The Coronavirus pandemic has undoubtedly been one of the most significant catalysts for economic shake up since the 2008 financial crisis. Most of us remember financial markets around the world taking a remarkable plunge in March 2020 when lockdowns in Europe were announced and the FTSE 100 index in the UK was no exception.
As we now begin to emerge on the other side and there is a feeling that we’re reopening those parts of the economy that were closed back up again permanently. We’re also discovering that behaviours that were born from how quickly the economy changed have created new situations that aren’t likely to “go back to normal” like other things will.
It follows now that the advice of accountants has become more valuable and relevant than ever for people in certain circumstances. This isn’t necessarily just from a HMRC regulatory and compliance point of view but also concerns long-term tax planning and making sure the choices made at this early stage are those that will work for you some years down the line.
Who is likely to be in this group of people who will benefit from the input of an experienced accountant?
- People Working from Home
For those working from home now who didn’t before the pandemic, it may be worth considering the advice of an accountant to explore the possibilities of taking advantage of certain tax reliefs. Such tax relief typically relates to the use of energy that otherwise wouldn’t have been used had you remained working from the office and in some cases equipment purchased that allows you to work from home. More people than ever are working from home now and there is a great deal of discussion around how permanent hybrid working models are here to stay.
- Starting a Side Business
As a means of taking advantage of new markets and new consumer behaviour that arose from the pandemic, people started small ventures of their own, some alongside their main work. There are many accounts of furloughed workers being given a once in a lifetime opportunity to work on their own projects without fear of neglecting their main source of income and some of these will still be around for some time to come.
Whilst there is an element of leeway for those embarking on a venture, there will still be the matter of taxation and declaration of income. An accountant is best placed to advise on next steps that people with a “side business” should take and how such a venture could be structured going forward.
- Becoming Self Employed
Becoming self-employed typically involves a steep learning curve and from a structural and taxation point of view and it’s one that requires expert advice from an early stage. There are many ways in which your self-employment can be set up including operating as a sole trader or setting up a limited company, both of which have their pros and cons. Your accountant is the first port of call if you choose to work for yourself.
- Moving Into the Next Tax Bracket
A controversial point, but a very relevant one for many people both this year and over the next five. In the most recent 2021 budget, the Chancellor announced a freeze in certain tax bands that have historically moved in line with inflation and wage growth. Taxes that have been frozen for the next five years include Income Tax and Capital Gains Tax which means even though the rate of tax has not been increased, the amount collected in tax revenue will go up as more people find themselves moving up into the next marginal tax bracket.
This doesn’t only affect the amount of income tax you pay but other elements of your tax liability which is why the advice of an accountant will be invaluable if you’re currently earning a salary or a self-employed income as a sole trader close to income tax thresholds.
- Property Market Involvement
The property market has been affected considerably both by the pandemic but also by the measures implemented by the government to encourage property transitions, most notably the Stamp Duty Land Tax holiday. Alongside this, there has been a renewed interest in the buy to let market and so new landlords would always be encouraged to seek the advice of an accountant to ensure tax is paid on earnings derived from rental income. The law has become tighter in recent years and the rules aren’t always straightforward, but this of course depends on your circumstances.