The current coronavirus pandemic has had a significant impact on the UK and global economy. If you’re self-employed, you may find that contracts have been paused or that new work has dried up, affecting your finances in the short and long term. However, steps have been taken to provide support to the self-employed that you may be able to take advantage of.
In recent years, self-employment has steadily increased thanks to more opportunities and improved technology. In 2017, official figures suggest over 15% of the UK’s labour force was self-employed, accounting for 4.8 million people. As the pandemic has meant many businesses have been forced to shut or limit operations, as well as individuals tightening their belts, Covid-19 has had an impact on the income of millions of self-employed individuals.
Following calls to provide support, the government unveiled a package of measures designed to support those who own their own business at the end of March. Understanding these measures can help you access financial support if you need it and provide confidence that you can get through the pandemic.
1. Self-employed tax deferral
If you’re due to make an Income Tax payment under the Self-Assessment system in July, this can be deferred. This measure applies to those that were due to make a ‘payment on account’ by 31st July 2020. These payments now won’t be due until 31st January 2021. This measure will be applied automatically and if you decide to defer payment you won’t face any penalties or interest for late payment.
It’s a step that can provide you with additional savings to use during the pandemic. However, keep in mind that the Income Tax payment will still need to be made early next year and plan for this. You don’t have to wait until January 2021 to make a payment, you can do so in line with the original deadline or later this year if you have the finances to do so.
2. Self-Employed Income Support Scheme
The Chancellor previously announced that employed workers that have been furloughed would receive 80% of their average monthly salary up to £2,500. The Self-Employed Income Support Scheme provides similar help for those running their own business.
This scheme 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. The scheme will be open for three months, with the possibility that it will be extended depending on how the pandemic situation develops.
The three months’ income will be paid as a lump sum in June at the earliest. Therefore, if your income has been immediately affected by the pandemic you will also need to look at other ways to meet financial commitments in the short term.
To qualify for the Self-Employed Income Support Scheme, you must:
If you have been employed for less than three years, the Chancellor said that HM Revenue and Customs will look at ‘what you have’ on a case-by-case basis.
The Self-Employed Income Support Scheme doesn’t mean you’re excluded from measures previously announced. It has been confirmed that self-employed workers can also access the Coronavirus Business Interruption Loans. This measure can help you access loans, overdrafts, invoice finances and asset finances of up to £5 million for up to six years, with the government covering the first 12 months of interest payments and any lender-levied fees. Keep in mind though, the loan will have to be paid back and you will be liable for the interest after the initial 12-month period.
3. Universal Credit
Claiming Universal Credit if you have faced a significant reduction in earnings is an option, the usual eligibility criteria remain in place. How much you’d receive depends on your financial situation. The benefits calculator provided by national charity Turn2us can help you understand how much you’d receive through Universal Credit. Benefits usually start within five to six weeks, if you need financial support immediately, you may be able to claim an interest-free loan within the first month.
To provide support for those following guidance on self-isolation and social distancing, the requirement of the Minimum Income Floor have been temporarily relaxed. This previously limited payouts to those earning below the minimum wage through self-employment.
4. HMRC Time to Pay service
Those with outstanding tax liabilities that are now struggling to pay may be eligible to receive support through the HMRC’s Time to Pay service. If you have missed a tax payment or may miss the next payment due to the impact of coronavirus, this service may extend the deadline. These arrangements are made on a case-by-case basis and will depend on your circumstances and liabilities. If you’re concerned about missing tax payments, you should contact HMRC through its dedicated helpline 0800 0159 559.
5. Payment holidays on mortgages and loans
If you’re a borrower, repayment holidays are an option.
The government announced that mortgage payment holidays of up to three months are available to all homeowners who are up to date with their mortgage payments. This can provide you with some short-term financial security and relieve some of the pressure if your income has fallen. However, you will still owe the same amount as you do now and interest will continue to accrue on this. This means if you take a mortgage holiday paying it off will take longer and cost more.
This measure has also been extended to Buy to Let landlords whose tenants have been financially impacted by the coronavirus. Landlords that take advantage of this are expected to pass this relief on to their tenants.
If you’d like to discuss a mortgage repayment holiday, you should contact your lender to understand their process.
In addition to mortgages, many lenders are offering holidays on payments for other forms of borrowing, such as credit cards and loans. This is at the discretion of your lender. If you’re worried about making repayments and want to know what your options are, you should contact your provider directly.
If you’re struggling financially, don’t bury your head in the sand. The above five measures can help you meet financial commitments during these uncertain times. Being proactive is key, don’t wait until you’re struggling or missing payments before addressing the issue.