The government has used the term ‘self-employed’ to define a specific group of freelance workers; those registered as sole traders or who are members of partnerships and who invoice for payment and complete yearly tax returns.
If you’re a sole trader
If you’re registered as a sole trader or member of a partnership, the government expects to be offering you support via its self-employment income support scheme.
The scheme has provided grants to self-employed individuals or partnerships with less or no work due to coronavirus.
Rounds 1 and 2 of the scheme, which began in March 2020, allowed individuals to claim grants worth between 70- 80% of average trading profits, paid out in single installments covering 3-month periods.
The scheme has been extended again from 1st November for individuals who were eligible for the previous grants (even if they didn’t claim them)
Grant 3 will cover a three-month period from the start of November 20 until the end of January 21. It will cover 80% of average monthly trading profits, capped at £7,500 in total. To qualify, you will need to evidence that,
• Your business is affected by Covid during this period
• Impact will cause a ‘significant reduction’ in trading profits
• This ‘significant reduction’ is due to ‘reduced demand, activity or capacity’ OR being temporarily unable to trade e.g. your business has had to close due to Government restrictions, you’ve been instructed to shield or self-isolate in line with NHS guidelines and are unable to work from home, you’ve tested positive for coronavirus and are unable to work, you cannot work due to parental caring responsibilities, e.g. as a result of school or childcare facility closures.
You can apply for this grant by following the instructions on the Gov.UK website. You must make your claim for this grant by 29th January 2021.
A further grant (grant 4) will be available to cover the period Feb- April 21. Details of this grant aren’t available yet.
For all stages of the scheme,
- HMRC will use an average of your profits from tax returns in 2016-17, 2017-18 and 2018-19 to calculate the size of the grant. If you haven’t submitted tax returns for all 3 years, an average of 2017-18 and 2018-19 or 2018-19 only will be used.
- The government has published detailed guidance of how it will calculate your grant.
- Grants won’t need to be repaid but will count towards taxable income.
- You can check online to find out if you are eligible. You will need your self-assessment unique taxpayer reference (UTR) and your National Insurance (NI) number.
Things to note:
- At least 50% of your earnings for the period must have come from work as a sole trader or partnership.
- Individuals showing trading profits of over £50,000 will not be eligible to apply
- You must have submitted a 2018/19 tax return.
- You’re also entitled to claim Universal Credit and might be able to apply for a coronavirus business interruption loan.
If you’ve set up a limited company and pay yourself through PAYE
The government may be offering you support via its coronavirus job retention scheme.
All UK employers with a PAYE scheme have been able to access support to continue paying part of their employees’ salary by placing them on furlough. Grants have been worth between 60- 80% of employee’s usual wage costs.
You can read more about how this applies to company directors and salaried members of United Limited Partnerships here.
The furlough scheme has been extended to the end of April 2021.
You can currently claim 80% of your salary, up to £2,500/mth. Pension and national insurance contributions will not be covered.
Employers across the UK can use the scheme – even if they haven’t before. So those in Wales, Scotland, and Northern Ireland should also be able to apply, even though they are subject to different lockdown rules.
You DON’T need to have used the furlough scheme before to take part. However, you do need to have been on your PAYE payroll on 30 October to be eligible.
You WILL be able to work part-time while on furlough. You will be responsible for paying your wages while at work but the government will continue to contribute to hours that you remain furloughed.
You can start your claim for wages via this scheme on the Gov.UK website here.
You can no longer submit claims for claim periods ending on or before 31 October 2020.
Claims for furlough days in December 2020 must be made by 14 January 2021.
Coronavirus business interruption loan scheme
The temporary Coronavirus Business Interruption Loan Scheme (CBILS) supports small and medium-sized businesses, including registered sole traders, with access to loans, overdrafts, invoice finance and asset finance of up to £5 million and for up to six years.
The scheme is open until 31st March 2021.
The government will also make a Business Interruption Payment to cover the first 12 months of interest payments and any lender-levied fees, so smaller businesses will benefit from no upfront costs and lower initial repayments.
The scheme will be delivered through commercial lenders, backed by the Government-owned British Business Bank.
There are 40 accredited lenders able to offer the scheme, including all the major banks.
To be eligible, your business needs to be based in the UK and have an annual turnover of up to £45,000. You must be able to prove that your business has been negatively affected by coronavirus but would be viable if not for the pandemic.
Small businesses (including sole traders and partnerships) applying for loans of up to £50,000 can access a coronavirus Bounce Back Loan. This is a 100% taxpayer-backed scheme to make the process quicker and more accessible for those who are having difficulties accessing the wider scheme. These loans can be used to support your income.
If you already have a Bounce Back Loan but borrowed less than you were entitled to, you can top up your existing loan to your maximum amount. You must request the top-up by 31 March 2021.
If the majority of your work comes from short-term PAYE contracts
Unfortunately, you’re not covered by the self-employment income support scheme. However, you may be benefiting from the coronavirus job retention scheme.
The furlough scheme has been extended to the end of April 2021.
Your employer will be able to claim 80% of your salary, up to £2,500/mth. They will be expected to cover your pension and national insurance contributions.
Employers across the UK can use the scheme – even if they haven’t before. So those in Wales, Scotland and Northern Ireland should also be able to apply, even though they are subject to different lockdown rules.
You do not need to have been furloughed before to benefit and your employer DOSN’T need to have used the furlough scheme before to take part. However, you do need to have been on your PAYE payroll on 30 October to be eligible
If you are on a short-term contract that is due to expire, this can be extended or renewed to benefit from the scheme as long as you were on the payroll on or before 30th October.
If your contract ended on or after 23rd September, you can be rehired and furloughed. Rehiring is at the discretion of your employer but it is worth asking about the possibility of this if you fit the criteria.
You WILL be able to work part-time while on furlough. As of now, your employer will be responsible for paying your wages while at work but the government will continue to contribute to hours that you remain furloughed.
You cannot access this scheme directly; a claim must come from your employer via the Gov.uk website.
Things to note:
• Both you and your employer must agree to put you on furlough.
• You can be on any type of contract, including a zero-hour contract or a temporary contract.
• You might be expected to return to work part-time but remain furloughed for the rest of your employed hours.
• If you were ineligible to be furloughed or your employer chose not to do this, the government expects to offer you support via Universal Credit (see below)
Your rights to benefits
- Employees who are too ill to work or who are self-isolating due to coronavirus are entitled to Statutory Sick Pay (SSP)
- Self-employed workers who are not eligible for SSP will be able to claim contributory Employment Support Allowance. This is now available from day one, not after a week
- Universal Credit is available for those who are unemployed, self-employed or on a low income. A number of beneficial changes have been made to Universal Credit in response to coronavirus
- The monthly standard rate has been increased
- The housing allowance has been increased
- The minimum floor element of the benefit has been temporarily suspended
Turn2us is a national charity providing information and guidance around finances, including a benefit checking service.
Reducing your costs
- Mortgage payment holidays have been in place since March 2020 to assist those who were unable to pay because of the impact of coronavirus. This scheme has been extended to 31st March 2021
- Borrowers who haven’t yet had a payment holiday will be able to request one up until 31 March 2021 with the option to extend it for another three months afterward
- All payment deferrals need to end by 31 July 2021, so you’d need to apply for your first payment holiday before your February mortgage payment is due to benefit for the full 6-months
- Borrowers who’ve already had or are on a three-month payment holiday will be able to apply for another three months. This would be up to a maximum of six months of paid holidays
- Borrowers who’ve already had six months of paid holidays and still need help will be offered ‘tailored support’. Your lender should contact you to discuss this
It is important that you discuss and agree to this with your lender before falling behind on your payments and to fully understand any future implications for your credit score
Your lender won’t be able to repossess your home for non-payment until at least 31st January
• Local government and housing association representatives have confirmed that no social renter should be evicted due to coronavirus.
• Private landlords can apply to evict tenants but must follow a lengthy process (6-months in England, Scotland and Wales, 12 weeks in N Ireland)
• Renters in Wales can apply for a loan from the Welsh Government to help with rent arrears
• A similar scheme, the tenant hardship loan, exists in Scotland
If you rent privately, speak to your landlord as soon as possible to let them know your situation and work out a plan.
Banking and bills
All banks and other high-street lenders were told to offer payment holidays to card and loan customers whose finances were affected by coronavirus. (Although these could be withheld if you were already in debt or facing financial difficulties before the coronavirus). This arrangement has been extended to 31st April 2021.
• Some banks are also offering customers the opportunity to temporarily increase their credit limits and access cash in fixed savings accounts without a penalty.
• The Lifetime ISA (LISA) withdrawal penalty has effectively been removed for a year.
• Borrowers with car finance plans can continue to ask for payment holidays under new proposals
• People are also entitled to ask for extensions on insurance payment holidays.
Other regular outgoings
A range of other measures has been introduced to support people whose finances have been impacted by Covid-19. These cover things including payday loans, IVA payment plans and utility bills.
If you have any regular outgoings that are causing financial stress, you are advised to contact your provider to discuss what is possible and agree a plan.
StepChange offers useful advice and guidance around debt and other financial worries.
Check out the moneysavingexpert website for more advice and tips.
HMRC has put measures in place to assist those struggling to pay their self-assessment liabilities due to reduced income through coronavirus. If you’re concerned about your ability to pay a tax bill, contact HMRC’s coronavirus helpline as soon as possible on 0800 024 1222.