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From the 2020 Budget to the latest support package to combat Coronavirus (Covid-19) on Friday 20th March, the biggest component missing is the support for the self employed. Below are summarised the current measures to date which will help the self employed. We will keep this updated if and when anything changes.
It may sound a little perverse, but I hope no one reads this blog. I hope within 6 hours all of this is superseded by a much bigger package of support for this critical group in the UK.
It is our understanding that more announcements here should be imminent (perhaps even later today). The clever thing about the measures announced to date is that they build on existing policies and infrastructures so can be delivered to a greater degree and more quickly. These are however more difficult for the self employed, which is why we suspect the slight delay here; last week Stephen Barclay said it would be “operationally” hard to protect self employed incomes. The problem is, this is exactly the group that need the support perhaps the most and the quickest, so we hope this is addressed very promptly.
Even more pressing, in a world of self-isolation and social distancing, last week 47% of the self employed surveyed would feel obliged to work even if they had the virus.
Who are the Self Employed?
The Self Employed are those who work for themselves as a freelance or the owner of a business, rather than for an employer.
It is not however quite as simple as you are an “employee” or “self employed”.
For example:
- if you own a limited company and for tax purposes have a PAYE scheme on your company, you are technically both self employed and an employee; and
- Some people are working as employees by the day and in the ‘gig economy’ by night, sometimes in the hope that the latter may take over the former, if things go to plan. These people are also self employed and employees.
The Importance of the Self employed
According to the Office of National Statistics 15% of all UK workers are now classed as self employed. In fact, the UK is currently home to over 5 million self employed workers, with figures continuing to rise as people finally remove the shackles of 9-to-5 working.
Yes, they can benefit from a better work-life balance, flexibility in when and how they work, they can even be paid more and pay less tax. However, at times like these the negatives are much more apparent.
Self employed support
One thing is for sure, when you compare this to our blog on SMEs, the support here is a lot more sparse. As we mention above, we hope this changes and quickly.
Self-Assessment Tax Return Payments
In reference to Self-Assessment Tax Return Payments, for those of you who were due to pay your second payment on account on 31 July 2020, this will now be deferred to 31 January 2021. This is a great cashflow help, but the second payment on account, as things stand, will still be due.
Employment Support Allowance
Self employed will now be entitled to the equivalent of Statutory Sick Pay, which is £94.25 per week, for up to 28 weeks, if you are too ill to work. This is through the ‘Employment and Support Allowance’, you can claim via Universal Credit. This was previously less generous. Although this might help, the benefit here is very small. Also if you consider that employees are being offered 80% of pay directly from the government, it isn’t exactly equivalent to say the least.
Other Self Employed Benefits
You may be entitled to Universal Credit or Housing Benefit. On Friday it was announced that there would be an increase in standard Universal Credit by £20 a week (£1,000 per year), with the same rise for those still on the working tax credit scheme (to cost £7bn per year), in addition to support for those struggling to pay their rent via Universal Credit with £1bn further support here.
We are not clear on the timings of when these will go live, but if you claim Universal Credit make sure all your information is up to date and you are applying for all the benefits you can especially at this time. If you are not currently claiming it, consider it.
Business Interruption Loan
There will be a special loan available for Small businesses who are hit by the Coronavirus, as a temporary Business Interruption Loan. This could also be available to the self employed, although we haven’t received the clarity on that yet, as the criteria have not been confirmed.
The British Business Bank will deliver the loan scheme, which should be in place this week, to support you, subject to certain criteria, including the future viability of your business.
Interest rates will be similar to current bank lending as the Government will guarantee 80% of the loan, without a charge to you on the loan (unlike the Enterprise Finance Guarantee scheme (‘EFG’)).
Whilst this could help you, especially at this time and the interest-free period is now twelve rather than six months, ultimately this is a loan and it will still need to be repaid, it’s not the simplest and it’s not been launched yet so it is unclear how helpful this might be.
Tax Helpline
HMRC have set up a specialised helpline and employed 2,000 specialised staff to help support businesses and the self employed concerned they will not be able to pay their tax on time, specifically due to the coronavirus. In additional to practical help and support, if you are unable to pay your tax as it falls due, they can explore:
- agreeing an instalment arrangements;
- suspending debt collection proceedings; and/or
- cancelling penalties and interest where you have administrative difficulties contacting or paying HMRC immediately.
Their scope is therefore above and beyond what can be provided as part of a time to pay agreement, so if you need to, we suggest you get in touch with them as soon as possible.
Their opening hours are Monday to Friday 8am to 8pm, and Saturday 8am to 4pm, and they are often less busy first thing and last thing.
Other Potential Methods of Support
- VAT relief – if you or your business is VAT registered, you will not pay any VAT until at least the end of June (and this could be extended) and again there is no cap. The payment can also be postponed until the end of the financial year (which we assume they mean 31 March 2021). However most self employed are not VAT-registered so this wouldn’t help you. It is also only a deferral so will still need to be paid back at a later date.
- Rates Relief – Small businesses can claim £10,000 cash grant (previously £3,000 in the Budget) with more specific relief in the retail, leisure and hospitality sectors (and more specific sector support expected to follow later in the year). However, a lot of self employed do not have offices, or business premises, so this wouldn’t help them.
- PAYE support – The government is offering a grant which will pay 80% of wages for employees who would be laid off, if employees keep them on in the meantime, up to £2,500 per month. However, most self employed businesses often do not employ staff. Even if you are a limited company and you and your partner are on PAYE, we understand currently that this is unlikely to be available, at least at this point. This is therefore likely to be of little help here.
Other Tips
At this difficult time we all need to come together to support and help one another. Other than the above schemes, there are also a few things you might be able to do to help your business, above and beyond the government schemes mentioned above. These can include:
- Act now, plan, prepare and be ready, whatever the scenario;
- Prepare cashflow models for your business, to understand how your position is looking and when your issues will arise under different scenarios;
- Go through your profit and loss account; are there any costs you can strip out? Today, next week, next month? Do you need to set the ball-rolling now, especially as some services require a notice period?;
- If you have a landlord (for business or personal) talk to them and see if there is any flexibility in your current arrangement. They are potentially getting relief, maybe they can pass this along to you to keep you as a tenant?;
- Manage your debtors and creditors. Don’t pay anyone before you need to and get money in from your customers as quickly as you can. Maybe look to see if you can extend credit terms, payment days or put things on direct debit to spread payments and ultimately improve your working capital;
- If you have any lenders, keep communicating. If you are going to have any issues with payment, the earlier you communicate the better. However, you never know, they may be able to accept delay payments, payment holidays or potentially even extend your current facility to you. Again, they might be getting some help here, so maybe they can pass this over to you.
Black and White Accounting
This is a difficult time for everyone and we must come together to get through this. Our thoughts are with you, your family and your friends especially at this time.
If there is anything we can do to help you at this difficult time, please do get in touch by contacting Black and White Chartered Certified Accountants, populate the “Got a Question” form on the right, or call us on 0800 140 4644.
