If you are self-employed or a small business, the lockdown and restrictions following Covid-19 will undoubtedly have been challenging. As we head into winter, many businesses face financial hardship and getting the right support is essential.
The self-employed and sole traders have seen the Government income support grant extended until April, although at a much-reduced rate of compensation. If you have found your business reduced or affected by the Covid-19 pandemic, you can claim for 20% of your average income based on previous self-assessment submissions.
For small businesses, the furlough scheme is set to finish at the end of October and will be replaced by the Job Retention Scheme which is aimed at supporting those jobs and businesses that are still considered viable.
This, along with the reduced rate for the self-employed, has led to some concern that the support in certain industries such as hospitality is insufficient and could lead to more job losses.
Here we take a look at what financial support that is currently out there over the next few months.
Self-Employed Covid-19 Support
If you are classed as self-employed (or a member of a partnership) but are not a limited company, you can take advantage of the Self-Employed Income Support Scheme.
The first stage of the grant closed on 13th July and covered 80% of the monthly trading profits for the self-employed. The second stage closed on 19th October and covered 70%.
The scheme has now been extended but at a much lower rate:
- From the three months of November to January, you can apply for the grant which will be calculated at 20% of your trading profits up to a maximum of £1,875.
- The grant will be extended to April after that but the support package has not yet been revealed.
To qualify, you need to be self-employed, you can continue to work but that work is at a much lower level than before Covid-19. You will also need to have previous self-assessment submissions to calculate the support from. This includes:
- You have traded in between 2018 to 2019 and submitted your tax return before 23 April 2020.
- You were trading between 2019 to 2020
- You are continuing to trade in the tax year 2020 to 2021
Other support for the self-employed outside of the grant include:
- You can apply for Universal Credit if you are getting no work or less work because of Covid-19 and don’t qualify for the Self-Employed Income Support Scheme. You can apply online here.
- If you are disabled or have a health condition that stops you working, you can apply for New Style Employment and Support Allowance.
- Taxes due for January 2021 can be deferred if you use self-assessment and are self-employed. If your liability is no greater than £30,000 you can use the HMRC’s Time to Pay facility and create a payment plan.
- If you are self-employed and have to pay VAT, you can also arrange to spread this over 11 months with no interest to be paid.
Support for Small Businesses
The majority of businesses in the UK have between 0 and 49 employees and account for about three-fifths of employment nationally and half of the economic output. The furlough scheme that was introduced at the beginning of the lockdown was invaluable in helping keep many of these businesses going.
- The furlough scheme is due to end on 31st There are thought to be some 3 million employees who are still on the scheme despite many sectors returning to work.
- The Government is replacing the furlough scheme with the Job Retention Scheme which is more focused on what they call viable jobs and businesses.
It is there to support employees who are now able to work 33% of their normal hours. This amount of work needs to be covered by payment from the employer. For the shortfall, the Government will pay for a third of the hours that are not worked because of the impact of Coronavirus. That means employees who work 33% of their normal hours will get 77% of their normal pay.
It is open to small and medium-sized businesses, although many sectors say that the new Job Retention Scheme is not enough to fully support businesses. To qualify, employees should not be on a redundancy notice and should have been entered onto the company’s PAYE system on or before 23rd September.
Employers can also take advantage of the Job Retention Bonus which is a one-off payment of £1,000 for employees who were furloughed and are being kept on until 31st January. You cannot claim this bonus until 15th February 2021.
Other support for small businesses include:
- Bounce Back Loans (BBL): These are designed to give businesses funding to help them stay operating with a Government guarantee for the first 12 months. The loans start at £2,000 up to 25% of turnover and a maximum of £50,000. Find out more here.
- Coronavirus Business Interruption Loan Scheme (CBILS): This gives small and medium-sized businesses access to loans up to £5 million with the Government guaranteeing 80% to the lender. To qualify, you need to have a turnover of more than £45 million and be based in the UK. Find out more here.
- All small businesses can also spread their VAT payments over 11 monthly instalments with no interest to be paid.
Further Lockdowns and Business Support
If you have been watching the news, you have noticed there is some contention of the Government’s tier scheme for lockdowns.
Those in Tier 3 areas are currently asking for more financial support for businesses, especially those employing low-pay staff. That could mean further measures and support being introduced in the future.
Why Contact VW Taxation
The range of help available for the self-employed and small businesses can seem a little complicated and it’s important to get the right advice. At VW Taxation, we can help with a free consultation to help you minimise your tax burden at this difficult time. Contact our expert team today to find out more.