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Coronavirus; Financial advice for small businesses & the benefits available

Featured | Traders- Hints & Tips

In the wake of the Coronavirus pandemic, we sought advice on funding and benefits for the self employed.

This is a time of uncertainty for many small businesses and self-employed people, and Pedddle’s wide range of stallholders are just some of the millions of people facing difficult times in the wake of the Coronavirus pandemic. 

Helping small independent businesses is at the heart of Pedddle’s ethos, so we want to help you best prepare for the coming months, share ideas, offer support and direct you towards helpful financial advice at this chaotic time. 

Mercedes from Slipped Ink is one of our fantastic brand new stallholders, creating original artworks reflecting the beauty of nature and the female form. Multi-talented Mercedes is also a Learning & Development Business Partner at a debt solution company, so is ideally placed to empathise with being a stallholder and small business owner in these tumultuous times, and advise on funding, getting credit, and where you can apply. Below she answers some of our most pressing questions:

I’m self-employed – how do I get money?

The UK government have implemented several useful measures for contracted employees (find out more here), such as paying 80% of wages, but the measures don’t correlate as well for self-employed people. The news is changing daily, so you can check here for updates, but for now it’s a struggle for the self-employed. 

Universal Credit could help. It’s a monthly payment to help with living costs, and in the wake of Coronavirus, the government are looking at raising the thresholds to help more of us out. It can take 5 to 6 weeks to come through – so in these uncertain times it’s a good idea to apply now, to prepare the financial help for when might you need it. 

If Universal Credit doesn’t apply to you, there are other options available. Browse this list of government benefits to see what you’re entitled to. 

Money Advice Service offer a free service which could help you.

Citizens Advice Bureau can help, and also offer an online chat service. 

HMRC have set up a helpline specifically for self-employed people in the wake of Coronavirus – call 0800 0159 559.

What is Universal Credit & how do I apply?

For those that aren’t familiar with Universal Credit, it replaces other benefits such as Child Tax Credit, Income Support, income-based Job Seeker’s Allowance (JSA) and Housing Benefit. It can be difficult to apply for but it’s all encompassing and takes into account all of these types of benefit. 

Universal Credit is assessed on a monthly basis, and so will alter each month. Your previous income is taken into account, so 7 days before your next installment is due you need to submit an update on what your income has been that month, and you will then receive payment based on what your projected earnings would be. 

To apply you’ll need details of your income and expenditure and ID (a passport or driving licence, as can’t apply face to face at moment!), and you must be over the age of 18 or under pensions age, and of low income. If you have over £16,000 in savings, you are less likely to be able to claim. 

For self employed people, this process can obviously be very varied and quite complicated due to having a fluctuating income, so Mercedes suggests that the best way to submit your application is with a live chat also open via Gov.uk or the Citizens Advice Bureau, so that they can talk you through it as you apply. 

Don’t forget – as your earnings are re-assessed each month, your payments can fluctuate. You also are highly unlikely to get your previous income before Coronavirus – but every little helps. 

What happens if I get benefits overpaid or my business runs at a loss? 

If your business has run at a loss or are overpaid benefits, you’ll be asked to pay back what you’ve already been given. All benefit assessments can fluctuate, and sadly this can happen. Universal Credit is given using a month-by-month calculation, so is likely to fluctuate, which is why you must update them each month and be as accurate and honest as possible.

What happens with my rent and utility bills? 

With the Universal Credit system, they look at the household minimum income, so if you’re renting and need housing benefits, have a disability or have children and need child benefits to care for them, this is all taken into consideration during the Universal Credit application process. 

The government are looking at offering a freeze on household bills, but utility companies can also offer freezes or payment plans directly for people in a financially vulnerable state. If you pay for utilities on a meter, the government are looking at ways of alternative payment methods, so that no keys or face-to-face transactions are required in the wake of the Coronavirus pandemic. 

Completing VAT & Self-Assessment Tax Returns

The UK government are pushing back VAT payments and Self-Assessment Tax deadlines, but these will still need to be paid at some point. Make sure everything is trackable with your current income and expenditure, so that you don’t get in a mess when the time comes! 

It’s also a good idea to work out a realistic household budget, which will help you work out payment plans and any areas that you may financially struggle. 

Finances & Mental Health

Finances and mental health are so closely linked that talking about your situation is really important, especially if you’re worried or stressed. There are so many options you can take – don’t feel alone or ashamed to ask for help. There are many debt solution companies who can advise and tell you which benefits you can apply for and so on (both free and paid services are available). Many utility companies, banks and lenders will also offer help if you’re financially vulnerable, and they can give advice or offer payment plans.  It’s vital to talk about your financial situation – don’t struggle alone! 

Can I claim 80% of my usual income now?

In light of the recent announcements, with the government having (finally) issued the Income Support Scheme for the Self-Employed, this basically means that self-employed people adversely affected by Covid-19 will receive a taxable grant of 80% of their average profits over the last 3 years, capped at £2.5k per month. So this basically provides the same cover for self-employed people as furloughed workers. The support will be available for at least 3 months, and will be reviewed and extended if necessary. To actually this support you would need the following:

i) individuals must have submitted their 2019 tax return (deadline extended from January 2020 to 4 weeks from 26/03/2020 for these returns to be submitted);

ii) the self-employed income must be the individual’s majority source of income; and 

iii) the trading profits from the self-employed income source must not exceed £150k. HMRC will directly contact all individuals who are eligible before the beginning of June.

There’s a link that goes into a little more detail here: https://www.gov.uk/government/news/chancellor-gives-support-to-millions-of-self-employed-individuals

Self Employed Grant Explained 

The following information will apply to sole traders and partnerships, but not directors of limited companies. The government will continue to review and assess this, but the information is correct as of 27.03.20.

1.       The grant is expected to be available in June 2020 – you don’t need to take any action right now.

2.       The initial guidance provided by HMRC is here: https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme

3. The scheme will pay up to 80% of an individual’s average trading profits calculated over the last 3 years.

4. If you have less than 3 years’ trading history, they will look at the relevant years only for the purposes of the calculation (so any years incl 16/17, 17/18, 18/19).

5. Payment will be capped at £2,500 per month, but paid in one lump sum in June (at the earliest).

6. The grant will be paid for a 3 month period back dated to March 2020, and will be paid directly into your bank account.

7. Only open to those with trading profits not exceeding £50,000.

8. You must have been trading during the 2018/19 tax year to qualify (i.e. have completed a 2018/19 tax return, and still trading (or trying to trade!) now.

9. The self employment income must be the individuals main source of income.

10. If your 2018/19 tax return is still outstanding, it must be submitted within the next 4 weeks.

11. HMRC will contact taxpayers directly with a request for information form to complete online.

Beware of scams!

The FCA (Financial Conduct Authority) have urged consumers to be vigilant for scams that could appear over the coming months. Scammers are sophisticated, opportunistic and will try to get personal details or money from victims in many ways. They tend to target people who are more vulnerable or susceptible to being scammed, particularly in the current climate with many more people being at home and financially vulnerable.  

There is a bit of info that the FCA has published on what tactics to look out for, how to protect yourself and how to report a scam here: https://www.fca.org.uk/news/news-stories/avoid-coronavirus-scams

This is a time of crisis for everyone, not a sign of business failure. If you’re financially vulnerable you are not alone. We’re all in this together! Watch out for more blogs on small businesses and tips for coping in the Coronavirus pandemic. 

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