Starting a new business after COVID-19
Price Mann • August 18, 2021
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Starting a new business after COVID-19
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New businesses can still grow and flourish
Not much can stop determined entrepreneurs from building a new business from the ground up, even during such challenging times as a COVID-19 or its ensuing fallout.
The pandemic has proven a huge challenge for businesses, with 396,155 UK firms closing in 2020 according to the Office for National Statistics, as business owners struggled to cope with restrictions and lockdowns.
The Federation of Small Businesses expects that an additional 250,000 small businesses could fold by the end of 2021.
And yet, despite the challenges, 407,510 new businesses were formed during 2020. Matt Smith, director of policy and research at the Centre for Entrepreneurs, predicts a “record number of new businesses” will also emerge this year.
Businesses that were able to fit their goods and services to the current circumstances by moving their operations online or opening up delivery services, for instance, have been the ones to grow and flourish.
This will remain the case for entrepreneurs in the second half of 2021 and beyond, after restrictions and social distancing rules in England ended on 19 July 2021.
Meanwhile, with Government financial support still in place but tapering off, some entrepreneurs might in fact benefit from starting sooner rather than later.
Opportunities for new businesses
With the toll COVID-19 has taken on the economy, businesses and consumer confidence, it might seem counterintuitive to set up a business now. However, there are a number of opportunities to take advantage of.
For example, with the closure of hundreds of thousands of businesses, including almost 10,000 licensed premises, startups might be able to capitalise on the reduced competition that new businesses typically face during ‘normal’ times.
There is also a pent-up demand for goods and services, particularly in retail, for entrepreneurs to capture if they play their hand right and spot where specifically that demand is and how they can fill in a gap in the market.
They might also be able to qualify for loans more easily post-COVID, which may be surprising given the risks associated with new businesses starting now.
Yet the Bank of England’s base rate of interest remains at a record low of 0.1%, which has been the case since 19 March 2020.
In June 2021, the central bank’s monetary policy committee unanimously voted to keep the rate at this level, so businesses can expect commercial banks to continue charging relatively low interest rates for the foreseeable future.
Government support
Businesses will also be able to enter a restriction-free trading environment while still being able to benefit from the schemes and policies that the Government created to protect firms against the worst economic impacts that restrictions had on business.
For instance, while the window has passed for new businesses to defer their VAT payments, they may nevertheless be able to see some security with smaller VAT obligations.
On 8 July 2020, the Government allowed VAT-registered businesses to apply a temporary 5% reduced VAT rate to certain supplies relating to hospitality, hotel and holiday accommodation and admission to certain attractions.
On 3 March 2021, Chancellor Rishi Sunak extended this reduced rate for six months to 30 September, adding: “And even then, we won’t go straight back to the 20% rate”.
Instead, relevant businesses will enjoy an interim rate of 12.5% for the next six months until returning to the standard rate of 20% in April 2022. New businesses like cafes, restaurants, pubs and hotels may also be able to get a two-thirds discount on their business rates bill for the rest of the 2021/2022 tax year.
Startups can also save on their recruitment costs through the kickstart scheme, through which the Government promises to cover 100% of the national minimum wage for 16 to 24-year-old universal credit claimants, for 25 hours of work per week over a total of six months.
Challenges to overcome
As ever, new businesses need to overcome certain challenges, but the post-COVID (and post-Brexit) world comes with additional hurdles.
First, businesses, especially those in the hospitality sector, are facing staff shortages, partly because many migrant workers have left the country.
As many as 1.3m people born outside the UK have done so, many of whom lost their jobs during the pandemic. Others are leaving because of the UK’s departure from the EU.
Meanwhile, university students who would be working part-time are studying elsewhere remotely, while some workers moved away from big cities to save money over the course of the pandemic.
Furthermore, businesses can’t expect everyone to go on a spending spree either, as many people still have health and safety concerns despite restrictions ending, while the business environment could be especially brutal as everyone tries to bounce back.
Steps to take
There are some things that new businesses can start doing to effectively prepare for success after COVID-19.
For example, a new cafe might recognise ongoing health and safety concerns some people have about coming in, in which case they could include an online ordering and delivery service to cater for these individuals.
Of course, doing that would require planning, specifically in terms of how the delivery process would work, how many employees would be needed to implement it, and how much extra it would cost.
Another example concerns businesses in the retail sector. While retail has enjoyed its best growth since the start of the pandemic, its growth in online sales masks a continued decline in performance on the high street.
Any new retail business needs to consider this in their strategic planning.
Generally speaking, new businesses also need a strong online identity to flourish in today’s digital age, whether they are business-to-business or business-to-consumer, along with SEO and a wide range of channels to maximise organic traffic.
Crucially, entrepreneurs must think about the future and prepare for the worst. While the Government largely remains in favour of learning to live with the virus and lifting restrictions,
if the last 16 months have taught us anything it’s that the world is a bit more fragile than we might have thought.
That means keeping a close eye on expenses to avoid overspending, and making multiple plans based on varying sales projections from the most pessimistic to most optimistic outcomes, so you are ready for whatever comes your way.
It also means keeping an eye on the deadlines for various Government support schemes, including the recovery loan scheme, which could benefit new businesses if the pandemic continues to trouble the economy.
Anyone looking to start their own business should also seek expert advice to help them with business structures, planning, financing and a strong tax strategy - the fees of an accountancy firm will always save you more money in the long run.
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Managing risk in your investment portfolio Tips for a balanced investment approach. Investment markets rise and fall, yet the goals that matter to you – retirement security, children’s education, a comfortable buffer against the unexpected – remain constant. Managing risk means giving each goal the best chance of success while avoiding avoidable shocks. You can do that by holding the right mix of assets for your timeframe, using tax wrappers efficiently, and controlling costs and emotions. The 2025/26 UK tax year brings unchanged ISA and pension allowances. This guide explains the key steps, such as diversifying sensibly, rebalancing with discipline, safeguarding cash, and monitoring allowances, so you can stay on track whatever the markets deliver. It is an information resource, not personal advice. Start with a clear plan Define goals and timeframes: Decide what each pot of money is for (for example: house deposit in three years, retirement in 20 years). Time horizon drives how much short-term volatility you can accept. Short-term goals usually need more cash and high-quality bonds; long-term goals can justify more equities. Set your risk level in advance: Ask yourself two questions. Risk capacity: How much loss could you absorb without derailing plans (linked to your time horizon, job security and other assets)? Risk tolerance: How do you feel about market swings? Use a more cautious mix if you are likely to sell in a downturn. Ring-fence cash needs: Keep 3-6 months’ essential spending in easy-access cash before you invest. This reduces the chance of selling investments at a low point to meet bills. Choose simple, diversified building blocks: Broad index funds and exchange-traded funds (ETFs) covering global equities and high-quality bonds provide instant diversification at low cost. Avoid concentration in a single share, sector or theme unless you are comfortable with higher risk. Diversification: Spread risk across assets, regions and issuers Diversification reduces the impact of any single holding. Practical ways to diversify include the following. Assets: Use both growth assets (equities) and defensive assets (investment-grade bonds, some cash). Regions: Combine UK and global holdings. Many UK investors hold too much domestically; global funds spread company and currency risk. Issuers: In bonds, mix UK gilts and investment-grade corporate bonds to diversify credit exposure. Currencies: Equity funds are commonly unhedged (currency moves add volatility but can offset local shocks). For bonds, many investors prefer sterling-hedged funds to lower currency risk. A diversified core helps the portfolio behave more predictably across different market conditions. You can add small “satellite” positions if you wish, but keep any higher-risk ideas to a modest percentage of the whole. Use tax wrappers to reduce avoidable tax and trading frictions Efficient use of ISAs and pensions is one of the most effective risk-management tools because it protects more of your return from tax. ISAs (individual savings accounts) Annual ISA allowance: £20,000 for 2025/26. You can split this across cash, stocks & shares and innovative finance ISAs. Lifetime ISAs (LISAs) are capped at £4,000 within the overall £20,000. Junior ISA (for children under 18): £9,000 for 2025/26 (unchanged). ISAs shield interest, dividends and capital gains from tax. Rebalancing inside an ISA does not create capital gains tax (CGT), which helps you maintain your chosen risk level at lower cost. Note: There has been public discussion about potential ISA reforms, but the current 2025/26 allowance is £20,000. If government policy changes later, we will let you know. Pensions (workplace pension, personal pension/SIPP) Annual allowance: £60,000 for 2025/26 (subject to tapering for higher incomes; see below). You may be able to carry forward unused annual allowance from the three previous years if eligible. Tapered annual allowance: If your adjusted income exceeds £260,000 and threshold income exceeds £200,000, the annual allowance tapers down (to a minimum of £10,000 for 2025/26). Money purchase annual allowance (MPAA): £10,000 for 2025/26 once you’ve flexibly accessed defined contribution benefits (for example, taking taxable drawdown income). Tax-free lump sum limits: The lifetime allowance has been replaced. From 6 April 2024, the lump sum allowance (LSA) caps total tax-free pension lump sums at £268,275 for most people, and the lump sum and death benefit allowance (LSDBA) is £1,073,100. Pensions are long-term wrappers designed for retirement. Contributions usually attract tax relief and investments grow free of UK income tax and capital gains tax while inside the pension. Personal savings: Interest allowances Personal savings allowance (PSA): Basic-rate taxpayers can earn up to £1,000 of bank/building society interest tax free; higher-rate taxpayers up to £500; additional-rate taxpayers do not receive a PSA. Starting rate for savings: Up to £5,000 of interest may be taxable at 0% if your other taxable non-savings income is below a set threshold. For 2025/26, that threshold is £17,570 (personal allowance of £12,570 plus the £5,000 starting rate band). Dividends and capital gains outside ISAs/pensions Dividend allowance: £500 for 2025/26 (unchanged from 2024/25). Dividend tax rates remain 8.75%, 33.75% and 39.35% for basic, higher and additional-rate bands, respectively. The annual capital gains tax (CGT) exempt amount , £3,000 for individuals (£1,500 for most trusts). CGT rates from 6 April 2025: For individuals, 18% within the basic-rate band and 24% above it, on gains from both residential property and other chargeable assets (carried interest has its rate). HMRC examples confirm the £37,700 basic-rate band figure used in CGT calculations for 2025/26. CGT reporting reminder: UK residents disposing of UK residential property with CGT to pay must report and pay within 60 days of completion. Other gains are reported via self assessment (online filing deadline is 31 January following the tax year; if you want HMRC to collect through your PAYE code, file online by 30 December; payments on account remain due 31 January and 31 July). Why this matters for risk: Using ISAs and pensions lowers the drag from tax, allowing you to rebalance and compound returns more effectively. Outside wrappers, plan disposals to use the £3,000 CGT allowance and each holder’s tax bands and consider transfer to a spouse/civil partner (no CGT on gifts between spouses) before selling where suitable. Bonds and cash: Interest-rate and inflation considerations Interest rates: The Bank of England reduced the Bank Rate to 4% at its August 2025 meeting. Bond prices can move meaningfully when rates are high or changing, especially for longer-dated bonds. Consider the duration of bond funds and whether a mix of short- and intermediate-duration exposure suits your time horizon. Inflation: Headline Consumer Price Index (CPI) inflation was 3.6% in the 12 months to June 2025, while the CPI including owner occupiers’ housing costs (CPIH) rose by 4.1%. Inflation affects the real value of cash and bond coupons, and can influence central bank policy, affecting bond prices. Review whether your mix of cash, index-linked gilts and conventional bonds remains appropriate as inflation and interest-rate expectations evolve. Cash strategy: For short-term needs, spread deposits to respect Financial Services Compensation Scheme (FSCS) limits. For longer-term goals, excessive cash can increase the risk of falling behind inflation. Control costs and product risk Keep fees low: Ongoing charges figures (OCFs), platform fees and trading costs compound over time. Favour straightforward funds and avoid unnecessary expenses. Understand the product: Structured products, highly concentrated thematic funds or complex alternatives can behave unpredictably. If you use them, size them modestly within a diversified core. Use disciplined trading rules: Avoid frequent tinkering. Set rebalancing points (see below) and resist acting on short-term news. Rebalancing: Why, when and how Markets move at different speeds. Without rebalancing, a portfolio can “drift” to a higher or lower risk level than you intended. Follow this simple rebalancing framework. Invest in something that will rebalance automatically (i.e. certain ETFs) Frequency: Review at least annually. Thresholds: Rebalance when an asset class is 5 percentage points away from target (absolute) or 20% away (relative). Tax-aware execution: I prefer to rebalance inside ISAs and pensions. Outside wrappers, use new cash or dividends where possible; then consider selling gains up to the £3,000 CGT allowance and factoring in dividend and savings allowances. Implementation tip: If markets are volatile, use staged trades (for example, three equal tranches a few days apart) rather than one large order. Safeguard cash and investments with the right protections FSCS protection (cash deposits): Up to £85,000 per person, per authorised bank/building society group is protected. Temporary high balances from specific life events can be covered up to £1m for six months. The Prudential Regulation Authority has consulted on raising the standard deposit limit to £110,000 and the temporary high balance limit to £1.4m from 1 December 2025 (proposal stage at the time of writing). FSCS protection (investments): If a regulated investment firm fails and your assets are missing or there is a valid claim for bad advice/arranging, compensation may be available up to £85,000 per person, per firm. This does not protect you against normal market falls. Operational risk checks: Use Financial Conduct Authority authorised providers, check how your assets are held (client money and custody), enable multi-factor authentication, and keep beneficiary and contact details up to date. Currency risk: When to hedge For equities, many long-term investors accept currency fluctuations as part of the growth engine, since sterling often weakens when global equities are stressed, partly offsetting losses. For bonds, many prefer sterling-hedged funds to keep defensive holdings aligned with sterling cashflow needs. A blended approach works: unhedged global equities plus mostly hedged bonds. Behavioural risks: Keep decisions steady Common pitfalls include chasing recent winners, selling after falls or holding too much cash after a downturn. Tactics to keep you on track include: automate contributions (regular monthly investing), which spreads entry points write down rules (what you will do if markets fall 10%, 20%, 30%) separate spending cash from investments so you do not sell at weak prices to fund short-term needs use portfolio “buckets” in retirement. Retirement planning: Sequence-of-returns risk and withdrawals If you are drawing an income from investments consider the following. Hold a cash buffer (for example, 12–24 months of planned withdrawals) to avoid forced sales during sharp market falls. Be flexible with withdrawals: Pausing inflation-indexing or trimming withdrawals after a poor market year can help portfolios last longer. Use tax bands efficiently: Consider the order of withdrawals (pension, ISA, general investment account) to make use of personal allowance, PSA, dividend allowance and the CGT annual exempt amount. Take care around the MPAA if you are still contributing to pensions after accessing them. Putting it together: A repeatable checklist Confirm goals and time horizons. Check emergency cash (3-6 months). Map your target asset allocation. Use wrappers first: Fill ISAs and workplace/personal pensions as appropriate. Keep costs low: Prefer broad index funds/ETFs. Set rebalancing rules: Annual review + thresholds. Document tax items: Monitor dividend/CGT use; note 60-day property CGT rule; plan for 31 January/31 July self assessment dates if relevant. Review protection limits: Spread larger cash balances across institutions in line with FSCS; note proposed changes for late 2025. Schedule an annual review to update assumptions for interest rates, inflation and any rule changes. Get in touch if: you are unsure how to set or maintain an asset allocation you plan to draw income and want to coordinate wrappers and tax bands you expect large one-off gains or dividends and want to plan disposals or contributions you have concentrated positions (employer shares, single funds) and want to reduce single-asset risk tax-efficiently you are considering more complex investments. Wrapping up Risk management is not a one-off task but an ongoing discipline. By defining clear objectives, spreading investments across regions and asset classes, using ISAs and pensions to shelter returns, and reviewing allocations at least annually, you create a framework that limits surprises and keeps decisions rational. Document key dates – self assessment payments on 31 January and 31 July, the 60-day CGT rule for property, and the annual ISA reset on 6 April – so tax never forces a sale at the wrong time. Check deposit limits and platform safeguards for peace of mind, and keep a written record of your rebalancing rules to prevent knee-jerk trades. If life events or regulations change, revisit your plan promptly. A measured, systematic approach lets your portfolio work harder while you stay focused on the goals that matter most. Important information This guide is information only and does not account for your personal circumstances. Past performance is not a guide to future returns. The value of investments and income from them can fall as well as rise, and you may get back less than you invest. Tax rules can change and benefits depend on individual circumstances. If you need personalised advice, please contact a regulated financial adviser. If you’d like advice on managing your portfolio, get in touch.
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