The government’s voluntary furloughing scheme for employers opened for business on Monday 20 April. Within a day the government reported 140,000 employers had logged on to reclaim money for furloughed staff.
Any employer can apply to furlough employees, and that includes freelancers who run a company and take a salary from it using a PAYE scheme.
Please note: this blog post refers to the scheme as it was launching in May. Furloughing is no long an option unless an employee was furloughed by 10 June. You can read about the Job Retention Bonus here >
If you’re worried about your finances and wondering what support may be available to you, this page suggests a number of steps to take.
Assess > estimate > investigate
Before investigating any form of support it’s important to first assess your current situation, then estimate for the next few months any income/cash from any source (including savings) and compare that to all anticipated costs.
This will help you quantify the level of support you might need before you go looking for it.
And check out our advice and guidance on our Free Stuff page.
1 – How do you take your income?
Directors of small limited companies typically take income from their company in two ways:
If you’re worried about your finances and wondering what support may be available to you, this page suggests a number of steps to take.
Assess > estimate > investigate
Before investigating any form of support it’s important to first assess your current situation, then estimate for the next few months any income/cash from any source (including savings) and compare that to all anticipated costs.
This will help you quantify the level of support you might need before you go looking for it.
And check out our advice and guidance on our Free Stuff page.
1 – How long have you been a sole trader?
If you are registered as a sole trader, the government calls you ‘self-employed’.
If you’re worried about your finances and wondering what support may be available to you, this page suggests a number of steps to take.
Assess > estimate > investigate
Before investigating any form of support it’s important to first assess your current situation, then estimate for the next few months any income/cash from any source (including savings) and compare that to all anticipated costs.
This will help you quantify the level of support you might need before you go looking for it.
And check out our advice and guidance on our Free Stuff page.
1 – Employment status
If you are paid through a payroll system with tax and/or national insurance taken off by the employer, you are treated by the government as an employee.
The loan schemes are aimed at people who run businesses, where there is a problem with cashflow because of the pandemic.
This technically includes freelancers who are sole traders, in partnerships or run their own limited companies. All are types of business in the UK.
There are two main loan schemes:
The Coronavirus Business Interruption Loan Scheme (CBILS)
Bounce Bank Loans for small businesses
Bounce Back Loans are more likely to be taken up by small businesses such as sole traders and limited company freelancers as the amounts are small and the government will stand behind 100% of the loan.
The schemes are meant to operate like this:
the government stands behind loans for 80% of the amount (or 100% for Bouce Back Loans), allowing participating banks or financial institutions to pass on favourable interest rates
financial institutions offer ‘products’ to customers and negotiate terms for the loan
In practice, there are a number of reasons why loan schemes might not be attractive to freelancers:
If you’re running a VAT registered business of any type, you’ll be aware that the government is allowing you to defer paying any VAT payment that was due between 20 March and 30 June 2020.
Here is a link to the scheme description on gov.uk:
Sole trader Sarah Carless has been freelancing for 25 years. She’s a floor manager, so nothing daunts her!
Listen to her experience of applying for Universal Credit when her work dried up because of coronavirus. (See also the important note below the video.)
There is an amendment to the Coronavirus Bill, proposed by the Lib Dems, which would create “statutory self-employment pay” at an average of the last three years’ net profit, OR £2917 per month, whichever is lower. The government didn’t adopt the amendment, but it shows the kind of thinking that’s going on. You can read the proposal on page 14 of the amendments document:
The COVID-19 pandemic has applied an unexpected stress test to parts of the way we earn and pay our taxes. And the system is showing its flaws.
It’s not surprising that the UK government first came up with a plan for supporting businesses to support their employees. Businesses hold all the information needed to push finance down the pipe into employees’ bank accounts. They also (in theory) have a moral duty to support their staff.
But the system for people who don’t fall into this earning category is more messy. Different words are used by people to describe themselves: freelancer, self-employed, sole trader, contractor, interim.
