will be able to overcome the initial challenges posed by COVID-19.
Interest in digital currency has grown significantly in the last few years. In this piece, we explore what digital currencies are, the current state of the cryptocurrency market and how it will impact the economy over the next few months based on current trends and events occurring in the UK.
Put simply, cryptocurrency is a digital currency managed by a network of computers.
Run through open source code, computers are used to verify each cryptocurrency transaction. Unlike traditional physical currency, they are decentralised and not managed by a central bank.
You have probably already heard of Bitcoin, which was one of the first types of cryptocurrency to come into existence. However, hundreds of other currencies have been developed since and each have different characteristics. For example, the coin Ethereum can be used to create contracts and run applications, while Litecoin and Bitcoin Cash run in a simpler way to Bitcoin, with the focus of these currencies being on processing transactions.
The technology used to manage these transactions is known as Blockchain. This technology has been around for a while and is used for many other purposes, including updating healthcare records. The UK government is even investing in blockchain to record and administer pension and benefit payments.
Cryptocurrencies have a huge amount of potential, particularly when it comes to providing accessible options for allowing people across the world to exchange money.
Currently, the use of cryptocurrency is still an emerging trend with a limited number of businesses accepting it as a payment method. These digital currencies are experiencing somewhat of an identity crisis as debates around its definition as a currency or commodity continue and authorities argue over whether it should be regulated.
Cryptocurrencies have a huge amount of potential, particularly when it comes to providing accessible options for allowing people across the world to exchange money.
However, governments and banks are reconsidering their cautious attitude towards digital currency as global businesses begin to invest in this technology. Facebook’s upcoming launch of their coin, the Libra, has caught the attention of the Bank of England. The BoE have warned Facebook that their currency would need the same level operational resilience as debit and credit card accounts, if they are to manage high volumes of transactions securely.
Libra will not be decentralised like other cryptocurrencies. Instead, it will be managed by an association of major technology and financial service companies.
Some EU governments have taken a hard-line approach, with France’s Finance Minister declaring that they will not allow the use of Libra within Europe. They state that the currency would put consumers at risk of financial fraud. Nevertheless, with the UK’s recent withdrawal from the European Union, it is likely that they will be exempt from such measures.
Brexit has also presented new opportunities for cryptocurrency processors. It is predicted that more cryptocurrency exchange offices will open in Dublin in 2020. This hotspot is ideal as it is an EU member with close proximity to the UK market.
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While cryptocurrencies are often seen as a highly volatile form of currency, the recent worldwide Coronavirus outbreak has had a damaging impact on the global economy and resulted in investors seeing digital currencies as a safe haven.
The virus is predicted to result in consumers buying less at physical stores as they avoid getting infected. As a result, the amount of online purchases being made is set to increase significantly, and with more powerful firms such as Facebook migrating over to cryptocurrency transactions, we can expect more and more of these purchases to be made with digital money.
Despite the Confederation of British Industry (CBI) announcing a “welcome lift in business confidence” at the start of 2020, the Government can’t afford to neglect the needs of SME businesses, the backbone of the UK economy.
We hear from Richard Godmon, tax partner at accountancy firm Menzies LLP.
With many UK businesses trading internationally, certainty surrounding future trading arrangements with the EU and the rest of the world is urgently required. However, if this can’t be delivered in the short-term, then the Chancellor must step up to the plate and provide support in the form of clear fiscal incentives and allowances, to help businesses to improve their cash position and facilitate investment.
R&D relief
Among the Budget announcements, tax specialists at the firm are urging the Chancellor to confirm that the rate of R&D relief that large companies can claim under the Research and Development Expenditure Credit (RDEC) scheme will be increased by one % (from 12 to 13 %). The Chancellor should also take the opportunity to extend the scope of the scheme to include costs for investment in cloud computing and big data analytics.
Annual Investment Allowance
Further certainty is needed surrounding the Annual Investment Allowance, which is currently set at £1 million but is expected to revert to £200,000 from 1 January 2021.
Investment requires confidence, and this can’t happen in a climate of uncertainty. Businesses need to know what is happening to the AIA so they can understand the cost of new plant and machinery and invest in their growth plans. The Chancellor could address this by either increasing the allowance or extending the current limit until at least the end of 2022.
Alternatively, if a blanket increase in the AIA limit is considered too costly, the Chancellor could select specific areas of capital expenditure, which might qualify for enhanced tax relief (say, of up to 110 % of cost) – for example, investments in robotics, AI systems, data integration, 3D printers and other value-driving tech.
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Entrepreneurs’ Relief
This Budget may see the end of Entrepreneurs’ Relief (ER), which is intended to encourage business investment by providing a favourable rate of Capital Gains Tax (CGT) to business owners on the disposal of all or part of their business. The relief, which saves business owners an estimated £2.2bn per year, may be under threat following publication of a report suggesting that it may not be boosting entrepreneurialism as intended.
This Budget may see the end of Entrepreneurs’ Relief (ER), which is intended to encourage business investment by providing a favourable rate of Capital Gains Tax (CGT) to business owners on the disposal of all or part of their business.
While it would be a big step for the Government to completely remove the idea of rewarding owners and investors for risking their capital, we may see reform of the relief, designed to reduce the tax cost. This might involve reducing the £10m lifetime allowance, or limiting access to new businesses, or those who reinvest their sale proceeds within a limited window.
We hope that any restrictions to ER will be offset by measures to enhance incentives for start-ups and growth businesses. This would continue to communicate the message that Britain is open for business, helping organisations to plan their long-term investment strategy.
Digital Services Tax
The Government is also expected to deliver a final decision regarding the controversial UK Digital Services Tax, and there is still time to soften its impact or even defer it altogether. If it goes ahead, the tax could impact UK competitiveness significantly.
It’s important to bear in mind that the Digital Services Tax would operate solely within the UK, rather than being EU-wide. As such, the UK could find itself isolated and at odds with trading partners should other countries choose not to introduce a similar tax. This could leave the UK at a considerable disadvantage when it comes to attracting international orders and so could have a negative ripple effect on UK-based SMEs. Hopefully we will see this tax deferred for a year pending the outcome of the OECD work on taxation of the digital economy, which it is hoped will reach an agreement by the end of 2020.
Housing and Property
Finally, with Brexit uncertainty still negatively impacting property sales, the Government could do more to get the housing market, traditionally a key driver of economic growth, moving and improve housing supply.
After seven years of punitive tax changes, buy-to-let property investors are hoping for a period of relative stability and maybe even a fiscal ‘escape hatch’ too.
A temporary reduction in the rate of Capital Gains Tax (CGT) payable on gains from the sale of B2L properties, made unprofitable by recent tax changes, could help to release stock onto the market. The new 30-day payment rules for CGT also means the Treasury’s coffers would feel the financial benefit immediately.
Further housing changes could see the Stamp Duty Land Tax (SDLT) threshold raised to £500,000 for all buyers, the introduction of a 3 % SDLT surcharge for non-UK resident buyers of UK property, and the expected tightening of tax reliefs on the sale of individuals’ main residences.
N26, which has a European banking license, is still one of the smaller challenger banks in the UK, but on April 15 it will be closing around 200,000 UK customer accounts. It has stated the reason behind this is difficulties surrounding Brexit, as the “timing and framework” of the withdrawal bill has made it impossible to continue operating in the UK.
Thomas Grosse, chief banking officer at N26, said: "While we respect the political decision that has been taken, it means that N26 will be unable to serve our customers in the UK and will have to leave the market."
Finance Monthly also heard from Forrester’s senior analyst Aurelie L’Hostis, who said: “N26’s launch in the UK might have felt like a natural next step back in 2018. The challenger bank had successfully attracted half a million customers in 17 European countries, and it could then use its European banking licence as a parachute. Yet, Brexit was already looming ominously in the distance back then – and there were questions regarding the validity of that licence post-Brexit. Beyond that, N26 entered the UK market on the heels of fast-moving rival challenger banks Monzo, Revolut and Starling Bank. Catching up was not going to be easy.”
All N26 accounts in the UK will function until April 15 as normal but will subsequently be closed automatically. Any money that customers fail to remove form the accounts will be placed in a holding account by default. It said UK staff involved in the business will move into other roles.
Other challenger banks like Monzo and Starling have UK licenses, which is why they likely won’t be pulling out of the UK anytime soon.
Today marks the day that the UK finally leaves the EU. It also marks the day where all self-assessment tax returns are due, and many in the accountancy sector are concerned that focus on Britain's exit from the European Union might lead to huge delays in tax returns being submitted in time.
Last tax year, 704,000 returns were submitted on the deadline day, while another 477,000 returns were filed late. Even though the time is running out, there are still some things that taxpayers can do before the clock hits midnight on Friday. TaxScouts, a specialist tax returns company, gave us their advice for anyone who still needs to get their returns done during the Brexit melee:
1. Register with HMRC as soon as possible
2. Make sure you’re filing for the right tax year
- The current tax return deadline is for activity from April 6th 2018 to April 5th 2019, so if you’ve only just become self-employed or started earning income from renting a property (since April 6th) you don’t need to file yet.
- Make sure you understand how the UK tax year works.
3. Don’t get held up sorting documents
- Don’t delay filing your return because you want to get all of your documents ready first.
- If you’re self-employed, and if your expenses are under £1,000, don’t even worry about it. Just claim the easy-to-use £1,000 Trading Allowance. No docs needed.
- If you’re not self-employed, there might still be some allowances that are higher than the expenses that you were thinking about claiming.
- If you have high expenses but for some reason or another can’t find the receipts right now, just remember that HMRC doesn’t actually ask you for them right away. Only when and if you get audited.
4. Don’t put it off because you’re afraid of a large tax bill
- Adding fines and penalties to a large tax bill won’t make it any smaller. Complete and submit your return before the deadline to avoid a late-filing penalties.
- HMRC has payment plans available if you can’t afford to pay your bill all in one go. Call them and explain your situation - they can usually help you figure out a solution where you pay a little bit every month and avoid penalties.
5. Calculate your tax bill
- If you’re self-employed, HMRC will ask you to pay 50% of the estimated future tax bill in advance. This is called Payment on Account. They’ll assume that next year you’ll earn and spend pretty much the same as this year.
- Moving forward, every year you pay 50% in January and 50% in June, which actually helps soften the blow.
6. Remember: you can amend your tax return later if you don’t have all paperwork ready
- If you’re struggling to find lost receipts or documents, just submit your return with your best estimates before the deadline to avoid late-filing penalties.
- When you do find the receipts or documents you needed and find that your figures have changed, you can file an amendment to your tax return with no penalties.
Although it might not seem that Brexit and delays in tax returns are linked, historically many tax returns are filed late and HMRC struggled to cope with the workload in 2019, something experts foresee happening again this year. Previously HM Revenue and Customs (HMRC) has issued warning letters in February following each January deadline. However, in 2019, many of the warnings weren’t sent until late April. The delays were being caused by the heavy workload currently being shouldered by civil servants due to Brexit preparations.
If this happens again, HMRC claimed last year that no one will be “unfairly penalized” and accountants hope this will be the case once more despite Brexit Day and Deadline day sharing the same January 31st calendar space.
The research found that:
- The most common assets investors hold are stocks and shares (53%), property (41%) and bonds (30%)
- 20% of investors said they plan to increase the amount of money they have invested in real estate in 2020
- 61% of investors believe traditional assets like property are best positioned to deliver stable and secure returns during the current political uncertainty
- Art and forex (both 19%), cryptocurrencies (17%) and classic cars (16%) were the least common investments
- 10% of those who have invested in cryptocurrency plan to reduce their amount of investment in this asset in the new year
- 64% of investors do not think cryptocurrencies are a safe or reliable investment
- 43% have become more socially and environmentally conscious in their financial strategies
- 42% are holding off making any major investment decisions until Brexit has been resolved
UK investors are turning to traditional assets as a result of the political uncertainty currently facing the country, new research from Butterfield Mortgages Limited (BML) has found.
The prime property mortgage provider surveyed 1,100 UK-based investors, all of whom have assets in excess of £10,000, excluding pensions, savings, SIPPs and properties they live in.
The research revealed the most common assets investors hold are stocks and shares (53%), property (41%) and bonds (30%). On the other end of the spectrum, classic cars (16%), cryptocurrencies (17%), art and forex (both 19%) ranked as the least popular.
Delving into the factors influencing their investment decisions, 61% believe traditional assets like property are best positioned to deliver stable and secure returns during this current period of political uncertainty. One in five (20%) property investors are planning to invest in more real estate in 2020.
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When it comes to non-traditional asset classes, nearly two thirds (64%) of investors surveyed by BML do not think cryptocurrencies are a safe or reliable investment. A tenth (10%) of those who have invested in cryptocurrency plan to reduce their amount of investment in this asset in the new year.
Looking into the factors influencing their financial plans for 2020, 43% of investors said they have become more socially and environmentally conscious and this will influence their financial strategy in 2020.
Brexit is also playing on investors’ minds. Two fifths (42%) are holding off making any major investment decisions until Brexit has been resolved, though half (49%) are confident in the long-term performance of UK-based assets. This compares to 23% of investors who are looking to assets based outside the UK for their investments in 2020 because of Brexit.
Alpa Bhakta, CEO of BML, said: “In this era of political uncertainty, investors are rallying towards traditional asset classes like property, which are historically resilient and able to hold their value in times of transition. The fact a significant proportion of investors are planning to increase investment into property in 2020 shows that despite Brexit, demand for real estate remains resoundingly strong.
“Interestingly, the factors influencing financial strategies are also changing–on top of security and stability, investors are also taking into account the environmental and social impact of their investments. This will evidently be an important trend over the coming years, and is something both financial services firms and advisers will need to pay attention to in 2020.”
However, while it is a significant factor, Mark Halstead, partner at business intelligence and financial risk firm Red Flag Alert, says Brexit can also distract from more fundamental problems with a business, such as unrealistic profit guidance given to markets, setting inflated expectations, poor management performance, unsustainable debts reducing ability to invest, or an inability to adapt to changing market conditions.
Financial Distress Has Increased
Of course, Brexit does have an impact on many businesses and is often a contributor to those in trouble.
Importers, for example, are suffering from the falling pound (at least those that haven’t been managing currency exposure) and the lack of certainty over a trade deal makes investment justification challenging.
Our own figures show that since the 2016 referendum, there has been a 40% increase in the number of UK companies in significant financial stress. And the number of those in ‘critical’ financial stress has increased 8% year-on-year. Businesses in the real estate and property, construction, retail and travel sectors have been the most severely affected.
Consumer Spending Remains Steady
However, if we look more closely at different sectors, we see that the impact of Brexit is more complex than it might first appear.
Take retail, for example. The sector has been experiencing a digital revolution that has seen the high street face stiff competition from the internet. At the same time, business rates and rents have increased, and consumer habits have changed.
Brexit has played its part by knocking consumer confidence, but some retailers are doing very well in this environment.
Clothing retailer Primark has no online sales presence at all, and yet it reported a 4% increase in sales earlier this year, while its mid-market competitor Next saw its full-price sales increase 4.3%
Both of these brands have strong value propositions: Primark is known for its heavy discounts on fashion, while Next had a reputation for its home delivery service long before online retail took off.
It’s also worth noting that consumer spending has actually increased during 2019. Although it may have peaked, it remains to be seen if the previous growth is set to continue.
Brexit can even present some opportunities. Low-interest rates have resulted in poor returns for investors, and so lending to businesses is now a viable alternative – helping businesses access capital for propositions that may have been unattractive to investors pre-referendum.
Builder blames Brexit
FTSE 250 housebuilder Crest Nicholson issued a recent statement outlining a decreased profit projection, and Brexit was the headline factor: “During the second half of FY2019, the Company has experienced a volatile sales environment in some of its regional businesses, driven largely by ongoing customer uncertainty relating to Brexit and the economic outlook in the UK.”
Two additional factors cited were a reduction in the value of some London property stock and a large cost associated with remedial works regarding combustible materials.
While Brexit uncertainty does affect housebuilders, it may be a stretch to blame it for huge reductions in profit. Perhaps Crest Nicholson were a little over-ambitious with original house evaluations, and Brexit has nothing to do with the £17m remedial works required to bring properties in line with government guidance.
While Brexit uncertainty does affect housebuilders, it may be a stretch to blame it for huge reductions in profit.
One could also argue that low-interest rates and weak sterling (both driven in part by Brexit) are helpful to housebuilders.
Beach the Brexit-blame
Another company blaming Brexit for not meeting performance expectations is travel retailer On the Beach: “This weakening of Sterling (driven by Brexit) leads to a significant increase in On the Beach prices versus full risk competitors; as a result, the Group anticipates delivering a full-year performance below the Board's expectations.”
Another interpretation might be that the company’s currency hedging strategy, or lack of it, wasn’t robust enough to maintain margins during uncertain times.
Lunar Caravans: Low Consumer Confidence or Overtrading?
Lunar Caravans is another business that has blamed poor performance on Brexit.
Until recently, the caravan, motorhome and campervan manufacturer had been profitable. In fact, in 2017 it reached a peak turnover of £50.6m from the production of around 3,400 units.
However, jump forward just two years, and the company was calling in the administrators, blaming a 20% drop in sales across the leisure vehicle industry caused by reduced consumer confidence due to Brexit.
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But once again, Brexit was only part of the story.
In 2016, the company’s profits were £1.6m; however, this dropped to £725k in 2017 when Lunar’s holding company had to buy back shares from three retiring shareholders.
Then, the company began to see a steady increase in its costs as the pound began to slip against the Euro.
With turnover increasing but profitability declining, the company was beginning to overtrade and struggling to manage its growth.
This reduced the value of the company by £1m and left it with fewer reserves to weather difficult times. And these difficult times soon came.
The company had invested heavily in new products, but several design issues in the new caravans saw a flood of warranty claims coming in from thousands of angry customers.
This further eroded profits, damaged the brand and added to the financial risk associated with the business.
With poor sales and spiralling costs, huge debts accrued, and the company was unable to pay its creditors – by which time the writing was on the wall.
Brexit Alone is Not Toxic
The impacts of Brexit are undoubtedly severe; however, they shouldn’t always be terminal, and Brexit alone doesn’t automatically equate to a toxic business environment.
In many cases, it represents a short financial shock that lays bare a company’s underlying long-term weaknesses and sends it spiralling.
But those businesses which are financially healthy and have competent management who can react to changes in the market stand a much better chance of being able to weather Brexit and maybe even achieve some growth.
It’s been an interesting three years since the 2016 referendum, with the next ten years promising more of the same. Below, Erica evaluates Boris Johnson’s Withdrawal Bill and its implications for UK businesses as well as the society we live in.
1. Diversity of thought is key to long-term success moving ahead
Narrow bands of interest and self-interest don’t create a vibrant society, nor a thriving business. Diversity has to include different thinkers, different ethnicities, ages, gender, problem solvers. Those companies, authorities and organisations who can’t embrace and harness this will become moribund. And rightly so.
2. Digital and real-world complementarity is critical
At the moment we have no idea what any post-Brexit trade deals will look like. Developing aligned business models and associated revenue streams is vital. With entertainment, retail and business services moving increasingly online, reducing trading frictions by evolving new digital services and products from real-world trade is vital. And for those only online, there is a rich opportunity to consider how an IRL leisure or experiential offering can enhance your bottom line. After all, there is space in abundance available in every single UK high street.
3. Environmental responsibility – get with the programme
In the current Withdrawal Bill, climate and environmental alignment with the EU has been shifted to future trade agreements. That might be fine to discuss then, but your clients and customers will be expecting it from you now. This is not an option.
Responsibility has to be taken at every step in the commercial process and, increasingly, will be an influencing factor in every personal purchasing decision. Get your supply chain to sign up to sustainability/ethical mandates now to gain early mover advantages and positioning to enable trade within even the strictest global environmental trade frameworks. Sustainability should be as important to your business and as measurable as profitability.
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Sabzproperty has a highly skilled technical team of professionals at work with a strong desire to ensure client satisfaction through excellent service delivery. We have a vibrant and engaging property market which offers a large property inventory accrued by competent property agents and developers from different neighborhoods. This has attracted teaming property audience over the years and has birthed the responsive value rewarding network we have today.
4. Uncertainty is the new certainty
Nothing is certain over the next few weeks… who will be in power? The next few months… in or out?
So you need to understand what deep uncertainty means for your business, your customers and your own personal circumstances. Be prepared to pivot, to take advantage of short term opportunities, to revel in the unexpected. What could this uncertainty allow you to unlock in your relationship with your past/present clients? Where will it allow you to find future clients? What could you develop with or for your competitors? And where might you find new buyers in differing marketplaces you had not looked to before?
And if you are not in the D2C world – look out of the window to ask what you can sell to that person walking past? Thinking the unthinkable has to be part of your new strategy.
5. Tough trading breeds new opportunities
The British are inventive people. Everyone who lives in this wayward nation contributes to its determinedly individualistic approach. We lead the world in creativity – in fact it makes up £101.5bn GVA, the second-highest sector in the economy. In times of economic retrenchment and difficulties that may lie ahead, there will be the potential for green shoots to force their way through, for businesses to grow and develop in unlikely sectors and unexpected ways.
In the 2007/8 recession, people delayed big-ticket purchases and cut back on eating out. This saw a rise in small spends - cupcakes, lip-sticks, feel-good treats. Home baking and entertainment surged with businesses that could supply this ‘batten down the hatches’ mood benefitting. The emergence of shows like The Great British Bake-Off first screened in 2010 after 18 months in development and production captured this back-to-basics mood. Now a highly profitable global tv format sold across many countries, it illustrates how there are opportunities in even the most trying economic circumstances.
As the next few weeks and months unfold, focus on these five points in both your business and personal dealings. Keep your mind alive to opportunities, inventive thinking and potential pivots. Living with uncertainty is something we’re all getting used to within our own lives, the UK economy and planet as a whole. So embrace it and turn it into positive actions build a commercially inventive road ahead.
About Erica Wolfe-Murray:
Cited by Forbes.com as ‘a leading innovation and growth expert’ Erica Wolfe-Murray runs innovation studio, Lola Media Ltd. With creative head and FD experience, she focuses on auditing intellectual assets/IP to evolve new products & services from a company’s existing business.
She is also the author of ‘Simple Tips, Smart Ideas : Build a Bigger, Better Business’ aimed at the UK’s 10m+ micro business & freelance sector to help build greater commercial resilience in this dynamic but often ignored part of the economy.
Sharing personal data with organisations in the EU is essential to thousands of SMEs, and we know that the financial services sector is one of those that is most reliant.
When the UK leaves the EU, it will become what is known as a 'third country' under the EU’s data protection laws.
This means that UK and EU/EEA organisations will need to take necessary action to ensure that personal data transfers from organisations in Europe to the UK are lawful.
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The benefits of taking action now means UK organisations won’t be at risk of losing access to the personal data they need to operate such as names, addresses or payroll details.
Financial service businesses should review their contracts relating to these personal data flows. Where absent, they need to update their contracts with additional clauses so that they can continue to receive personal data legally from the EU/EEA after Brexit.
For most financial service businesses, this will not be expensive and will not always require specialist advice.
Digital Secretary Nicky Morgan said: “If you receive personal data from the EU, you may need to update your contracts with European suppliers or partners to continue receiving this data legally after Brexit.
“So, I am urging all businesses and organisations to check and ensure they are ready for Brexit.
“There are simple safeguards you can put in place by following the guidance available. UK and EU businesses should get on the front foot and act now to avoid any unnecessary disruption.”
