The government has extended financial support schemes for self-employed workers affected by COVID-19. Here’s everything you need to know
As things change rapidly during the coronavirus (COVID-19) crisis, this guide will be updated regularly to reflect changes in rules and regulations.
Earlier this 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, covering a certain proportion of their profits, as reported in tax returns over the last three years. The grant does not need to be paid back, but it is taxed.
On 24 September, chancellor Rishi Sunak unveiled an extension to the scheme, alongside some other measures to give self-employed workers and small businesses added financial support.
Here’s what it means for you.
The government has announced that the Self-Employment Income Support Scheme will be extended, with two further grants being paid out.
The first grant, which launched in May and ran for two months is now closed to new applicants.
But there’s still time to apply for the second grant if you have not already done so. The second grant is worth 70% of average monthly trading profits over three months.
So if an eligible worker’s trading profits were worth an average of £2,000 per month in the last tax year, then they’ll receive £6,000 in one lump sum (the average monthly trading profit multiplied by 3).
You’ll need to be able to show that your work and income have been ‘adversely affected’ by Coronavirus on or after 14 July. The government has capped payments from the second grant at £6,570 per payment. The deadline for applications for the second grant is 19 October 2020.
The third grant will be paid out to those whose businesses are affected between November 2020 up to the end of January 2021. It will only cover 20% of your trading profits for three months - up to a maximum of £1,875.
The government has not yet announced the exact details of how the fourth and final grant payment will work. However, we know that it will cover self-employed workers affected by COVID-19 between February 2021 to the end of April 2021.
To be eligible for financial help from the Self Employment Income Support Scheme you need to make sure you meet the following requirements:
You need to be a self-employed person or a member of a partnership
You need to have filed a tax return for 2018-19 (This means you need to have been self-employed before 6 April 2019)
You need to have traded during the tax year 2019-20 AND you plan to continue trading into the tax year 2020-21
Your average trading profits must be worth less than £50,000 per year
You must be earning at least 50% percent of your income from self-employed work
You cannot be trading through a limited company
It’s important to note that if you were not eligible for the second grant, you will not be eligible for the third one.
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.
Now, taxpayers oweing 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.
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 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.
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.
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 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.
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.