COVID-19: The government’s measures to help the self-employed

The changes announced in the Spring Budget
The changes announced in the Spring Budget

If you’re self-employed and your business has taken a hit due to the coronavirus crisis, don’t worry. The government has stepped in with various ways to help boost your finances whether you’re still working or have had to temporarily place your business on hold.

These measures, which we’ve explained below, help you keep up with your monthly outgoings for both your personal and business needs, such as your mortgage or rental payments, insurance costs, utility bills and tax payments. This ensures your business can continue to thrive when this health crisis is over.

Self-Employment Income Support Scheme (SEISS)

The SEISS lets you claim a taxable grant worth 80% of your monthly profits. This amount is up to a cap of £2,500 per month. This applies whether you’re self-employed or belong to a partnership and you can continue to work while receiving this grant. The amount you receive is determined by your average profit over the 3 years’ tax returns submitted for 2016–17, 2017–18 and 2018–19.

Eligibility criteria

To be eligible for this scheme, you need to meet the following requirements:

  • Your trading profits must be less than £50,000
  • At least half of your income must derive from self-employment
  • You have been adversely affected by COVID-19

The latter point could be due to personal reasons, such as shielding or taking care of others. It can also be because you’ve had to temporarily cease or cut back trading due to staffing issues, fewer customers or disruptions to your supply chain.

If you pay yourself a salary or dividends, you won’t be eligible for this grant. However, you might be eligible to claim 80% of your salary via the Coronavirus Job Retention Scheme. We’ve detailed this scheme later in this article.

How to claim via the SEISS and when to expect payment

The online service for this scheme went live on 13th May. If you are eligible, HMRC will advise you on the date you can make a claim from. Please note there is no need for you to contact HMRC.

The payment should be made to you in June although HMRC endeavours to process applications as quickly as possible. It will be backdated to March so that you receive three months’ worth of payments in one go. This is a long time to wait so, in the meantime, take a look at the other government measures available. You may eligible for further financial support, such as Universal Credit.

Universal Credit

Universal Credit is a monthly payment to help you with your living costs. Due to the impact of COVID-19, payments have been calculated differently since 30th March. A Minimum Income Floor is no longer being taken into account for self-employed claimants. Therefore, your actual earnings based on your monthly assessment reports are used to determine the amount you receive.

You might be eligible for Universal Credit if you have a low income and it can be claimed alongside other benefits. It’s worth looking into to help relieve some of the financial pressure at this time.

What you need to provide

At the end of the assessment period each month, you need to provide details of your self-employed earnings. Your report must include details of:

  • The amount received by your business
  • Different business expenses
  • National Insurance and tax payments made
  • Any funds paid into a pension

The criteria for Universal Credit applications also applies to company directors, even when paying yourself via PAYE. You can be both employed and self-employed to benefit from Universal Credit. Your combined earnings are used to calculate the amount you receive.

Universal Credit also provides additional help, such as with housing costs. When renting, you can apply for help with your rent and service charges. If you own your home, you can apply for help with your mortgage payments via the Support for Mortgage Interest (SMI) loan. As this is a loan, however, you may prefer to defer your mortgage payments instead with a mortgage payment holiday.

Coronavirus Job Retention Scheme

If you are a limited company director, you can furlough yourself and claim help via the Coronavirus Job Retention Scheme. Based on the PAYE aspect of your income, this scheme covers 80% of your salary. This is capped up to a maximum of £2,500 per month.

The minimum furlough requirement is 3 weeks and you cannot work for the company while you are claiming. You can still continue with the statutory obligations as a director. You can also work for others during this period, provided it’s outside the remit of your limited company.

In the same way, if you work as a freelancer or via an agency and are taxed through PAYE, you are eligible for furlough under this scheme. This is because you are considered to have the same rights as an employee.

New Style Employment and Support Allowance (New Style ESA)

If the amount you work is affected by a health condition, this benefit provides help with your living costs. You can claim this contribution-based benefit on its own or with Universal Credit. It applies if you are deemed to be at high risk of illness and have to remain at home or if you or your child have been affected by COVID-19, either directly or if you are self-isolating following contact with someone who might have it.

Eligibility criteria

As a self-employed claimant, you may be able to receive help via New Style ESA as long as you have paid or been credited with sufficient National Insurance contributions within the last 2 to 3 years.

Deferred self-assessment tax payment

To give you extra breathing space at this crucial time, your next self-assessment tax payment, which would normally be due on 31st July, has been deferred by the government until 31st January 2021. This should help remove some of the financial pressure you might currently be under. There is no need for you to apply for this as it is automatically deferred for you. You can still make the payment in July if you prefer not to take advantage of the deferral.

Please note that you still need to submit your self-assessment tax return by the normal due date. This applies even if you do not make the payment until January.

Deferred VAT payments

To help ease your cash flow, if your business is VAT registered, you can also defer your VAT payments. This applies to those due from 20th March to 30th June. You can defer them until 31st March 2021 at the latest.

As with the self-assessment payment deferral, the VAT payment deferral is automatic so you don’t need to apply for this. If you prefer, you can still pay your VAT as normal rather than accepting the deferral.

Please note that you need to cancel your direct debit and reinstate it again once the deferral period has finished. You still need to file your VAT returns on the due dates.

HMRC’s Time to Pay (TTP) service

If you were already struggling to keep up with your tax payments before this situation and now have outstanding bills, the government has issued a coronavirus (COVID-19) helpline. Call this number to arrange help via the HMRC Time to Pay service. This lets you pay off your debt in instalments with the first payment being delayed for up to 3 months.

IR35 reforms have been delayed

The planned introduction of the IR35 reforms has now been delayed until 6th April 2021. Due to the current climate, the government has decided to postpone this reform rather than making new tax changes. This delay gives you longer to prepare for it.

Coronavirus Bounce Back Loan Scheme (BBLS)

On 4th May, the government launched the new Bounce Back Loan Scheme. This is for small or medium-sized businesses that need an essential and quick cash injection to keep them going. You can apply for a loan between £2,000 and 25% of your turnover up to a limit of £50,000.

Although this is a loan, no interest is to be charged and no payments are due within the first year. After that, the annual interest rate is to be set at a low 2.5%. Not only that, but the loan is 100% guaranteed by the government. You can apply for this loan easily online with access to the cash in just a few days.

Coronavirus Business Interruption Loan Scheme (CBILS)

Small or medium-sized businesses can apply for a loan, overdraft or finance facility up to £5 million via this scheme. It is administered by the British Business Bank. With regard to the lender, the government guarantees 80% of the finance. Any fees and interest due for the first year are also to be covered by the government.

If your annual turnover is up to £45 million, your business is based in the UK and you can show it has been adversely affected by the coronavirus pandemic, you can apply for financial support via this scheme.

Coronavirus Large Business Interruption Loan Scheme (CLBILS)

If your company turnover exceeds £45 million, this scheme lets you apply for a loan of up to £25 million. Alternatively, with a turnover above £250 million, you can apply for finance up to £50 million. As with CBILS, the government provides a guarantee to the lender for 80% of the loan.

The Future Fund

If you have an innovative company that has succumbed to financial difficulties as a result of the coronavirus outbreak, you may be eligible for a convertible loan via the Future Fund. This launched on 20th May and offers government loans between £125,000 and £5 million. To be eligible, you must find a third-party investor or institution to match the funds. If you have been unable to secure a loan through CBILS and you depend on equity investment, this fund may be a good option for you.

Business rates relief and grants

Some businesses are eligible for extra help in the form of a business rates holiday or a business grant.

Business rates holiday

Certain businesses don’t have to pay business rates due for 2020–21. This applies if your business is in the hospitality, leisure or retail sector or you own a nursery. Your discount is applied automatically so you don’t need to do anything.

This business rates holiday still applies if you have had to temporarily close your business due to the coronavirus situation. If you are already in credit, you can expect to be refunded accordingly.

Business grant funds

Local authorities can now provide extra support to small businesses and businesses in the leisure, hospitality and retail sector. This is in the form of taxable grants to help maintain their ongoing business expenditures.

  • Under the Small Business Grant Fund (SBGF), you are eligible to receive a grant of £10,000 if you already receive Small Business Rates Relief or Rural Rates Relief.
  • Under the Retail, Hospitality and Leisure Grant Fund (RHLGF), you are eligible to receive £10,000 if your business has a rateable value up to £15,000 or £25,000 if your business has a rateable value over £15,000 and under £51,000.

If you are eligible for one of these grants, you will be contacted by your local council.