Ltd Company Freelancers: pathways to support

Limited company freelancer

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:

  • monthly salary
  • dividends

The government has not worked out a way of calculating the level of dividends that come from a specific source, and therefore ignores dividend income altogether in the coronavirus support schemes.

If you take all your income using this route, there’s not much I can say, except skip to section 2 below.

There is intense lobbying to get the Treasury and HMRC to look at this anomaly, given that many limited company freelancers cannot get work except by using this business type.

Money from salary

If you take income in the form of a salary from your company, you can use the Job Retention Scheme, presuming you were on your company’s payroll on 28 February 2020.

One further obstacle is that it doesn’t work if you run your payroll reporting annually and have a reporting date after 19 March for 2019-20. This is how some accountants operate things on behalf of freelancers. It’s a horribly cruel twist for people who thought they were eligible for furloughing, but didn’t realise the annual reporting cut-off date applied to them.

The scheme opened for applications on 20 April 2020, and grants are paid within about ten days.

HMRC will use your monthly PAYE information to check your claim against records.

Read my blog on the Job Retention Scheme here >

Downsides?

When you use the Job Retention Scheme you have to furlough yourself from your own company.

This means you can’t do a thing to generate business, or contact clients on behalf of your own company. You have to stop working for the duration of the furlough.

Also, if you only took a low salary from your company, the government will only reimburse your company with 80% of the salary, based on the recent monthly wage.

So you might not get much.

UPDATE 29 MAY 2020: Flexible furloughing will be introduced from July 2020. E.g. Part week furloughed and part week working.

On the other hand?

Being furloughed by one business doesn’t stop you working for another.

Technically you could even set yourself up as a sole trader (self-employed) and get income that way.

But you’d have to register as such by the end of this tax year and meanwhile keep all the usual records of income and expenses for your sole trader business, as well as everything for your limited company.

This is probably not going to be attractive to many people, especially those that hate paperwork.

2 – Keep now, pay later

Limited companies have available to them other business support measures.

These might be loans or deferment of some taxes. Unfortunately everything has to be paid back, so even if you use these you might be storing up problems for later.

Read my blog on the business loan schemes >

3 – Check your eligibility for benefits

Benefits may be available to you even if you’re getting some limited support from other schemes.

It’s worth using a benefits checking site to see what you might be eligible for. It’s like a dry run for applying to the DWP. You can also get advice from Citizens Advice.

turn2us.org.uk >

Citizens Advice >

Universal Credit

Universal Credit may work for you if you do not have support from elsewhere.

To be eligible your household needs to have less than £16K in accessible cash (savings, etc).

  • If you live on your own you are the household. 
  • If you live as a couple, sharing bills, you are both the household.
  • If you live in a flat share, but not as a couple, you’re treated as if you live on your own.
How much will you get?

This is very hard to generalise about. If you are 25 or over, a basic amount may be £450-ish per month. For a couple it would be £550-ish per month. But UC can be substantially higher if you have children, and are paying rent or mortgage interest.

It’s paid monthly in arrears (fortnightly in Scotland), but you can get an advance within days if eligible for UC and in difficult financial circumstances.

View a video of a freelance floor manager describing what it was like to apply for Universal Credit >

4 – Check support from industry bodies

If you don’t get enough from the schemes listed above, or from benefits, there are a number of charities who might be able to help you.

If you work in film or TV, the Film and TV Charity has set up some emergency funds. Many creative freelancers are falling between the gaps in the support schemes.

Check out our support for freelancers page >

Go back to ‘Types of Freelancer’ page >

5 – Borrow money (handle with care)

Small businesses can access a bounce back loan. This a special government loan scheme with no interest for a year – then low interest rates for a further five years.

It’s the business that would get the loan, so if a limited company freelancer accessed the scheme, the money would go to the limited company as working capital. You’d probably need advice from your accountant to work out how to use the money within the rules of the scheme.

[If you’re a sole trader, the money goes to you as the business. You personally would be liable to pay back the loan.]

Martin Lewis of Money Saving Expert has a very good explanation of how the scheme might work for sole traders and limited company directors.

www.moneysavingexpert.com…bounce back loans >

Image credit: Peggy_Marco pixabay.com

Please note:

Although every effort has been made to provide accurate tips and information, David Thomas Media Ltd accepts no responsibility for any errors, omissions or out-of-date facts. Trainees are advised to seek up-to-date professional advice on all financial and tax matters before making decisions relating to these subjects. Nothing in our notes, courses, webinars, downloads or social media should be considered as financial advice.
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Posted on 14 April 2020

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