While the coronavirus pandemic has affected the health of hundreds of thousands of people worldwide, it has also had a devastating effect on small and medium-sized businesses in the UK and beyond.
The Chancellor has previously announced a substantial package of support for businesses, including paying 80% of the wages of furloughed workers, VAT deferrals and business interruption loans.
Following calls to help freelancers and the self-employed, the government has now unveiled a package of measures designed to support those who own their own business. Here’s a summary of the assistance that Rishi Sunak has announced.
Income Tax payments due in July 2020 under the Self-Assessment system may be deferred until January 2021.
You are eligible if your self-assessment ‘payment on account’ is due to be paid on 31 July. It’s 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.
After announcing a support package for employed people, the Chancellor was keen to assure self-employed workers that they had not been ‘forgotten’.
The Self-Employment Income Support 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 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 any self-employed workers across the UK who:
The three months’ income will be paid as one lump sum 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.”
The scheme essentially covers the same amount of income as for furloughed employees, although has been more difficult to implement because the self-employed are a ‘diverse population’.
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. Workers will have to complete an online form in order to access the grant, which will be paid straight into your bank account.
The Chancellor also confirmed that self-employed workers can also access business interruption loans, for which there have already been 30,000 enquiries.
Self-employed workers who have seen a significant reduction in earnings 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.
The government has announced that mortgage payment holidays of up to three months are available to all homeowners who are up to date on their mortgage payments.
They’re 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.
Payment holidays are available to any homeowners who are concerned about their ability to meet their mortgage repayments, for example due to a loss of work or other changes in their circumstances.
Note that you will still owe the bank 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.
Your lender will not require you to provide any documentation or undergo any affordability tests.
If you’re self-employed, struggling with your finances, and have outstanding tax liabilities, 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.
In this speech, the Chancellor was at pains to point out that the support for self-employed individuals was comparable to employed workers. Taking this into account, Rishi Sunak hinted that self-employed people may therefore 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”.
Watch this space!