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Coronavirus: what help is there for the self-employed?

Many self-employed workers, freelancers, and contractors are facing financial difficulties as a result of the coronavirus (Covid-19) outbreak. We’re going to look at some of the support and measures in place to help you during this difficult time.

How is coronavirus affecting the self-employed?

Many self-employed individuals are experiencing a loss of income as a result of the Covid-19 outbreak. This might be due to government restrictions on their ability to work or a lack of jobs and clients as a result of the country-wide lockdown. Of course, those who are self-isolating with symptoms will be unable to work either. 

Amongst those affected are:

  • Builders
  • Musicians
  • Journalists
  • Painters and decorators
  • Designers
  • Copywriters
  • Personal trainers

Having provided a comprehensive package to support businesses during the coronavirus crisis, the government was under increasing pressure to step in and support the 5.2 million workers classified as self-employed. However, this is a highly varied workforce making it difficult to create a fair and deliverable support package.  

Summary of support available

There are a number of measures in place to help you stay solvent and cover your loss of income. 

  • Construction worker on site
    Self Employed Income Support Scheme

    The grants will be for those with profits of under £50,000 a year on average and grants will be capped at £2,500 a month..

  • Universal Credit

    The government’s welfare programme is open to self-employed applicants and payments have been raised to match the rate of statutory sick pay (£94.25 a week).

  • 'New Style' Employment and Support Allowance

    If you’ve paid enough National Insurance Contributions, you might be able to claim new style ESA.

  • Five pound note
    Income Tax payments deffered

    Income Tax payments due in July 2020 under the Self-Assessment system will be deferred to January 2021.

  • HMRC Time To Pay

    Through the HMRC Time To Pay Scheme, “viable” (ie otherwise profitable) self-employed people experiencing short-term cash flow may be able to agree a payment plan for tax they owe.

10:48

Video: Martin Lewis explains coronavirus income support for self-employed people

by MoneySavingExpert.com

In this ‘rough’ video, Martin explains who qualifies and discusses freelance issues, agency workers, limited companies and more.

Self Employed Income Support Scheme

Billed as the “most generous support package” of its kind anywhere in the world, the government has announced it will make taxable grants available to 90% of people who are self-employed. The grants will be worth “80% of average monthly profits over the last 3 years, up to £2,500 per month” and be open to applications across the UK for up to three months. To be eligible for the scheme you will need to:

  • have a tax return for 2018/19
  • make a majority of your income from self-employment
  • intend to continue to trade in the tax year 2020 to 2021
  • have a trading profit of less than £50,000 in 2018-19, or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2017-18.

The government has allowed individuals who missed the tax year 2018/19 deadline, and have not yet filed their tax return, up to Thursday 23 April to submit their self-assessment.

The scheme will be open to applications on May 13 and the first payments made before the end of May. HMRC will contact those likely to be eligible and assign you a slot in which to apply online based on your unique taxpayer number (UTR). 

A new eligibility-checker tool has been launched following the publication of new guidance on eligibility on 1 May.

Bounce Back Loans

If you’re self-employed you may also be eligible for the Bounce Back Loan scheme. Specifically aimed at small-sized businesses, the scheme was launched as an alternative solution to the main Coronavirus Business Interruption Loan Scheme (CBILs).

  • Apply for a loan from £2,000 and up to 25% of your turnover (maximum of £50,000).
  • The government will guarantee 100% of the finance to the lender. 
  • You won’t pay any interest in the first 12 months, this will be covered instead by the government. 
  • You also don’t need to make any repayments for 12 months
  • Interest is capped at 2.5%.
  • The loan term is six years, but you can make early repayments without being penalised.

The scheme is open to all sole traders and partnerships who were trading on 1 March 2020. Accredited lenders are listed on the British Business Bank website.

The first place to go is to your own bank (provided they are part of the scheme) and complete a short online form. On this form, you’ll need to self-certify that you’re circumstances match the eligibility criteria listed here on GOV.UK.

Universal Credit

In the meantime, if you’re self-employed you’ll be able to sign up to the Universal Credit scheme and claim benefits to cover your loss of income. This amounts to a single monthly payment (or twice in Scotland) for those out of work or unable to work. These payments are being temporarily raised during the coronavirus period to match the rate of statutory sick pay (£94.25 a week).

Your Universal Credit payment is made up of the standard allowance and any extra amounts that apply to you, for example, if you:

  • have children
  • have a disability or health condition which prevents you from working
  • need help paying your rent

Here’s a handy benefits calculator from Money Saving Expert to help you work out what you’re entitled to. 

You may also be able to claim ‘New Style’ Employment and Support Allowance with, or instead of Universal Credit, depending on your National Insurance record. This is a fortnightly payment. More details of how the ESA works including eligibility criteria can be found on GOV.UK.

Income Tax and VAT deferrals

The government has announced that it will defer payments of Income Tax and VAT in order to ease the pressure on self-employed workers and businesses. 

  • The next quarter of VAT through to the end of June has been deferred (those payments can now be paid at the end of the financial year). 
  • If you’re self-employed, Income Tax payments due in July 2020 under the Self-Assessment system will be deferred to January 2021.

Further help is available through the Time To Pay scheme if you’re struggling to pay your tax bill. 

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Coronavirus (Covid-19)The latest business guidance and support