While the coronavirus pandemic has affected the health of more than a million people worldwide, it has also had a devastating effect on the global economy.
The Chancellor has put in place a substantial package of support for businesses, including paying 80% of the wages of furloughed workers, VAT deferrals and business interruption loans. Read our guide to small business support here.
After criticism that the government were not doing enough to support self-employed and freelance workers, a package of measures has also been unveiled designed to provide support. Here’s a summary of the assistance that Rishi Sunak has announced.
Claim a grant though the Self-Employed Income Support Scheme
The Self-Employment Income Support Scheme (SEISS) will pay a taxable grant to self-employed people equivalent to 80% of their average monthly profits over the last three years, up to £2,500 a month.
Rishi Sunak confirmed that the scheme would be open for at least three months, with the possibility that it will be extended.
The grant will apply to you if you’re a self-employed worker and you:
- Have trading profits of up to £50,000
- Make the majority of your income from self-employment
- Filed a tax return in 2019 and are already self-employed. To help more people access the scheme, the government confirmed that HMRC has extended the tax return deadline for another four weeks to enable self-employed workers to submit a tax return.
The three months’ income will be paid as one lump sum, expected to be in June.
The Chancellor said that 95% of people who are ‘majority’ self-employed will benefit and that the 5% the scheme doesn’t cover have an average income of £200,000. These are the steps, he said, to “make this scheme deliverable and fair.”
Note that if you have less than three years trading accounts, then HMRC will look at ‘what you have’. If you are ‘very recently self-employed’ you will not be eligible for the scheme.
The government hopes that the scheme will be available at the start of June. You will need to complete an online form in order to access the grant, and this will be paid straight into your bank account.
The Chancellor also confirmed that self-employed workers can also access business interruption loans.
Defer your July 2020 tax payment
If your next self-assessment payment is due on 31 July, you can defer this payment until January 2021.
This is an automatic offer and so you don’t have to apply for a deferral. You won’t pay any penalties or interest for late payment if you decide to defer your payment until 31 January 2021.
Note that the deferment is optional. If you are still able to pay your second payment on account on 31 July 2020 you should do so.
Claim Universal Credit
If you’re self-employed and you have seen a significant reduction in your earnings, you are able to claim Universal Credit, providing you meet the usual eligibility criteria.
To support you with the economic impact of the pandemic and allow you to follow government guidance on self-isolation and social distancing, the requirements of the Minimum Income Floor will be temporarily relaxed.
Take a mortgage payment holiday
The government has announced that lenders will offer mortgage payment holidays of up to three months if you are:
- A homeowner
- Up to date with your mortgage payments
- Concerned about your ability to meet your mortgage repayments, for example, due to a loss of work or other change in your circumstances.
Your lender will not require you to provide any documentation or undergo any affordability tests. This payment holiday should also not affect your credit rating.
Payment holidays are also available to Buy to Let landlords whose tenants have been financially affected by the coronavirus. Landlords who take payment holidays are expected to pass on this relief to their tenants.
At the end of the payment holiday, you will still owe your lender the same amount as you do now, but interest will continue to accrue on this. This means it will take you longer and cost you a little more to clear your mortgage.
Use the HMRC Time to Pay service
If you’re self-employed with outstanding tax liabilities and you’re struggling with your finances, you may be eligible to receive tax support through HMRC’s Time to Pay service.
These arrangements are agreed on a case-by-case basis and are tailored to your individual circumstances and liabilities.
If you have missed a tax payment or you might miss your next payment due to Covid-19, please call HMRC’s dedicated helpline on 0800 0159 559.
Beware of Income Tax and National Insurance changes in the future
During the speech where he announced the self-employed support measures, the Chancellor was keen to point out that the support for self-employed individuals was comparable to that for employed workers. Bearing this in mind, Rishi Sunak hinted that self-employed people may therefore have to pay more tax in future.
The Chancellor said: “If we all want to benefit equally from state support, we must all pay in equally in future. It is just an observation that there is currently an inconsistency in the tax treatment of the employed and self-employed”.
Get in touch
If you’re self-employed and you’d benefit from advice on your business or personal finances during this period and beyond, please get in touch. Email admin@stonegatewealth.co.uk or call us on 01785 876222.
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of government legislation which is subject to change.
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