As things change rapidly during the coronavirus (COVID-19) crisis, this guide will be updated regularly to reflect changes in rules and regulations.
Last year the government introduced the Self-Employment Income Support Scheme (SEISS) to help workers not covered by its national ‘Furlough’ scheme.
The scheme is designed to pay out a lump sum to eligible self-employed workers whose incomes have been hit by COVID-19 restrictions. The scheme covers a certain proportion of a self-employed worker’s profits, as reported in tax returns over the previous three years.
The grant does not need to be paid back, but it is taxed.
With the return of a national lockdown across England from 5 January 2021, the government has made some changes to the latest SEISS cash grant.
Here’s what it means for you.
The government has announced that the third Self-Employment Income Support Scheme grant will be extended by three months, covering a total six-month period.
During this time eligible workers will receive two grant payments. The first payment will cover the three-month period from 1 November 2020 to 31 January 2021.
Before the second lockdown was announced, the SEISS scheme for this 3-month stint was originally set to pay one grant covering 40% of a self-employed person’s trading profits over three months, up to a cap of £3,750.
So if an eligible worker’s trading profits were worth an average of £2,000 per month in the last tax year, then they would have received £2,400 in one lump sum (40% of the average monthly trading profit multiplied by 3).
But the government has now increased this grant to cover 55% of a worker’s average monthly trading profits over three months, up to a maximum cap of £5,160.
The second grant will cover the 3-month period from 1 February 2021 to 30 April 2021. The grant is worth 80% of your average monthly trading profits, covering three months, capped at £7500.
Both grants will be taxable and they’ll also be subject to National Insurance contributions.
A fourth grant to cover February to April 2021 was announced as part of the 2021 Budget. Workers who meet the criteria can claim 80% of average monthly profits capped at £2,500 per month.
In September the government also announced a series of smaller changes to give the self-employed and freelancers more time to pay outstanding tax bills.
Previously, if you had self-assessment payments originally due in July 2020 but were unable to pay because of the impact of the pandemic on your income, the government extended the deadline to 31 January 2021.
Due to the continued financial difficulties that many workers are facing, in late January the government announced that it would not impose any late payment penalties on those who submit online by 28 February 2021.
In addition, taxpayers owing up to £30,000 in self-assessment payments can use the HM Revenue and Customs’ ‘Time to Pay’ service. This allows you to spread your payments over the course of 12 months, meaning you’ll have until January 2022 to make all your payments.
It’s worth noting that if you would like to make use of the ‘Time to Pay’ service, you’ll still need to submit your self-assessment form online by 28 Feb by the latest. If not, you will begin being charged interest
If you’re struggling to cover the cost of your self-assessment payments, it’s a good idea to contact HMRC as soon as possible to explain your situation. Otherwise, the tax authorities may start charging you interest on tax payments due.
If your business was due to make value added tax (VAT) payments between 20 March and 30 June this year but were unable to cover the payments due to Coronavirus, you were previously given the chance to delay making those payments for a year.
Under the previous rules you needed to pay in full by March 2021. But know you have the option to pay in smaller installments over a longer period of time - up to the end of March 2022.
To benefit from this VAT deferral, you’ll need to opt-in to the ‘New Payment Scheme’. It’s worth noting that the opt-in process will not actually start until ‘early’ 2021, according to the government.
HMRC has created a new tax helpline to help self-employed workers and business owners who are worried about being able to make their tax payments due to the consequences of Coronavirus.
The helpline number is 0800 015 9559. The line is open Monday to Friday from 8am to 8pm, and Saturdays from 8am to 4pm.
The government’s Bounce Back Loan Scheme (BBLS) helps small and medium-sized firms impacted by COVID-19 to borrow between £2,000 and up to 25% of turnover. The maximum loan available is worth £50,000.
In light of the second national lockdown, the government has further extended the deadline for applying for a BBLS loan from 30 November 2020 to 31 January 2021.
You will not need to pay any fees or interest on the loan for the first 12 months. After a year, the interest rate will be 2.5% a year.
More time to repay
If you were one of over a million businesses who obtained a BBLS loan, you’ll now have even longer to repay the money, as part of a new ‘pay as you grow’ flexible repayment system.
Under this new system, firms that have already taken out a BBLS loan can:
Extend the repayment period to 10 years. This is up from the 6 years that were offered when the loan scheme was first introduced. This should lead to lower monthly repayments.
Temporarily move to making interest-only payments for up to 6 months. This option can be used up to three times.
Take a payment holiday of up to 6 months (but only after they’ve made 6 payments.
The government has also extended the deadline for applying for a BBLS loan to 30 November 2020.
If you’re self-employed and have been working from home due to coronavirus restrictions, there are a range of costs that you may be able to claim against your tax.
This could include part of the following bills
To work out how much you can claim for, you’ll need to work out how much time you’re using your home as a workplace.
If you work from home for more than 25 hours a week, you might be able to use HMRC’s simplified expenses system for working from home.
It’s worth noting that you cannot use this expenses system to claim internet and or telephone costs - you’ll need to work these out yourself.
You’ll need to make these claims when filling in your self-assessment tax return, so make sure to keep good records of your costs.
If you work through a limited company, the rules for claiming business costs against your corporation tax will be different. Log on to the GOV.UK website for more information.
Sadly, while the extension to the Self-Employment Income Support Scheme will be welcomed by some, there are still many self-employed workers who will not be eligible to claim any grants.
The National Audit Office, the watchdog that scrutinises government spending decisions, has said that up to 2.9 million people have been excluded from both the Coronavirus Job Retention Scheme and SEISS grants.
One way for self-employed workers and freelancers who cannot access either scheme to get financial support is through Universal Credit.
On 3 November, the government announced that its suspension of the minimum income floor (MIF) required for Universal Credit claimants to access the full amount of the benefit will be extended to the end of April 2021.
It was originally planned to come back into force on 12 November 2020.
While this sounds quite technical, all it means is that when you apply for Universal Credit, the amount you’ll get will be based on your actual earnings.
When the minimum income floor was in place, your Universal Credit payments could be based on a calculation that may reduce the amount you would have received.
The government has created a helpline and website with resources for self-employed workers and small business owners worried about the impact of Coronavirus on their businesses.
If you want to speak to an advisor over the phone, call 0800 024 1222. Lines are open Monday to Friday from 8am to 4pm.