With the global spread of COVID-19, the impact of these uncertain times on our finances is still hard to anticipate. For many self-employed people, the situation is precarious as contracts are cancelled and work grinds to a halt.
On Thursday 26th March the Chancellor announced a support package to help the 5 million self-employed whose income has been impacted by this pandemic. If you’re self-employed, what are the options available to you to reduce some of the financial pressure?
With the(SEISS), you are entitled to a grant equivalent to 80% of your average monthly trading profits up to a maximum of £2500 a month. This grant is non-repayable but it is taxable. Unlike the furlough scheme for the employed, as a self-employed person, you can apply for this grant and keep working.
- Your profits will be calculated based on the last three years’ tax returns. If you’ve been self-employed for less than three years, it will be based on the average of the years you have worked.
- In order to qualify, you must have been self-employed for over a year and have filed a self-assessment tax return for the year 2018/19.
- The average of your last three years taxable profit must be £50k or less. If you have paid yourself in dividends, these are not included in the calculation.
- More than 50% of your income must come from self-employment.
The Self-Employment Income Support Scheme will open to online applications from Wednesday, 13 May. In the meantime, you can check if you're eligible using the government's.
These options are designed to help you to keep enough in your bank account to tide you over until the scheme opens.
- A mortgage holiday: If you’re a homeowner, mortgage lenders are offering three-month mortgage holidays so you can postpone your payments without affecting your credit score. You’ll still pay interest but not until your payments resume. And, as our mortgages are often our largest expense, this will help with cash flow significantly.
- Deferring your self-assessment tax bill: The government have deferred the July instalment of your 2020 tax bill by six months so the money you have put aside for that bill can now be used for your day-to-day needs.
- Deferring your VAT payments: If you’re registered for VAT, the government have deferred VAT payments until the end of June. As this is a deferral, you’re not off the hook for the payment but it will help you manage cash flow until payment is due.
There are some self-employed people who don’t meet the criteria for the bail-out package. If that’s you, then it’s time to look at, which is available to you as long as you don’t have savings of £16k or more. The Government have removed the minimum income floor and boosted the standard allowance meaning that a single person over the age of 25 could get a standard monthly allowance of £409.89.
To speed up the process, you now apply online and they will call you back. Universal Credit is usually paid after five weeks but you can ask for an advance during that call to have it paid out quickly. This is designed to help with cash flow, however, you do have to pay the advance back when your payments kick in.
If you are suffering from Coronavirus or self-isolating on government advice, you are entitled to apply for the(Employment and Support Allowance), which is available from day one of your isolation.
The government have relaxed some for the requirements meaning you don’t have to provide a fit note. The new style ESA is based on your national insurance contributions and they will look at your contributions from April 2017 to April 2019. The usual seven day waiting period for new claimants now doesn’t apply and you’ll be paid from day one.
If the realisation of exactly what benefits you’re entitled to if you’re ill or in an accident has come as a shock, now might be the time to look ator . This not only protects your family if you’re ill but allows you to keep paying your self-employment bills, so you have a business to go back to.
Looking for income protection insurance? It’s easy to get a quote through ClearScore..
Many people have seen their incomes reduced to zero in a matter of days. But do remember that this is a global pandemic. Nobody was ready for it. You’ve already proven you can build an independent income and support yourself, and that is to be celebrated. Your achievements haven’t changed, the world has simply shifted around you.
And while things might seem slightly out of control in the world around us, there are some things you can still take into your own hands. Regularlyis a simple way to stay on top of your finances and know where you stand. Don’t forget that you can check your score as many times as you like – it won’t damage your score.