CoronavirusMay 14 2020

Government help available for the self-employed

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Government help available for the self-employed

In the UK, there are around 104,000 self-employed workers in financial services and insurance, according to the Office for National Statistics, as at December 2019. 

The government has faced extreme backlash on the support made available for the self-employed.--Sherad Dewedi

However, there may be substantially more than this number, given that many individuals will operate within a limited company structure, in order to win contracts from larger clients and for tax efficiency purposes.

For self-employed financial advisers, there are several forms of financial support available.

However, it is important to recognise that some of these support measures have significant consequences for the intermediary and their business.

“Since the UK first went into lockdown, Chancellor Rishi Sunak has introduced several support packages to allow businesses and individuals to access financial help,” explains Sherad Dewedi, managing partner of Shenward, an accountancy firm.

“However, the government has faced extreme backlash on the support made available for the self-employed. While some will fall through the gaps, others have a variety of avenues to access financial support.”

Get a cash shot

The most straightforward of all of the government’s policies for self-employed advisers has been the Self-Employed Income Support Scheme (SEISS).

Launched on 26 March 2020, SEISS is designed to support self-employed workers who had lost income as a direct result of Covid-19. 

The online service for SEISS launched this week, with payments due to start being made to the self-employed in the last week of May.

Under the rules of the scheme, self-employed advisers are able to claim a taxable grant of up to 80 per cent of their average monthly trading profits, which will be paid in a one-off instalment to cover three months of earnings. It is capped at £7,500 in total.

SEISS allows individuals to continue to work, or take on other employment.

However, you cannot claim under the SEISS rules if you are not a sole trader or in a limited partnership. You are also ineligible if you declared trading profits of more than £50,000 last year, or if your trading profits are less than your non-trading income. 

Those who failed to submit a self-assessment tax return for 2018-19 are also excluded. Remember that any grants under SEISS are taxable.

Should you furlough?

Self-employed advisers also have the chance to furlough themselves under the Job Retention Scheme (JRS). 

Doing so allows the government to pay 80 per cent of an intermediary’s wage plus employer national insurance and pension contributions.

The JRS is available to any self-employed individual who is signed up to the government’s Pay As You Earn payroll process and has a UK bank account. 

What about loans?

Self-employed individuals operating within a limited company structure may be eligible for one of the two loan schemes being offered by the government.

Self-employed individuals who run a business within a limited company structure may also wish to consider the recently announced Bounce Back Loan scheme (BBLS).

Under the new scheme, the government guarantees 100 per cent of the amount extended by lenders, between £2,000 and £50,000. The BBLS does not have to be repaid for 12 months. 

However, if you have already applied for a loan under the previous “CBILS” lending scheme, you will not be able to apply for the new scheme.

It is essential that the self-employed act quickly to obtain payment holidays on mortgages, credit cards and finance deals.--Pat Lewis

“Advisers should look at their cashflow forecast before accessing additional debt, taking into account the term of the loan, and the repayments due when interest is applied,” says Mr Dewedi.

“What some individuals have done is use the funds to settle existing business loans and benefit from the lower repayments while interest isn’t being applied.”

Larger loans of up to £250,000 are also available under the Coronavirus Business Interruption Loan Scheme (CBILS), which was launched in the initial round of business support packages. 

Liquidity through this scheme can be in the form of bank overdrafts or through invoice financing for a period of up to three years.

Pat Lewis, tax department manager at Intellect Business Services, says advisers need to act quickly to assess their cashflow needs, including the potential for any delays to the arrival of government funding. 

Ms Lewis explains: “It is essential that the self-employed act quickly to obtain payment holidays on mortgages, credit cards and finance deals. 

“It is also worth considering eligibility to Universal Credit and Council Tax relief as these may help in the short-term.”

Tax deferrals

One quick win that is available to all self-employed advisers is deferring payments on VAT and personal income tax. 

Under the government plans announced in March, advisers are able to defer quarterly and monthly VAT payments for the periods ending in February, March and April 2020.

Under the scheme, deferrals must be paid no later than 31 March 2021. There is no requirement to tell HMRC that your VAT payment will be deferred.

Similarly, individuals who were due to make a payment by 31 July 2020 for their income tax will now have until 31 January 2021 to make this payment. 

HMRC has confirmed that individuals will not need to contact them to advise them of a deferral, as long as their account is up to date by January.

Joe McGrath is a freelance journalist