Self-employment and freelancers in the Coronavirus crisis: Frequently Asked Questions
IPSE has compiled a list of commonly asked questions we are getting from freelancers and the self-employed about the coronavirus. We are constantly updating this page to reflect the latest government policy and advice. Please note that the support available to you may also depend on whether you are self-employed as sole trader (unincorporated business) or operating via a Limited Company – we have tried to clarify the differences in the Q&As below.
If you have a question that we haven’t answered please email [email protected] and we will endeavour to find an answer for you.
Self-Employment Income Support Scheme (SEISS)
The Self-Employment Income Support Scheme (SEISS) was announced on 26 March after sustained lobbying by IPSE and other organisations. The SEISS provides a grant to eligible self-employed individuals or partnerships who have been impacted by coronavirus. The grant is based on past tax returns - HMRC will use the average profits from your 2018-19 (and 2016-17 and 2017-18 if applicable) tax returns to calculate the size of the grant.
The first and second phases of the SEISS, which provided a grant worth 80% and 70% of past trading profits, are now closed for applications but the scheme has been extended. The Chancellor announced in September 2020 that the scheme will be extended in two further grants and will last for six months, from November 2020 to April 2021. Grants will be paid in two lump sum instalments each covering a three-month period. However following the recent reintroduction of national lockdown measures, and to keep the level of support broadly comparable with the extentsion of the furlough scheme, it has now been confirmed the third grant will again be worth 80% of past trading profits, up to a cap of £7,500.
Applications for the third grant will open from 30 November. You can make a claim using this link here: https://www.gov.uk/guidance/claim-a-grant-through-the-self-employment-income-support-scheme
You can use an online tool provided by HMRC to check if you're eligible. The eligibility criteria are as follows. You:
- have submitted your Income Tax Self Assessment tax return for the tax year 2018-19
- traded in the tax year 2019-20
- are trading when you apply, or would be except for COVID-19
- intend to continue to trade in the tax year 2020-21
- have experienced reduced demand or been unable to trade due to COVID-19 during the qualifying period (Nov-Jan) and reasonably believe you will experience a significant reduction in trading profits for your tax year - for more information on this, see 'Is the criteria for the third SEISS grant the same as the first two?'
- have self-employed trading profits of less than £50,000 and more than half of your income comes from self-employment - this will apply for either the tax year 2018 to 2019, or the average of the tax years 2016 to 2017, 2017 to 2018, and 2018 to 2019 if you have returns for these years
You can check online to find out if you’re eligible to make a claim. Your tax agent or adviser can also check your eligibility on your behalf using this link: https://www.tax.service.gov.uk/self-employment-support/enter-unique-taxpayer-reference. But please note they cannot make the claim on your behalf. To apply you will need your Self Assessment Unique Taxpayer Reference (UTR), National Insurance number, Government Gateway user ID and password (if you do not have a user ID, you can create one when you make your claim) and UK bank details.
Once you’ve submitted your claim, you will be told straight away if your grant is approved. HMRC will pay the grant into your bank account within 6 working days.
You should not claim the grant if you’re a limited company or operating a trade through a trust. If you think you have been overpaid, or that your grant amount is too low, you should contact HMRC to review your case.
You must keep a copy of all records in line with normal self-employment record keeping requirements, including:
- the amount claimed
- the claim reference number for your records
- evidence that your business has been adversely affected by coronavirus
You will need to report the grant:
- on your Self Assessment tax return
- as self-employed income for any Universal Credit claims
- as self-employed income and that you’re working 16 hours a week for any tax credits claims
Full information about the scheme is available here: www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme
IPSE welcomed this package of financial support but we acknowledge there are omissions, particularly in terms of those who are Limited Company contractors and those who are newer to self-employment and yet to file a tax return. We will keep working with government to plug any gaps and at the same time provide as much information and support to those who the scheme does not cover.
Yes, the SEISS has now been extended for a further two times and will now run until April 2021.
The grant is a lump sum based on three months of your average trading profits. The first SEISS grant, which is now closed for applications, covered 80% of three months' worth of average monthly trading profits, up to a cap of £2,500 a month. The second phase covered 70%, capped at £2,190 a month, has also closed for applications.
The government announced in September it will provide two additional SEISS grants. The first will cover 1 November to 31 January, its eligibility criteria is the same as the previous grant, which will have no bearing on whether or not you recieve support. However, there has been an important change in the declaration criteria for the third SEISS grant. See the other item in the FAQ titled 'Is the criteria for the third SEISS grant the same as the first two?'
The grants will be worth 80% of your average profits up to a total value of £7,500 (an increase on the 20% originally announced by the Chancellor when the extensions were confirmed, as a result of new lockdown measures) and is taxable. A fourth grant covering 1 February to 30 April will be made available, following the same criteria however government has said it will keep the amount available under review.
While the eligiblity criteria for the third SEISS grant is the same as the first two, there has been an important change to the declaration criteria for 'SEISS 3'.
n SEISS 1 and 2 your business only needed to be “adversely affected” - this broadly meant any adverse impact due to Covid-19 would allow you to qualify qualified for the scheme (e.g. increased cost of buying things such as PPE/equipment; reduced work, cancelled or delayed projects; or if business interrupted by illness, self-isolation or caring/shielding). You also had to say you intended to continue trading.
For SEISS 3, there are two changes. First your business needs to either be impacted by “reduced demand” or be “unable to trade” from coronavirus in the qualifying period for SEISS 3 (Nov 1 - 31Jan). Second, you “must decide if the impact on your business will cause a significant reduction in your trading profits for the tax year you report them in”. In other words, not only do you have to evidence reduced demand or inability to trade for the period Nov - Jan but you also need to have a ‘reasonable belief’ that this meant your profits will be lower than they otherwise would have been for the whole tax year you report in.
Unfortunately, HMRC has provided no clear definition of what constitutes a “significant reduction” in trading profit. HMRC says it cannot make this decision for a business because individual and wider business circumstances will need to be considered (it has published some examples online here) and you will need to make an “honest assessment”.
It is important to note here that – unlike SEISS 1 and 2 – SEISS 3 is a forward looking test based on considering a reduction in trading profits for your ‘basis period’ (the tax year you report in, will be March or April). Therefore, to make a claim you must consider whether any reduction in demand in the period 1 Nov – 30 Jan will significantly reduce your trading profits as a whole for the tax year ending in March/April (this will depend on your own reporting period). For this reason, HMRC says “You should wait until you have a reasonable belief that your trading profits are going to be significantly reduced, before you make your claim.” So if you are unsure about whether you might be eligible when the grant application opens in November, you may want to wait until later in January (29 Jan is your last chance) before making an application.
But what counts as ‘reduced demand’ or being ‘unable to trade’?
For the former, HMRC says this applies if your business has been impacted by “reduced demand, activity or capacity due to coronavirus” - e.g. fewer customers, contracts cancelled, less work. However, they are clear that “you must not claim if the only impact on your business is increased costs” such as purchasing face masks or cleaning supplies. Increased costs on their own – without loss of work - do not constitute a valid claim.
‘Unable to trade’ applies to you if you’re temporarily unable to carry out your business activities due to coronavirus in the qualify period (e.g. had to close due to restrictions, instructed to shield or self-isolate, you've tested positive, cannot work due to caring responsibilities). The only exception that does not count is if you have returned to the UK from travelling abroad.
How does HMRC calculate my income and trading profits to check eligibility for the Self-employment Income Support Scheme? What about expenses?
HMRC will assess your eligibility for the grant based on your total income and trading profits. They will use the figures on your tax returns for your total trading income (turnover), then deduct any allowable business expenses and capital expenditure.
Allowable expenses include office costs, travel costs, staff costs, costs of your business premises, training courses and advertising or marketing. It also inlcudes any business expenses deducted through the trading allowance, capital allowances, and flat rate expenses.
HMRC will not deduct any losses carried forward from previous years or your personal allowance from your trading profits.
To work out your average trading profit HMRC will add together all profits and losses for all tax years you’ve had continuous trade. If you have only one year of trading history and that was for 2018-19, that will be used to determine your grant. If you traded in 2018-19 and 2017-18 - or 2018-19, 2018-18 and 2016-17 - then they will use an average across all those years.
Your total income is the total of all your:
- income from earnings
- trading profits
- property income
- savings income
- pension income
- miscellaneous income (including social security income)
Therefore, to be eligible for the SEISS, your trading profits must be no more than £50,000 and more than half of your total income for either:
- the tax year 2018 to 2019
- the average of the tax years 2016 to 2017, 2017 to 2018, and 2018 to 2019
HMRC has published a full guide on this, including several worked examples, here: https://www.gov.uk/guidance/how-hmrc-works-out-total-income-and-trading-profits-for-the-self-employment-income-support-scheme
If you’re self-employed and had a new child, you may still be able to make a claim.
If you’re already eligible for the grant based on your 2016 to 2017, 2017 to 2018 and 2018 to 2019 Self Assessment tax returns, how HMRC work out your grant amount will not be affected.
You may be able to make a claim if having a new child either:
- affected the trading profits or total income you reported for the tax year 2018 to 2019
- meant you did not submit a Self Assessment tax return for the tax year 2018 to 2019
For this scheme having a new child is any of the following:
- being pregnant
- giving birth (including a stillbirth after more than 24 weeks of pregnancy) and the 26 weeks after giving birth
- caring for a child within 12 months of birth if you have parental responsibility
- caring for a child within 12 months of adoption placement
You must have been self-employed in the tax year 2017 to 2018 and have submitted your Self Assessment tax return for that year.
You must also meet all other eligibility criteria.
HMRC will work out your eligibility and average trading profits based on your Self Assessment tax returns for either the:
- average of the tax years 2016 to 2017 and 2017 to 2018 if you were self-employed in both these years
- tax year 2017 to 2018 if you were not self-employed in the tax year 2016 to 2017
You’ll need to confirm to HMRC that being a new parent affected your trading profits or total income in the tax year 2018 to 2019, and provide supporting evidence. You’ll be able to do this for the first and second grant using an online form in August 2020.
More information can be found here: https://www.gov.uk/government/news/self-employed-new-parents-can-claim-support-grant
For the first two SEISS grants, HMRC guidance stated a business must be 'adversely affected' - this is “typically when your business has experienced lower income or higher costs due to coronavirus…there is no minimum threshold over which your business’ income or costs need to have changed”. There are numerous possible examples of this, including but not limited to: being unable to work due to shielding, self-isolating, or caring responsibilities due to COVID; your business being scaled down, experiencing higher costs, having your supply chain affected, loss of or fewer clients, cancelled contracts, and PPE costs.
For the third grant, the wording of the criteria appears to have changed slightly and you must now show your business has experienced 'reduced demand'. This appears to rule out the impact of self-isolating or shielding as evidence for the claim. IPSE is checking with HMRC about the detail of this.
Yes. You can apply for Universal Credit while you wait for the payment to come through. Provided you meet the eligibility criteria, such as having less than £16,000 in savings, you will be assessed on need – you can also ask for an advance that could be paid out within days. A UC application will not affect the grant you receive under SEISS.
However, the government guidance does state you should record the grant as part of your self-employment income, and it may affect the amount of Universal Credit you get. This will not affect Universal Credit claims for earlier periods.
Yes. Unlike the Job Retention Scheme designed for ‘furloughed’ employees, you can continue working and earning in self-employment if you are able to if you are eligible for the scheme. This will not have an impact on you getting a grant or the amount available, as this will be based on previous returns. You will, however, have to provide evidence of your business being 'adversely affected' as part of your application.
Unfortunately not. You will have had to file a tax return for self-employed earnings in 2018/19 to be eligible for the scheme and your previous earnings as an employee will not count towards anything.
IPSE is asking the government to consider ways that the current tax year could be factored into calculations. For example, if taxpayers submitted a tax return for 19/20 by the end of April. We are waiting for a response from the government but at present the only other support available would be the bounce back business loans, Universal Credit or tax deferrals.
The only exception is for those self-employed individuals who reside in Scotland. The Scottish Government has set up a Newly Self-Employed Hardship Fund. More informaiton is available here: https://findbusinesssupport.gov.scot/service/coronavirus/newly-self-employed-hardship-fund
Unfortunately, not all self-employed people will be able to access this scheme. Broadly speaking, this includes the following groups:
- Those who are directors of their own Limited Company and pay themselves dividends
- Those who became self-employed after April 2019
- Those whose average earnings are above £50,000
- People who are part-time self-employed and generate less than 50% of their income from self-employment
IPSE are continuing to make representations to government to ensure there is support available to the wider self-employed population.
However, for those who are not eligible you can find about additional forms of support that have been made available below. These include help with taxes, loans and grants, Universal Credit and more.
Loans and grants
IPSE has prepared a full guide to Bounce Back Loans which can be read here. We have offered a shorter summary below.
The government has an additional loan scheme for small businesses, called Bounce Back Loans. You cannot apply if you are already claiming under the Coronavirus Business Interruption Loan Scheme (CBILS), however if you have received a CBILS loan under £50,000 this can be transferred into the Bounce Back Loan Scheme.
The Bounce Back Loan Scheme aims to help small and medium-sized businesses to borrow between £2,000 and £50,000.
The government will guarantee 100% of the loan and there won’t be any fees or interest to pay for the first 12 months.
A series of changes were announced by the government in September 2020 to make the loans easier to manage for borrowers, known as the 'Pay as you Grow' options. This means you can pay back your Boune Back Loan over ten years, rather than the original six, making it easier to manage. You can also have the option of paying only the interest for up to three seperate periods of 6 months. Alternatively you can also pause payments for 6 months. This can be done once, and only after 6 initial payments have been made.
No repayments will be due during the first 12 months.
The scheme will be delivered through a network of accredited lenders and opened on 4 May 2020. To apply for a loan your business must be based in the UK, have been negatively affected by COVID-19, and not an 'undertaking in difficulty' on 31 December 2019. The final deadline for applications has recently been extended to 31 January 2020.
Full details of the scheme are also available here: https://www.gov.uk/guidance/apply-for-a-coronavirus-bounce-back-loan
The CBILS is intended to provide government-backed, partially-guaranteed (80%) financial support – via accredited lenders – to small businesses and self-employed people that are losing revenue, and seeing their cashflow disrupted, as a result of the COVID-19 outbreak.
The British Business Bank says self-employed people with an annual turnover of up to £45m can apply under the scheme, as long as they operate through a business bank account, and generate more than 50% of their turnover from trading activity.
This includes sole traders, freelancers, and limited partnerships, operating in all sectors.
A lender can provide up to £5 million in the form of:
- term loans
- invoice finance
- asset finance
The Government will not charge businesses for this guarantee, and will also cover the first 12 months of interest payments for businesses. The CBILS deadline has been extended to 30 November 2020.
For more information on the Coronavirus Business Interruption Loan Scheme and the eligibility requirements go to: www.British-business-bank.co.uk/CBILS.
The government has given additional funding to local authorities to distribute to businesses in their area. While the government has asked local authorities to prioritse particular types of business, particularly those in the leisure and hospitality sectors with physical premises, local councils have discretion about how to spend this funding. Please check with your council for details of their scheme.
To see if your local authority might be able to offer grant funding, find them here: https://www.gov.uk/find-local-council and check their website to get in touch.
The Government is providing additional funding for Local Authorities to support small businesses that already pay little or no business rates because of small business rate relief (SBRR), rural rate relief (RRR) and tapered relief. This will provide a one-off grant of £10,000 to eligible businesses to help meet their ongoing business costs.
You will be eligible if you are a small business or self-employed and already receive SBRR and/or RRR and you are a business that occupies property. In other words, you are likely to be eligible only if you have a business premises.
For more information see here: www.businesssupport.gov.uk/small-business-grant-funding/
Extra support is also available for businesses in the Hospitality, Leisure and Retail sectors. More information can be found here: https://www.gov.uk/guidance/check-if-youre-eligible-for-the-coronavirus-retail-hospitality-and-leisure-grant-fund
Job Retention Scheme and Job Support Scheme
Due to the recent increase in cases, the government has decided to extend the original 'furlough' (Job Retention) scheme until March. This extended Job Retention Scheme will operate as the previous scheme did and will be open to limited company directors. The level of the grant will mirror levels available under the CJRS in August, so the government will pay 80% of wages up to a cap of £2,500 and employers will pay employer National Insurance Contributions (NICs) and pension contributions only for the hours the employee does not work.
Claims can be made from 11 November and you do not have to have previously been on furlough to access the scheme. IPSE has prepared a template furlough letter, accessible to members, available here: https://www.ipse.co.uk/resource/ltd-co-furlough-letter-template-docx.html
Full guidance on the extension of the JRS and how to apply can be found here: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
The Job Support Scheme, which was due to have a mix of employer and government contribution, will be introduced following the end of the CJRS. More information on the JSS is available in the Q&As below.
NB: Please note the introduction of the JSS has been postponed. Due to the annoucnement of a second England-wide lockdown, the original Job Retention Scheme has been extended until March.
The first phase of the government's support for businesses included the Coronavirus Job Retention Scheme (JRS). As part of this scheme, the government compensated employers for 80% of wages for furloughed employees, up to £2,500 a month. It will last until 31 October and the amount available from government has been progressively tapered down. The Job Retention Scheme is now closed for new applicants.
In September, the Chancellor announced a new Job Support Scheme (JSS) to replace the furlough policy. He made revisions to the scheme in October.
The JSS opens on 1 November and will run for six months. To be eligible, you have to have been on the company payroll on or before 23 September. You do not have to have been on furlough via the Job Retention Scheme to be eligible.
To qualify for the scheme, you must work at least 20% of your normal hours. For every hour not worked, the employee will be paid up to two-thirds of their usual salary. The government will provide up to 61.67% of wages for hours not worked, up to £1541.75 per month (more than doubling the maximum payment of £697.92 under the previous rules). The cap is set above median earnings for employees in August at a reference salary of £3,125 per month. Employees can cycle on and off scheme – you don’t have to be working same pattern each month.
IPSE are seeking clarification but, at present, it looks like limited company directors will be able to make use of the Job Support Scheme as they did the JRS. However, we are campaigning to ensure directors can include dividend income in the calculation so that directors can get a more accurate picture of their earnings.
Full information is avaiable here: https://www.gov.uk/government/publications/job-support-scheme
IPSE recognises that many self-employed people, including many of our members, operate via a Limited Company as 'owner-managers' and typically receive income either as salary and/or dividends. We have campaigned for any financial support provided to the self-employed to include those who are owner-managers or directors of their own limited company as well. We are disappointed that they have been exlcuded from the financial support package offered to sole traders and have advocated for a 'pay now, claw back later' proposal to help them in our evidence to the Treasury Select Committee (view here). The Committee adopted the proposal as part of its recommendations to government but the Treasury said such a scheme would be too "resource intensive". IPSE continue to campaign for more support.
The government has confirmed that company directors - including those who are directors of their own limited company - are eligible for the Coronavirus Job Retention Scheme and would be able to furlough themselves and receive 80% of the salary you received from the company as PAYE. However, any additional income you take out as dividends will not be covered. We have developed a template furlough letter for members that can be accessed here: https://www.ipse.co.uk/resource/ltd-co-furlough-letter-template-docx.html
As noted above in more detail in this FAQ page, there are some other measures that might be of some help. You can consider using the HMRC Time to Pay arrangements to defer or delay tax payments. You can also defer your next VAT payment. The CBILS or the Bounce Back Loans are other options that are open. IPSE has developed a guide to Bounce Back Loans here. It is worth checking whether your local authority has grant funding available as well, they have been given discretionary funding from central government. If you do not know your local authority, you can check here.
From 25 March 2020, companies can apply online for a three-month extension for filing their accounts to Companies House. The Government has also said that it will temporarily suspend the wrongful trading rules to help company directors continue to trade during the coronavirus period.
If you are still unsure, contact us at [email protected] The government has put together a business support finder - simply enter your details and you will be notified of what support you may be able to access: https://www.gov.uk/business-coronavirus-support-finder
Please note: The Job Retention Bonus has been postponed until further notice.
Directors are, as far as we are aware, able to access the newer Job Retention Bonus (JRB) and Job Support Scheme (JSS). The JRB is a one-off payment to employers of £1,000 for every employee, including directors, who they previously claimed for under the CJRS and whose employment is maintained until the end of January 2021. Directors can also claim the JSS and they are not required to have used the JRS in order to claim - however the amount available remains relatively low.
Please note: the introduction of the Job Retention Bonus has been postponed until further notice.
The Job Retention Bonus is a one-off payment to employers of £1,000 for every employee (inc. directors) were furloughed under JRS, and who remain employed through to 31 January 2021. The government guidance states: "Employers can claim the Job Retention Bonus for all employees who meet the above criteria, including office holders, company directors and agency workers, including those employed by umbrella companies. The above criteria must be met regardless of the frequency of the employee’s pay periods, their hours worked and rate of pay."
Eligible employees must earn at least £520 a month on average between the 1 November 2020 and 31 January 2021. he employee does not have to be paid £520 in each month, but must have received some earnings in each of the three calendar months that have been paid and reported to HMRC via RTI.
Employers using the Job Support Scheme will also be able to claim the Job Retention Bonus if they meet the eligibility criteria
More information can be found here: https://www.gov.uk/government/publications/job-retention-bonus/job-retention-bonus
NB: Due to the annoucnement of a second England-wide lockdown, the original Job Retention Scheme has been extended until March.
The government has published updated guidance on how company directors can apply for the Job Retention Scheme. Full guidance is available here under the section 'Company Directors': https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme.
It states that while salaried company directors are eligible to be furloughed and receive support through the JRS, they owe fiduciary duties to their company as set out in the Companies Act 2006. The decision to furlough a director should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.
IPSE has developed a template furlough letter for company directors, exclusively for members. We will be amending this to reflect the new dates shortly. This is available to access here: https://www.ipse.co.uk/resource/ltd-co-furlough-letter-template-docx.html
As the guidance states, where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company “they may do so provided they do no more than would reasonably be judged necessary for that purpose, for instance, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.” The kind of work that a director may reasonably be expected to continue includes administrative work such as filing, preparing tax returns and annual accounts and updating company records.
This also applies to salaried individuals who are directors of their own personal service company (PSC).
While this appears restrictive, and we are seeking further clarification on these points from HMRC, there are important points to consider that may enable you to keep income flowing in.
First, if you furlough yourself, it can be for a short time period - three weeks is the minimum. If a work opportunity comes up, or is due to come later in the year, you can take yourself off furlough and work, then ‘re-furlough’ if necessary afterwards. Second, as yet there is no suggestion that you cannot undertake work outside of your current Limited Company. In other words, you should be free to take up a PAYE job, operate as a sole trader, or indeed set up a new Limited Company while you are furloughed.
NB: Due to the annoucnement of a second England-wide lockdown, the original Job Retention Scheme has been extended until March. We are waiting for technical guidance on the scheme.
The government guidance states:
"Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, i.e. they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company."
In other words, you cannot invoice clients or suppliers, take on, or seek, additional work while on furlough. However this does not mean you can find other ways to keep income flowing in.
First, if you furlough yourself, it can be for a short time period. If a work opportunity comes up, or is due to come later in the year, you can take yourself off furlough and work, then ‘re-furlough’ if necessary afterwards. Second, as yet there is no suggestion that you cannot undertake work outside of your current Limited Company. In other words, you should be free to take up a PAYE job, operate as a sole trader, or indeed set up a new Limited Company while you are furloughed.
Update: for information about changes announced in September relating to repayment of deferred income tax and VAT returns, see the other FAQs in this section.
The government announced that Income Tax self-assessment payments – due in July 2020 – can be deferred to January 2021 for the self-employed. This is an automatic offer with no applications required. The government website states that you are eligible if you are due to pay your second self-assessment payment on account on 31 July.
The government also states the deferment is optional and “if you are still able to pay your second payment on account on 31 July you should do so”.
The government has also announced that for VAT, the deferral will apply from 20 March 2020 until 30 June 2020. This is an automatic offer with no applications required.
The HMRC helpline is 0800 024 1222. More information is available here: www.gov.uk/difficulties-paying-hmrc
For more general advice and help, the government also has a Business Support Helpline. Information is available here: www.gov.uk/business-support-helpline
All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service.
IPSE is checking with government the exact scope of this but our understanding is that arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities. This means that, for those operating via a Limited Company, you can use this service to defer or delay Corporation Tax payments and dividend income tax, which is also on payment on account.
The HMRC helpline is 0800 0159 559. More information is available here: www.gov.uk/difficulties-paying-hmrc and here: https://www.gov.uk/government/organisations/hm-revenue-customs/contact/coronavirus-covid-19-helpline
For more general advice and help, the government also has a Business Support Helpline. Information is available here: www.gov.uk/business-support-helpline
In September, the government announced it will give the self-employed and other taxpayers more time to pay taxes due in January 2021, building on the Self-Assessment deferral provided in July 2020. Taxpayers with up to £30,000 of Self-Assessment liabilities due will be able to use HMRC’s self-service Time to Pay facility to secure a plan to pay over an additional 12 months. This means that Self-Assessment liabilities due in July 2020 will not need to be paid in full until January 2022. Any Self-Assessment taxpayer not able to pay their tax bill on time, including those who cannot use the online service, can continue to use HMRC’s Time to Pay Self-Assessment helpline to agree a payment plan.
More information can be found here: https://www.gov.uk/government/news/self-assessment-customers-to-benefit-from-enhanced-payment-plans
Announced in September, the government will give businesses which deferred VAT due in March to June 2020 the option to spread their payments over the financial year 2021-2022. Rather than paying in full at the end of March 2021, businesses will be able to choose to make 11 equal instalments over 2021-22. All businesses which took advantage of the VAT deferral can use the New Payment Scheme. Businesses will need to opt in, but all are eligible. HMRC will put in place an opt-in process in early 2021.
More information is available here: https://www.gov.uk/guidance/deferral-of-vat-payments-due-to-coronavirus-covid-19
Welfare support, including self-isolation payments
Universal Credit is a payment to help with your living costs. It’s an ‘in and out of work’ benefit and was brought in to replace a suite of existing benefits (Child Tax Credit, Housing Benefit, Income Support, income-based Jobseeker’s Allowance (JSA), income-related Employment and Support Allowance (ESA), Working Tax Credit). The rollout of UC is not fully complete - there are still many people on these ‘legacy’ benefits or who live in areas where it is not available, and the following information does not apply directly to them.
For many self-employed people who see their incomes fall substantially or, in some cases, entirely, Universal Credit (UC) will be the primary route for you to top up your income. Employment & Support Allowance (ESA) is available if you are ill or self-isolating as a result of COVID-19 (more information below).
IPSE will be launching a more comprehensive guide to applying to UC shortly but here we summarise the benefit, the basic eligibility requirements and amounts available.
UC is made up of a standard allowance, and some people may be able to get additional amounts, due to their circumstances. This is a difficult area to navigate because what you can claim is largely dependent on your individual circumstances, including: your specific earnings, whether you have a partner and what their earnings are, if you have children, a disability or health condition which prevents you from working, or require help in paying rent.
The government has made some welcome changes in recent weeks to help ensure that self-employed people affected economically by the crisis are better compensated than they would otherwise have been.
First, the main change has been to temporarily remove the ‘Minimum Income Floor’ in Universal Credit for those affected by coronavirus, either economically or in terms of their health. The MIF was a formula used to work out how much UC you should get when self-employed, based on the National Minimum Wage and an assumed number of worked hours. IPSE has always felt this was a bad policy which did not account for fluctuations in people’s freelance incomes – we are pleased to see it removed for the duration of the outbreak.
The Resolution Foundation has estimated that a self-employed person earning around £20,000 annually would now have an income replacement rate of 85 per cent if their earnings fall to zero, compared to 59 per cent with the MIF in operation, a substantial boost.
Second, the government has announced a one-year increase in the standard allowance of £1,000. This brings the standard allowance available up to an equivalent rate to Statutory Sick Pay - £94.25 a week (£95.85) from April 6.
Universal credit allowance depends on your individual circumstances. Following the changes, new and existing claims will stand at the following:
- If you're single and under 25 - £342.72
- If you're single and over 25 - £409.89
- In a couple and you’re both under 25 - £488.59
- In a couple and either of you are 25 or over - £594.04
This does not include the additional elements for other costs, such as housing, caring responsibilities or bringing up children. As our friends at Money Saving Expert have noted, It is important to note that from April there will be big change to housing payment within UC – which can be used to cover your rent, interest payments on your mortgages, and any service charges you may pay - has been increased quite substantially which will be reflected in your calculation.
There are many helpful online calculators where you can work out what you me be entitled to. For further information see: www.entitledto.co.uk/
If you or your partner have £6,000 (£10,000 if you are over state pension age) or less in savings this will not affect your claim for these benefits.
If you or your partner have £16,000 or more in savings, you will not be entitled to any of these benefits. If you or your partner have any savings or capital of between £6,000 and £16,000, the first £6,000 is ignored. The rest is treated as if it gives you a monthly income of £4.35 for each £250, or part of £250.
For those directly affected or self-isolating, there will be no attendance requirements, and Universal Credit can be claimed online or via phone. There is a five week wait for the money to come through but you can get an advance. Universal Credit is tax-free.
This is a complex area and IPSE is working with other organisations and the government Business Department to provide you a clear guide. To help guide you through, Citizen’s Advice and Money Advice Service also offer helpful guides.
No. The self-employed are not eligible for SSP and won’t be able to claim for it. If you are ill or self-isolating as a result of Coronavirus, you should be able to apply for ‘new-style’ Employment and Support Allowance (ESA) instead. The standard allowance available through Universal Credit has been increased so that it is available at a rate equivalent to SSP – around £94.25 a week.
What if I have the coronavirus or I am self-isolating according to government advice and I cannot work – what support is available?
If coronavirus means you’re unable to work and you’ve paid enough National Insurance Contributions, you might be able to claim new style Employment and Support Allowance (ESA) if you’re ill.
Self-employed people unable to work because they are directly affected by Covid-19 or self-isolating will be eligible for Contributory or ‘new-style’ Employment and Support Allowance. This is now payable from the first day of sickness, rather than the eighth. Eligible claimants under 25 will be entitled to £57.90 per week, and over 25s £73.10 per week.
You’ll need to have paid enough National Insurance contributions for 2 tax years – in 2020 the tax years are 2017-18 and 2018-19.
This is separate to the broader question of what happens if you are otherwise healthy and are seeing your income fall. For information on this, see the advice on Universal Credit.
Yes, provided they meet the other eligibility criteria. There is also nothing to suggest you cannot claim UC while on furlough – the 80% of your PAYE salary you receive will however be treated as earnings.
Unlike the ‘legacy’ benefits it was intended to replace, Universal Credit generally treats company directors as self-employed. Further information about how company directors and their income is treated is available here: https://revenuebenefits.org.uk/universal-credit/guidance/entitlement-to-uc/self-employment/companies/
Applying for Universal Credit as a company director can raise several uncertainties in terms of the application form. We would recommend you speak with a trusted welfare adviser, such as Citizen’s Advice, if you do go down the UC route.
However, for illustrative purposes, we have shared below the guidance received from DWP for one Limited Company Director who shared their experience with us. The example is of a ltd co contractor who intends to furlough themselves through the JRS but currently has no other income coming in. The following is a summarised version of DWP’s guidance:
The applicant should answer ‘Yes’ to the question of whether they are currently working. The applicant should answer that they are Self Employed on the question of what their employment status is. The DWP will get any PAYE element direct from HMRC, the applicant would just need to enter any additional Self Employed earnings (excluding PAYE) for the qualifying period (i.e. next month for calculation at end of month) which may be 0 (if unable to pay any further earnings/dividends). If the applicant subsequently applies and qualifies for JRS then they will not need to enter that as DWP will be informed by HMRC.
I'm self-employed and have coronavirus and/or have been told to self-isolate by NHS Test and Trace. What should I do? Can I claim any support?
IPSE do not want people to face a choice between their (others') health and their income and have been calling for government to introduce financial support to those self-isolating.
From 28 September, people will be required to self-isolate by law. The government has said that those on lower incomes, including the self-employed, who cannot work from home and have lost income as a result will be able to receive a lump sum £500 payment to cover this two-week period.
Just under 4 million people who are in receipt of benefits in England will be eligible for this payment, which will be available to those who are required to self-isolate from 28 September. Local authorities do have an amount set aside for discretionary payments as well for other individuals facing hardship who do not meet this criteria.
Local authorities have now set up the systems to adminster these Test and Trace support payments. If you are contacted by Test and Trace and advised to self-isolate, then contact your local authority to see if you meet the eligibity criteria to receive a support payment.
To find your local authority use this link: https://www.gov.uk/find-local-council.
Businesses in England that are required to shut because of local interventions will now be able to claim up to £3,000 per property per month. The eligiblity criteria for funding, which currently only applies in England but is expected to be rolled out to the devolved administrations shortly, applies to:
- any businesses still closed at a national level (e.g. nightclubs), will not be eligible
- if a business occupies a premises with a rateable value less than £51,000 or occupies a property or part of a property subject to an annual rent or mortgage payment of less than £51,000, it will receive £1000
- if a business occupies a premises with a rateable value of exactly £51,000 or above or occupies a property or part of a property subject to an annual rent or mortgage payment of exactly £51,000 or above, it will receive £1500
- Local authorities will also receive an additional 5% top up amount of business support funding to enable them to help other businesses affected by closures which may not be on the business rates list. Payments made to businesses from this discretionary fund can be any amount up to £1500, and may be less than £1000 in some cases.
- Local authorities will be responsible for distributing the grants to businesses in circumstances where they are closed due to local interventions
- further eligibility criteria may be determined by Local authorities
More information is available here: https://www.gov.uk/government/news/ministers-announce-new-grants-for-businesses-affected-by-local-lockdowns
On 22 October the Chancellor announced additional funding to support cash grants of up to £2,100 per month primarily for businesses in the hospitality, accommodation and leisure sector who may be adversely impacted by the restrictions in high-alert level areas (Tier 2). The funds will be distributed by local authorities.
IPSE has welcomed these interventions but warned that it risks missing out many self-employed businesses.
We have published links to the coronavirus advice pages for individual banks and building societies on our main coronavirus hub. While we cannot provide an exhaustive summary of the actions of each individual bank or building society, broadly speaking they are undertaking a range of actions that might help – these include:
- Some banks and building societies are now saying you’ll be able to access savings in fixed term accounts with no penalties
- No fees for missed payments on credit cards, loans and mortgages
- Extra borrowing – change credit limits and overdraft facilities
- Several banks have begun to announce changes to how overdraft fees are to be paid will no longer go ahead
Yes. Mortgage lenders have announced support if you have to take time off work because of coronavirus, including a repayment holiday of up to three months. This includes buy-to-let mortgages. Information on how to do this is available here: https://www.fca.org.uk/consumers/mortgages-coronavirus-consumers
The government has announced emergency legislation to suspend new evictions from social or private rented accommodation during the coronavirus crisis.
Your landlord will not be able to apply to the court to start possession proceedings until you have missed rent payments for at least three months. This has recently been extended.
As well as the other support highlighted in this FAQ, a number of creative and arts organisations have launched dedicated ‘hardship funds’ open to freelancers. These are listed below:
- Arts Council England Emergency Fund (All artists)
- Help Musicians Hardship Fund (Musicians)
- Performing Right Society (PRS) Emergency Relief Fund and PRS Sustaining Creativity Fund (Musicians)
- Musicians Union Hardship Fund (Musicians)
- Dance Professionals Fund (Dance)
- BFI Film and TV Emergency Relief Fund (Film & TV freelancers and workers)
- Society of Authors: Author’s Emergency Fund (Writers)
- Funds For Freelancers: A financial resource for actors, creatives, ushers working in theatre (Theatre)
The Welsh Government has announced two additional policies that self-employed people may benefit from.
First, the Covid-19 Wales Business Loan Scheme. This will work alongside the CBILS and offers loans between £5,000 to £250,000, with 12-month capital and interest repayment holiday. Sole traders, partnerships and limited companies are eligible to apply and will need to provide 3 months of previous bank statements. More information is available here: https://developmentbank.wales/covid-19-wales-business-loan-scheme
Second, as part of the Welsh Government’s Economic Resilience Fund, grants of £10,000 will be made available for micro-businesses employing up to 9 people. This includes sole traders employing staff. Qualifying businesses will be able to apply by mid-April. More information is available here: https://gov.wales/new-500-million-economic-resilience-fund-launched-wales
The Scottish Government has published a list of current funding sources and advice here: https://findbusinesssupport.gov.scot/coronavirus-advice. On 15 April, the government announced it would be making grant funding available for those newly self-employed people who are ineligible for the SEISS. Information is available here: https://news.gov.scot/news/additional-support-for-business
The Newly Self-Employed Hardship Fund (totalling £34 million) will be managed by Scottish local authorities. They will allocate funds to the newly self-employed facing hardship through grants of £2,000. It will be possible to make applications for the grants by the end of April and recipients will receive funds in early May.
The Scottish Government has put in place a similar scheme of business rates reliefs and grants, for those who have business premises, that is operational in England.
The Northern Ireland Executive has published a list of current funding sources and advice here: https://www.nibusinessinfo.co.uk/business-support/coronavirus.
There is as yet no dedicated scheme or grant for the self-employed. However the NI Executive has put in place a similar scheme of business rates reliefs and grants, for those who have business premises, that is operational in England.
Coronavirus (COVID-19) hub
For more information about how COVID-19 is affecting the self-employed, visit our Coronavirus hub