FINANCE
Are your savings working hard enough?
Jillian Thomas (pictured) is Managing Director of Chamber patron Future Life Wealth Management, based in Renishaw, Derbyshire. Here, she looks at the effect of inflation on cash savings.
You might have squirreled away a bit of a nest egg for rainy days in a cash ISA or two, or your business may have cash stashed away in a deposit account as a cushion for when trading is not so good. Saving in the form of cash is seen
as the safe option; you are not subject to the vagaries of the stock market, with values going up and down. But what you are subjected to are the effects of inflation. And right now those effects are not so good. The uncertainty of Brexit and the increase in the oil price with the turmoil in the Middle East don’t help. The Bank of England has a target of inflation (as
measured as CPI) being no more than two per cent, but over the past 12 years it has been above that nearly all the time. Meanwhile, the average long-term savings rates remain low. All this means we will continue to see inflation at rates higher than deposit interest rates. And so your savings are, in real terms, being eaten away. Our concerns prompted us at Future Life Wealth Management to do our
own bit of research. On one day in January we looked at the interest paid on 385 cash ISAs on the Which? website. We found that just 16 beat the current rate of inflation. Crunch the numbers and you can see that in pounds and pence. Let’s say you have £50,000 invested in cash ISAs; inflation remains at 1.5% (not unrealistic); your cash ISAs pay 0.8%. If you do the maths you will see that your nest egg falls in ‘real’ value by 6.7% or £3,369.
The situation can be worse for businesses, where corporate accounts
typically pay a lower interest rate than personal accounts. So, what to do? Don’t go and blow all the money. We all know the importance of having an emergency fund you can access just in case, so you might need to find a new home for your cash. Whatever you do, you need to take action now and get some advice.
No individual investment advice is given, nor intended to be given, in this article and liability will not be accepted in respect of any action you may take as a result of reading this article. If you are unsure you are urged to take independent investment advice.
New IR35 rules – time to act By Stephen Allender, Senior Tax Manager at Chamber patron Shorts
From April 2020, HMRC is due to change the IR35 rules for individuals that contract through a Personal Service Company (PSC). These changes are likely to result in increased tax for workers, and an administrative burden for the companies that engage them. IR35 is the term used to refer to
tax legislation designed to make sure workers who provide their services through an intermediary, but would be an employee if they were providing their services directly to the client, pay broadly the same tax and National Insurance Contributions (NIC) as employees. An intermediary will usually be the worker’s own PSC. Historically, where a worker was engaged via a PSC, the IR35 rules applied only to the PSC. However,
90 business network February 2020
‘Private sector businesses should be acting to determine the tax status of workers engaged via a PSC and withhold tax and NIC from payments where relevant’
from April 2020, every medium and large UK private sector business will become responsible for determining the tax status of contract workers engaged through a PSC. In advance of these rule changes,
private sector businesses should be acting to determine the tax status of workers engaged via a PSC and withhold tax and NIC from payments where relevant. Workers deemed to be within
the IR35 rules will, from April 2020,
see their fees subject to tax and NIC deducted at source, rather than being paid gross. It is expected that businesses will err on the side of caution in the majority of instances and treat workers as caught by the new rules. The worker can appeal against an employment status determination if they disagree with the decision, but only for the engager to review and justify their original decision. Although the Chancellor has announced a review of the new
Stephen Allender
rules, a complete U-turn is unlikely, and businesses should prepare accordingly. Shorts has a dedicated tax planning team ready to support businesses and workers prepare for the new rules.
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