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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 who have been adversely affected by the pandemic. 

  • 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

Over the course of 2020, the government has announced it will make taxable grants available to people who are self-employed. The first grant covered 80% and the second 70% of monthly profits over the last 3 years, capped at £2,500 and £2,190 per month respectively. The deadline for the second grant was 19 October.

The scheme has been extended, with the government announcing two further grants which will cover November to end of January and February to the end of April. This will be payed in a single lump sum and cover 40% of trading profits for three months, capped at £3,750. The level for the next payout has yet to be set.  A key change is that you will need to have some evidence for how you’ve been adversely affected by reduced demand due to the pandemic. 

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.

You can still continue to trade whilst claiming the grant and you can claim again if you’ve already claimed before. A new eligibility-checker tool has been launched following the publication of new guidance on eligibility.

 

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.

Update:

  • The loan length has been extended from 6 years to 10 years, enabling businesses to reduce their repayment liabilities. 
  • Businesses can also choose to just pay the interest for up to six months. Businesses suffering serious financial issues may be able to get repayments temporarily suspended too. 

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 announced earlier in 2020 that Income Tax and VAT payments could be deffered in order to ease the pressure on self-employed workers and businesses. 

  • The over half a million businesses who deferred VAT due in March to June 2020 are to be given the option to spread their payments over the financial year 2021-2022.
    • They will be able to choose to make 11 equal instalments over 2021-22.
    • All businesses which took advantage of the VAT deferral can use the New Payment Scheme.
    • Businesses will need to opt in, but all are eligible.
    • HMRC will put in place an opt-in process in early 2021.
  • Enhanced Time to Pay for Self-Assessment taxpayers
    • The self-employed and other taxpayers are to be given more time to pay taxes due in January 2021.
    • Taxpayers with up to £30,000 of Self-Assessment liabilities due will be able to use HMRC’s self-service Time to Pay facility to secure a plan to pay over an additional 12 months.
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Coronavirus (Covid-19)The latest business guidance and support