self employed helpCoronavirus support: what help are self-employed people and small limited companies entitled to?

The coronavirus pandemic has fundamentally changed the way we live and at the time of writing this (May 28th 2020), the future is still quite uncertain.

As of May 24th, 8.4 million jobs were furloughed in the UK as part of the government’s job retention scheme and when it comes to businesses, there are a few grants available as well as loans and tax relief to try and keep the economy afloat. While this has helped many get through the peak of the pandemic, like most situations, there are some that have fallen through the cracks, particularly self-employed people and limited company directors.

Many who are self-employed have found that they can’t continue in business. This is, sadly, a common occurrence during this time so to help others know exactly what rights and support they have, this quick guide outlines exactly what self-employed help is available.

Self-employed help; your options…

Self-Employment Income Support Scheme (SEISS)

This government grant aims to help self-employed individuals whose businesses have been adversely affected by the coronavirus. Individuals have to check their eligibility and fill out an online application, and if they are deemed eligible, payments will arrive in their bank accounts within six working days.

Information about the grant:

  • March-May – the grants are worth up to 80% of your profits – this is capped at £2,500 per month and is taxable. The grant is paid in the form of one lump sum (£7,500). Individuals can continue to apply for the first SEISS grant until 13th July.
  • June-Aug – the grants are worth up to 70% of your profits – the SEISS has been extended so that self-employed individuals can claim a second and final grant in August. This payment will be capped at £6,570 to cover three months’ worth of profits.

Eligibility for this grant:

  • You traded in the tax year 2018 to 2019 and submitted your Self Assessment tax return on or before 23 April 2020 for that year.
  • You traded in the tax year 2019 to 2020.
  • You intend to continue to trade in the tax year 2020 to 2021.
  • You carry on a trade which has been adversely affected by coronavirus (e.g. you’ve had to scale down or temporarily stop trading and/or you’re unable to work because you’re shielding, self-isolating, have caring responsibilities or are off sick due to the coronavirus).
  • You must earn more than 50% of your total income from self-employment. This must have been the case for either your 2018/19 tax return or, if not, the average of your 2016/17, 2017/18 and 2018/19 tax returns.
  • Your average trading profit must be less than £50,000/year.

Bounce Back Loans

Not all self-employed people are eligible for the SEISS grant (e.g. if they earn more than £50,000/year or if less than half of their income is from self-employment), so this is where knowing your additional options is important.

For example, you can apply for a small business bounce back loan to support your income.

Information about the loan:

  • Since the 4th of May, business bounce back loans have been available to enable smaller businesses to access finance more quickly during the coronavirus outbreak.
  • The scheme helps small and medium-sized businesses to borrow between £2,000 and up to 25% of their turnover. The maximum loan available is £50,000.
  • The government guarantees 100% of the loan and there won’t be any fees or interest to pay for the first 12 months. After 12 months the interest rate will be 2.5% a year.
  • These loans can be used to support your income though there can be tax/regulation issues depending on your firm’s structure.

Eligibility for this loan:

  • Suitable for newly self-employed, self-employed people with £50,000+ in profits, and limited company directors.
  • You can apply for a loan if your business is based in the UK, was established before 1st March 2020, and if it has been adversely impacted by the coronavirus.

Business Interruption Loans

The temporary Coronavirus Business Interruption Loan Scheme is open to self-employed people and offers access to loans, overdrafts, invoice finance and asset finance of up to £5 million for up to 6 years. As well as the loan, the Government could also give you a Business Interruption Payment to Cover the first 12 months of interest and fees on the loan. Both of these loan schemes will run alongside each other.

This scheme is open for applications and is offered by all major banks.

Information about the loan:

  • The scheme helps small and medium-sized businesses to access loans and other kinds of finance up to £5 million.
  • The government guarantees 80% of the finance to the lender and pays interest and any fees for the first 12 months.

Eligibility for the loan:

  • Your business needs to be in the UK and have an annual turnover of up to £45 million.
  • You need to show that your business would be viable were it not for the pandemic and how it has been adversely impacted by the coronavirus.
  • If you want to borrow £30,000+, you need to confirm that your business wasn’t classified as a “business in difficulty” on 31st December 2019.
  • You cannot be in any of these sectors: banks, insurers and reinsurers (but not insurance brokers), public-sector bodies, and state-funded primary and secondary schools.

Other things you can do

Self-employment help doesn’t stop in the form of grants and loans. If you need to tighten your belt further, there are more things that you can do to increase your cash flow over the next few months:

  • Defer your income tax payments – under the self-assessment scheme, you can defer your income tax payments that are due in July 2020 until January 2021. Contact the HMRC to delay your payments.
  • Apply for Universal Credit – you can’t get statutory sick pay if you’re self-employed, but if you have to take time off work due to sickness of self-isolation, you can check if you can claim benefits towards housing and other costs. SEISS doesn’t make you ineligible for this but once you start receiving self-employed income support, the amount of credit you receive will decrease.

Need financial help or advice?

Goringe Accountants can assist and advise you with any financial pressures you may be facing during this unprecedented time; please don’t hesitate to reach out, we’d love to help