Rishi Sunak's Winter Economy Plan explained (by someone far cleverer than me!)

September 27, 2020  •  Leave a Comment

Hello!  I hope everyone is staying safe and well.  For this blog, I thought I would share the wise words of my fantastic Accountant, Paul from ShutterTax.

I cannot recommend ShutterTax highly enough.  From our very first conversation with them I was confident that I had found a company that completely understood my business and who I could trust to help me navigate the quagmire of book keeping and tax returns.

Paul and his lovely wife/business partner Debra are also both professional photographers with many years of experience, so you see when I say they completely understand my business, its the absolute truth!

You can find out more about ShutterTax here.  In the meantime, the information below will no doubt be a great help to anyone wanting more information about the recently announced government plans to support businesses and the self employed this winter.

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Covid-19 - Winter Economy Plan

On 24 September, Rishi Sunak unveiled the government's plan to protect jobs and support businesses over the coming months.

As has been the case with previous announcements, it will be several days before the full details become clear and several weeks before the finer details are thrashed out. This page will be updated as and when we receive more information.

Let's start with a recap of all the help available to include any changes announced yesterday.

Bounce Back Loan Scheme (BBLS)

This loan has been extended to 30 November 2020.

This scheme allows banks to offer loans to all small businesses and the self-employed. The Government will provide lenders with a 100% guarantee on the value of the loan which opens this up to those of us who would be unable to get a loan under normal circumstances due to inadequate security. There will be no fees or interest to pay for the first 12 months then after this period the interest rate will be only 2.5% a year. Finance terms for the loan were initially up to 6 years but have now been extended to 10 years.

You can borrow between £2,000 and 25% of your business' turnover. The maximum loan amount is £50,000.

You can apply simply by contacting one of the 11 accredited lenders. It should take no longer than a standard application.

Most participating lenders have a dedicated page explaining the application process.

Please visit British Business Bank - Bounce Back Loan Scheme for full details.

Coronavirus Business Interruption Loan Scheme (CBILS)

This loan has also been extended to 30 November 2020.

If you want to borrow more than is permitted under the Bounce Back Loan Scheme (BBLS), then this can be a viable alternative.

The Government will provide lenders with an 80% guarantee on the value of the loan and will also cover the first 12 months of interest payments and any arrangement fees (although many lenders have said they'll waive these fees anyway). Unlike the Bounce Back Loan Scheme (BBLS), interest rates are set by the lender as opposed to the fixed 2.5% rate. Finance terms for the loan were initially up to 6 years but have now been extended to 10 years.

You can apply simply by contacting one of the 40+ accredited lenders. It should take no longer than a standard application.

There are a few eligibility restrictions but thankfully photographers are not amongst them. However, you must have a borrowing proposal which would have been considered viable by the lender before the current pandemic.

Most participating lenders have a dedicated page explaining the application process.

Please visit British Business Bank - Coronavirus Business Interruption Loan Scheme for full details.

Coronavirus Self-employment Income Support Scheme (SEISS)

The government originally announced a grant allowing you to claim up to 80% of your monthly taxable trading profit for the period, initially for 3 months backdated to March. This grant was extended to cover the months of June to August and reduced to 70% of your monthly taxable trading profit for the period. You're unable to backdate claims for the first grant available but you can still apply for the second grant (June to August) up to 19 October.

The government have announced an extension of this grant to cover the months of November 2020 to April 2021. The first grant will cover the 3 month period of November 2020 to January 2021 and will be for 20% of your monthly taxable trading profit for the period.

There is no information available yet on the second grant to cover the 3 month period of February 2021 to April 2021.

Let's break this down:

  • Taxable trading profit is the figure on your Self Assessment tax calculation for profit from self employment
  • It will be calculated from your 2019 tax return. If you filed a return in 2018, it will be calculated on an average of the 2 years, and if you filed a return in 2017, it will be calculated on an average of all 3 years
  • If you will be filing a return in 2020 for the first time, unfortunately you are not eligible for this grant
  • Your average profit based on the above must be less than £50,000 per annum
  • Your profit from self employment must be over 50% of your total taxable income (this includes employment, property etc)
  • The second grant is capped at £2,190 per month. The new grant will be capped at £1,875 in total (per 3 month period).
  • It will be paid directly into your bank account in one instalment and will be taxable
  • HMRC will contact you if you are eligible for the scheme and invite you to apply online. If they haven't, you can get more information and check your availability here - Claim a grant through the Self-Employment Income Support Scheme

Coronavirus Job Retention Scheme

This scheme is due to end on 31 October. For this last month, HMRC will cover 60% of the salary of employees who would otherwise have been laid off during this crisis and you must top up the additional 20% as it is mandatory that employees receive 80% of their salary. This is subject to a cap of £1,875.

To recap the rules:

  • It is available to all employees on the payroll at 29 February 2020
  • All UK businesses are eligible
  • Once furloughed, an employee is not allowed to do any work for the business. Directors can be furloughed but other than statutory duties, they are not allowed to do any work for the company. This would include dealing with bookings/postponements and cancellations unfortunately. However, flexible furlough was introduced in July allowing employees to work part-time and to claim for the hours they didn't work
  • The furlough calculation is based on the higher of:
    • same earnings for the corresponding month last year
    • average monthly earnings from the 19/20 tax year

Job Retention Bonus

Employers will receive a one-off bonus of £1,000 for every furloughed employee (including directors) who are continuously employed to the end of January 2021. Employees must earn at least £520 (the National Insurance lower earnings limit) between 1 November 2020 and 31 January 2021 to be eligible.

Job Support Scheme

The government have announced the successor to the Coronavirus Job Retention Scheme. The scheme will open on 1 November 2020 and will run for 6 months.

The main points are as follows:

  • Employees must be on the payroll on or before 23 September to be eligible. This means that an RTI submission to HMRC on or before this date must have been made
  • Employees don't have to have previously been furloughed
  • The employee must work at least 33% of their usual hours. With the lack of guidance for directors, we will use (as we have been for flexible furlough) a standard 40 hour week
  • For every hour that an employee doesn't work during the month, the government and the employer will each pay a third of the 'usual wage'
  • The 'usual wage' will be calculated in the same way as it has been for the Job Retention Scheme

Here's a working example:

  • Employee's usual wage (as per the previous furlough calculation) is 600.00 per month
  • Employee must work at least 33% of their usual hours (usual hours being 40 for directors)
  • In this scenario, the employee earns £198.00
  • Hours not worked are 67%
  • 67% of £600.00 is £402.00
  • Employer must pay two thirds of this to the employee ie £268.00
  • Employer will then receive a grant of £134.00 to the employer (a third of £402.00)

More details will emerge over the coming days/weeks and I will update as soon as I have them.

Self assessment tax payments deferred

As previously announced, payments on account due to HMRC by 31 July 2020 have been deferred until 31 January 2021.

The government have announced a further additional 12 month extension meaning payments deferred from July 2020, and those due in January 2021, will now be able to be paid over a twelve month period up to January 2022. No announcement has been made about whether interest will be charged but as this will be under the existing 'Time to Pay' arrangement, it is likely that it will be.

VAT payments deferred

The government initially announced a 3 month VAT payment holiday from 20 March to 30 June.

The government have now announced that instead of paying the full amount by the end of March 2021, you can make smaller payments up to the end of March 2022, interest free.

Mortgage holidays

UK banks are offering various relief measures to customers affected by coronavirus (this includes loss of income). The measures vary slightly from bank to bank but include repayment holidays on mortgages and loans of up to 3 months, increased credit card limits and the ability to withdraw funds from fixed savings accounts with no charges. I would recommend contacting your bank directly.

If you haven't already claimed a mortgage holiday, you have until 31 October to do so. If you have already claimed, you can apply to extend this holiday by up to a further 3 months.

Business rates holiday

For those of you who pay business rates, these have been scrapped for 12 months from 1 April 2020. You'll need to get in touch with your local authority if you haven't already done so.

Grant of up to £25,000

If you pay business rates and operate from premises with a rateable value between £15,000 and £51,000, then you are eligible for a non-repayable, taxable grant of up to £25,000. You should have been contacted by your local authority.

£10,000 cash grant

If you would usually pay business rates, but you're claiming either 'Small business rate relief' or 'Rural rate relief', then you are eligible for a non-repayable, taxable £10,000 cash grant. You should have been contacted by your local authority.

Statutory Sick Pay (SSP)

If you employ staff who are off sick due to coronavirus (either illness or staying at home on government advice), the government will refund up to 14 days of SSP. This will be available from day one as opposed to day four.

Employment and Support Allowance (ESA)

For the self-employed, if you're unable to work due to coronavirus (either illness or staying at home on government advice), and you don't have savings or investments worth over £16,000, you can claim up to £73.10 per week from day one. If you're in receipt of Working Tax Credits, you will still be eligible. To claim, simply go to this page and download the form. You won't need to attend an interview but it may be worth calling the number on the gov.uk page to clarify the sitation.

Universal Credit

This benefit is available if you're on a low income (employed or self-employed) and neither you nor your partner have savings or investments worth over £16,000.

The chancellor has announced an increase of £1,000 per annum (also applicable to Working Tax Credits) and suspension of the minimum income floor for the self-employed. This is the amount used to calculate your universal credit payment each month. The standard rule is that if you earn more than the minimum income floor, you'll get less universal credit, and if you earn less than the minimum income floor, you won't get any extra money to make up the difference.

By relaxing the rules, your claim will be based on what you actually earn each month so you'll be better off.

It is often quite complex to work out the exact amount you can claim but Citizens Advice have a national phone line providing help and advice with your claim. You can also check out the benefits calculator link below.

Other benefits

There are a number of benefits available for both the employed and the self-employed. As your personal circumstances are unique, it would be impossible to list them all. Here's a really useful link - https://www.gov.uk/benefits-calculators - which should help you find out what benefits you could get and how to claim them. If you need any information from us, please get in touch.

I will do my best to update this page as soon as anything changes but I hope you find it helpful.

Stay safe everyone.


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