We’re following the government’s response to the crisis closely, particularly in relation to those who are self-employed.
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 offer you support via its self-employment income support scheme.
The scheme will provide grants to self-employed individuals or partnerships who have less or no work due to coronavirus.
The scheme currently allows you to claim a grant worth 80% of your average trading profits, paid out in a single instalment covering an initial 3 months from March 2020 and capped at £2,500 per month (£7,500 in total)
If you’re eligible, you should claim this grant by 13th July 2020.
The scheme is being extended and a second (and final) grant will be available in August 2020. The application for this stage of the grant isn’t open yet.
This grant will be worth 70% of your average monthly trading profits, paid out in a single instalment covering a further 3 months, capped at £6,570 in total.
- 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.
- HMRC will contact you if you’re eligible and invite you to claim using the GOV.UK online service.
- 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.
Payments from the first round of the scheme are expected to reach accounts 6 working days from application.
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 offer you support via its coronavirus job retention scheme.
All UK employers with a PAYE scheme will be able to access support to continue paying part of their employees’ salary by placing them on furlough. Employees must be furloughed for a minimum period of 3 weeks.
Initially, HMRC will pay employers a grant worth 80% of an employee’s usual wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. This will be in place from March- August 2020.
From 1st July, employers will be given flexibility to bring furloughed employees back to work on a part time basis. Employers will be responsible for paying wages while employees are at work but the government will continue to contribute to hours that employees remain furloughed.
From August 2020, the scheme will be tapered.
- In August, the government will pay 80% of wages up to a cap of £2,500. Employers will start to pay Employer National Insurance contributions and pension contributions.
- In September, the government will pay 70% of wages up to a cap of £2,187.50. Employers will pay the additional 10% of wages as well as NI and pension costs
- In October, the government will pay 60% of wages to a cap of £1,875. Employers will pay 20% of wages plus NI and pension costs.
The final date that you will be able to furlough yourself will be 10th June 2020 as the scheme will close to entirely new entrants 3-weeks later on 30th June. As an employer, you have until 31st July to make any claim for the period up to 30th June.
This scheme is accessed via an online portal
You will need to:
- Designate yourself (as the employee of your company) as a ‘furloughed worker’
- Submit information to HMRC about your earnings
Things to note:
- As a furloughed worker, you won’t be able to carry out paid work through your company until the rules change on July 1st. However, you can be put on furlough via your own company but accept work from a separate employer.
- You must have begun paying yourself via the PAYE scheme on or before 19th March 2020
- You will only be able to claim 80% of your salary, not your dividends
- If your business needs short term cash flow support, you may be eligible for a coronavirus business interruption loan
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 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.
Small businesses (including sole traders and partnerships) applying for loans of up to £50,000 can access a coronavirus Bounce Back Loan. This 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.
To be eligible, your business needs to be based in the UK, have been negatively affected by coronavirus, and not to have been in financial distress on 31 December 2019 although you won’t have to prove the future viability of the business.
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 benefit from the coronavirus job retention scheme if you were on the payroll on or before 19th March and your employer treats you as a ‘furloughed worker’.
If you were employed and on the payroll on 28th February and made redundant or stopped working for your employer due to the coronavirus before 19th March, your employer can rehire you and put you on furlough. This applies even if you had worked only a day or two of the contract.
The final date that you will be able to be placed on furlough by your employer will be 10th June 2020 as the scheme will close to entirely new entrants 3-weeks later on 30th June.
Things to note:
- Your employer is responsible for claiming through the Job Retention Scheme on your behalf and for paying you what you’re entitled to. You can’t apply for the scheme yourself
- 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 when the scheme changes on 1st July
- You can be furloughed under the scheme if you are a foreign national.
- You can be furloughed by more than one employer or be furloughed by one employer and continue to work for another.
- Your employer could choose to pay the additional 20% of your salary themselves but they don’t have to.
- If you’re ineligible to be furloughed or your employer chooses 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,
If you live in Scotland and you’re newly self-employed, you may be eligible for the ‘newly self-employed hardship fund’- a one-off grant of £2000. Contact your local authority to discuss the scheme and how to apply in your area.
Reducing your costs
- All homeowners can apply for a break from their mortgage repayments if they are unable to pay because of coronavirus. This was initially put in place for 3-months from March 2020 and has now been extended for a further 3-months. It is important that you discuss and agree this with your lender before falling behind on your payments.
- Emergency legislation is in place to protect renters and prevent evictions from social or privately rented accommodation. You should speak to your landlord and come to an agreement if you’re struggling to manage your rent.
Banking and bills
- All banks and other high-street lenders have been told to offer three-month payment holidays to card and loan customers whose finances are affected by coronavirus. These can be withheld if you were already in debt or facing financial difficulties before the coronavirus.
- 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 ask for a three-month payment holiday.
- People are also entitled to ask for a 3-month insurance payment holiday.
- Some utility companies have said that they will take steps to ease the burden on clients by offering increased flexibility and support.
Other regular outgoings
A range of other measures have been introduced to support people whose finances have been impacted by Covid-19, from one-month payment holidays on payday loans to more flexibility around IVA payment plans.
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.
- HMRC have relaxed the rules on tax liabilities during this period. If you’re concerned about your ability to pay a tax bill, contact HMRC’s coronavirus helpline as soon as possible on Covid