During these unprecedented times, I’m sure that many freelancers and small businesses have faced some challenges. The UK government has introduced many different schemes to help laid-off employees, businesses, and self-employed persons to get through this difficult period. In this article, I will explain the government aid available for UK freelancers and small businesses during the COVID-19 pandemic.
The UK government and HMRC have introduced financial support for businesses affected by the pandemic which outline several different factors including how to pay your employees, sick pay, tax, business rates, etc. It also outlines specific relief depending on your business type from freelancers to large corporations.
COVID-19 support for self-employed & freelancers
If you are a freelancer or self-employed and have lost income due to the coronavirus, you are able to claim a grant from the “Coronavirus (COVID-19) Self-employment Income Support Scheme (SEISS).”
Who qualifies for the SEISS grant?
If you are self-employed or a member of a UK partnership, you may qualify for this grant if you meet the following criteria:
- You submitted a personal tax return for the 2018/2019 tax year
- You have traded and operated your business during the 2019/2020 tax year
- You are currently trading or operating your business, or would have if not for the pandemic
- You plan on continuing trading and operating your business for the rest of this tax year
- You have lost income due to the coronavirus, and have some proof of this
- Your business profits were not higher than £50.000 and more than 50% of your total income for the 2018/2019 tax year (or the average of the 2016/2017/2018 tax years)
How much money will I receive from the SEISS grant?
The taxable grant is calculated from your previous tax returns, specifically from the trading income from the 2016/2017, 2017/2018, and 2018/2019 tax years. If you didn’t submit a tax return for all 3 years, then they will use the average profit based on the information they have, whether it be three, two, or one years.
The grant will be paid out monthly based on 80% of your average business profit up to a maximum of £2,500 per month. To calculate this, find the average profit from your previous tax returns, and calculate 80% of the total amount, then divide by 12.
For example:
Business profit from:
- 2016/2017 tax year = £20,000
- 2017/2018 tax year = £30,000
- 2018/2019 tax year = £25,000
Average business profit = £25,000 (20,000 + 30,000 + 25,000 = 75,000. 75,000 / 3 = 25,000)
80% of the average profit = £20,000 (25,000 x 0.8)
Monthly grant = £1666.67 (20,000 / 12)
How do I claim the SEISS grant?
HMRC will contact you (if eligible) in May 2020. They will send you a link to make a claim using an online government page. HMRC has asked not to try to contact them regarding this scheme as they will reach out to you when the time is right. They will aim to start payments in early June.
The grant is currently scheduled to last 3 months, however, that may be extended depending on the pandemic situation at a later date.
The monthly grant will incur normal income tax and national insurance payments but they will not need to be repaid.
It is also important to note that you can claim for a “universal credit” while waiting for the self-employment income support grant, however, this will count towards your total income and may affect the amount of credit/grant you receive. You can find more information regarding this on the UK government website.
COVID-19 support for small businesses
There are several different schemes, and financing opportunities to help your small business and employees during this time. I have explained each one in detail below. Not all of the schemes may apply to your business, so it is important to check on the UK government website to ensure that you are able to take advantage of each scheme.
Coronavirus Business Interruption Loan Scheme (CBILS)
This scheme is aimed at small and medium-sized businesses (up to £45 million annual turnover) to access loans and finances of up to £5 million with repayment terms up to six years, for UK businesses experiencing revenue disruptions due to the pandemic.
The government will provide an 80% guarantee of each loan to recognised lenders so that they can continue providing funds to small businesses.
These loans started on March 23rd, and are available to all UK businesses so long as they meet the minimum turnover requirements. The borrowing company is liable for the debt and must comply with the repayment terms.
If you apply, the government will cover the first 12 months of interest and fees ensuring that small businesses will have no upfront costs associated with the loan.
You can find more information on how to apply for this scheme from the British Business Bank. To apply, you will need to select a lender from their list of 40+ accredited lenders, read their eligibility criteria, and contact the lender directly (phone, email, or website form) to apply.
The small business grant fund (SBGF)
This grant applies for England based businesses only. For information on other countries, please visit the government website.
The small business grant fund (SBGF) offers eligible small businesses a £10,000 lump sum grant if affected by the pandemic. The grants are issued from local authorities, and you do not need to apply, the authorities will contact your business directly if you are eligible.
To be an eligible business, you must have a property in England and must have been small enough to have qualified for “small business rates relief (SBRR)” before March 11th. This includes businesses who were on the tapered relief scheme.
There are certain restrictions to the eligibility, if your property was used for personal usage, or if your business was in liquidation as of March 11th.
If you have any queries regarding this grant, you will have to contact your local authorities directly.
The retail, hospitality and leisure grant fund (RHLG)
This grant applies for England based businesses only. For information on other countries, please visit the government website.
Similar to the SBGF, the retail, hospitality and leisure grant fund (RHLG) offers businesses in these industries either a £10,000 or £25,000 grant, as well as deferrals in business rate payments.
The grant is calculated by your business rates. Your business will receive a £10,000 grant if your business property has a rateable value up to £15,000. Your business will receive a £25,000 grant if your business property has a rateable value between £15,000 and £51,000. If your business property has a rateable value higher than £51,000, unfortunately, you do not qualify for this grant.
The property cannot have been used for personal matters, and cannot have been in liquidation as of March 11th.
This grant is paid by your local authorities who will contact you directly if your business is eligible.
Claim for employee wages
The UK government has created the “Coronavirus Job Retention Scheme” to help employers cover the cost of employee wages who are on temporary leave due to the coronavirus pandemic.
If your business is unable to keep some/all of your employees working due to the impact of the pandemic, you can grant a leave of absence (furlough) to employees, and claim a percentage of their wages through this scheme.
This scheme started in March 2020 and is applicable for 3 months, but may be extended in the future depending on the situation at the time.
Although the Coronavirus Job Retention Scheme is aimed at helping businesses that are severely impacted by the pandemic, all employers can apply for the grant which will cover 80% of the employee’s normal wages, with a maximum of £2500 per month. This will also cover the employer’s contributions of pension and national insurance.
To be eligible for this grant, you must have created a PAYE payroll before March 19th of this year, are currently enrolled with PAYE online, and obtain a UK bank account. You can only claim for workers that were already on your payroll before March 19th.
You can claim this grant for any employee that has been furloughed, regardless of their contract type or citizenship. The employee is not eligible if they plan on working for your company while receiving the grant, unless they will be working for another employer.
If you previously laid-off employees due to the pandemic, you can re-employ them and use this scheme to claim their wages.
If you are not an employee, but a director, part of an LLP, or an agency, you can also be furloughed and receive this grant.
This grant covers the majority of employees in the UK and is there to protect the working population and the UK economy during the pandemic and lockdowns. You can easily claim this grant through HMRC online.
Claim back COVID-19 statutory sick pay (SSP)
If your employees take sick leave specifically related to coronavirus or self-isolation due to the coronavirus, then it is possible to reclaim the SSP from HMRC. If the employee is taking sick leave for any other reason, employers will not be able to reclaim SSP, and the standard SSP rules apply.
Statutory sick pay is £95.85 per week for up to 28 weeks. If an employee is self-isolating for over 4 days, SSP can be paid to them from the first day of leave, and employers can claim back up to 2 weeks of the SSP for that purpose.
The law has not officially changed for the coronavirus SSP reclaim yet, but HMRC are planning on introducing that option soon. You can find the most up to date information on the UK government website.
COVID-19 tax relief for small businesses and freelancers
Due to the coronavirus pandemic, HMRC has announced that you can delay some tax payments such as VAT and your self assessment tax balance.
If you are a VAT registered business, you can continue with you VAT payments as normal, or choose to defer the payment until a later date if you have VAT owing between March 20th and June 30th. HMRC will not charge any late fees or penalties if you choose to defer your payment, however, you will still need to submit your return on time.
You can defer the VAT payments until March 31st, 2020 at the latest. If you currently use direct debit for VAT payments, you can contact your bank to cancel the automatic payments.
Your self assessment second payment is normally due by July 31st, however, due to the pandemic, HMRC will allow you to defer that payment until January 31st, 2021. If you choose to delay your payment, you can either pay in one bulk sum or choose to pay in instalments throughout the year (if owing less than £10,000).
Summary
We understand that these are difficult times for all and I hope this article shed some light on some opportunities for you and your business. If you need more information, I would suggest going directly to the UK Government website for the most up to date information and advice. All the best!
