Self-Employed & Limited Companies Help in Coronavirus Crisis

self employed and coronavirus

It’s fair to say that the COVID-19 pandemic has fundamentally changed the way we live, and as much our primary concern is health – our jobs and our finances are coming in a very close second. For those who are self-employed, or who run small limited companies it has been a particularly worrying time, with many people not knowing if their businesses will survive.

My article takes a look at what rights you have as a self-employed person and what support is out there for both you, and directors of limited companies.

Self-Employed Coronavirus Grants

The majority of self-employed people are aware of the Self-Employment Income Support Scheme (SEISS) – but, did you know that there are actually TWO grants available?

More on that second one in a moment, but first, for those of you who’s knowledge of the SEISS is limited to, “something to do with 80%”, let’s see exactly what, and how much, it entails…

The first grant could be applied for from May 13th and is worth up to 80% of your profits, capped at either £2,500 per month, or £7,000 in total. Around 2.6 million claims have already been made to the tune of more than £7.7 billion – but if you haven’t applied for yours yet you only have until July 13th, so you might want to get in there quick!

What Do I Need To Know?

  • The HMRC should have contacted you by now either by letter, text or email if you are eligible for the scheme. If you haven’t heard from them and you think you might be eligible then it’s worth contacting them and seeing if you can arrange an application appointment
  • As it’s a grant you don’t have to pay it back. Bonus.
  • You CAN keep working. Another bonus.
  • You don’t need to PROVE that you have been impacted by the coronavirus, but you will need to declare that your business has been affected over the period of March to May to .
  • You can still apply for and receive universal credit as well as SEISS, but it’s worth noting that once you start receiving the SEISS it is classed as income, and so the amount of universal credit you receive will decrease.
  • The money should be in your account within 6 working days
  • The amount you receive is based on the average of your tax returns for 2016/17, 2017/18, and 2018/19
  • You need to have filed a tax return for 2018/19 – so you MUST have been self-employed BEFORE April 6th 2019 in order to be eligible. If your 2018/19 tax return only shows a few months self-employment, that will be counted as your total profits for the year. The government won’t pro-rata it based on your monthly profits.
  • More than 50% of your total income must come from being self-employed in order to qualify for the grant. Any income you have from property, dividends, savings or pensions all count as taxable income, and so these combined mustn’t exceed 50% of your total earnings.
  • Your average profit must be less than £50,000 a year……

However….

  • If you DID earn more than £50,000, OR earned LESS than half your income in 2018/19, the government will check your 2017/18 and 2016/17 tax returns and, if on AVERAGE over the three years you earnt LESS than £50,000 and made MORE than half your income from being self-employed, you’ll still be eligible.

And What About That Second Grant?

Applications for the second SEISS grant open in August and will be worth 70% of your average monthly profits, also paid out in a single instalment. This time round the grant is capped at £2,190 per month, or £6,570 in total.

The eligibility criteria for this second grant are exactly the same, and you don’t need to have claimed the first grant in order to claim the second one.

The big difference between the two grants is that with this second instalment you will have to prove your business has been adversely impacted by the virus on or after July 14th. So, what does the HMRC consider ‘adversely affected’?

Well, if you are unable to work because:

  • You’re shielding or self-isolating
  • You are off sick because of coronavirus
  • You are caring for someone who has coronavirus

Or, you’ve had to scale-down or stop trading because:

  • Your supply chain has been interrupted
  • You have fewer or no customers/clients
  • Your staff can’t come into work

In a nutshell, the first grant is for those whose business was affected before July 13th, and the second one is for those impacted on or after July 14th. If you were affected before and after those dates then you are eligible for both.

What If I’m Not Eligible For the SEISS?

What are your options if you are self-employed and have been affected by the coronavirus, but you don’t meet the eligibility criteria?

Small business bounce back loans can be used to support your income, and is particularly helpful to those who are newly self-employed, and to limited company directors. These loans, for up to £50,000, have been available since May and are interest and payment free for the first year. If you aren’t able to pay it back within that first year you’ll be pleased to know that the annual interest after that is a low 2.5%

The Temporary Coronavirus Business Interruption Loan Scheme is open to self-employed people and offers access to loans, overdrafts and asset finance of up to £5 million for up to 6 years. This scheme is offered by all major banks and is open for applications now.

You can defer your income tax payments until January 2021 if they are due in July 2020 under the self-assessment system.

This all sounds very encouraging for those who are self-employed, but what support is available for those limited company directors whose small businesses are struggling?

Support For Limited Company Directors

  • Unfortunately there’s no official scheme in place for limited company directors, but they can furlough the PAYE element of their income, even if they’re the only employee. In other words, get 80% of their salary up to £2,500 a month. Because more income is dividends it’s not likely to be a huge amount, but it’s better than nothing.
  • You are able to claim universal credit
  • Limited company directors can use the small business bounce back loans to support their income……

Bounce Back Loans And Limited Company Directors

I’ve already spoken a little about these loans when it comes to the self-employed, but when it comes to the directors of limited companies it’s a little bit more complicated. This is because the money from the loan belongs to the company – not you. So how can you get the money?

  • Dividends – Dividends have to be paid out of profits, and obviously a loan isn’t a profit. BUT the loan might provide the cash flow needed to pay a dividend, if there’s no money available otherwise.
  • Salary – If you just need the loan to cover your salary you could furlough yourself, although this does mean that you can’t work other than fulfilling the minimum statutory obligations of a director.
  • A Loan To A Director – If the loan happens to free up other cash within the company, then that cash can be lent to a director. However, be aware that if that loan isn’t paid back within 9 months then the company (YOUR company in this case) will have to pay a quasi-corporation tax, which at 32.5% isn’t cheap!

Being Self employed or running limited company during coronavirus has been impacful, but more than that it has been confusing. We are here to help. Be sure to give me a call if you have any questions.

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Sam

Sam

I’m More Than Money’s Income Protection and Business Protection Insurance expert, I started my career in finance 8 years ago. I’ve gone from advising on insurance in my home county of Kent, to working in the big city of London. I started More Than Money with my Dad and Brother, to get away from the 'sales environment'. When you're a qualified Adviser, the quality of your advice has to come first, not a 'sale on the board'. I thought, if I cant find that environment elsewhere, well i'll create it myself.

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