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News Update: The Knock-On Effect to Our Taxes from the Economic Position

It should come as no surprise that the economic effects of the pandemic lockdown have only just begun. Already this year the government has overshot its borrowing. So, how might that affect our economy?

This does not constitute advice and advice should be sought in all instances before acting on it. The Financial Conduct Authority does not regulate tax advice. 

A big portion of the recent borrowing is the furlough scheme, contributing £123bn to the overall “best-case scenario” estimate of £337bn of debt. On the tax revenue side, as businesses have been closed and many people are still limiting their shopping, eating out, and driving, VAT and income receipts are down, and they might take a while to recover.

What’s the long-term impact?

No matter what happens in terms of economic activity for the rest of the year, it’s still going to take years to catch up. And it could be even longer with still unsettled Brexit money to factor in and the possibility of another recession on the horizon. Of course, there’s also the VAT cuts for hospitality sectors, designed to stimulate spending. This money will need to be recouped later. There’s only one way to dig out of a hole – spending cuts and long term changes to taxes.

What could possibly be changing?

There are whisperings of losing the triple lock on pensions and freezing public sector pay. Capital gains and income taxes might align, which is troublesome for small business owners because capital gains tax is lower than income tax and only adds to the problems from the new restrictions on Entrepreneurs’ Relief announced in March. There might be National Insurance increases and a lower tax rate in lieu of the Personal Allowance. One way or another, we’re all responsible for helping the country out of these tough times.

What can you do?

Be prepared for any eventuality. When tax changes are announced, be sure you can act quickly and pivot plans for your business to mitigate any negative financial effects.

Work with a financial adviser to ensure you have a plan for every tax situation and possible outcome which is incorporated into your overall financial plan. Don’t hesitate to schedule a review with us to get tailored advice for you and your business.

Considering your financial plans?
Investments | Financial Planning | Retirement | Save Tax | Protection |

Dental & Medical Financial Services have been helping doctors and dentists to build and protect their wealth, whilst saving tax for over 25 years.
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Tel: 01403 780 770


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