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Financial Support for Sole Traders

In our next instalment from Mount Business Services, we look what the Government financial support package looks like for Sole Traders. There was a bit of a wait for this to be announced as it’s quite a complex area, but Andy Eaton takes an in-depth look at what’s on offer and provides clear answers to help your business.

What does the support package look like?

The Government is releasing the details behind the support packages on an almost daily basis and the good news is this is likely to continue.  There is something for most of us and we need to ensure we are aware of the aid and whether it’s worth securing

The cost to the economy, £350bn, is enormous. To be frank, it will need to be paid back one day. However, right here and now it’s your turn to take control and carefully consider the help being offered.

Always start with personal finances

The first and best place to start is by looking at your own expenditure and asking yourself; “Do I need it?” and if you do, “Do I need it now?” From this point, create and keep a simple 13 week cash flow forecast for your household and business

Self-Employment income support scheme

This scheme is equivalent to the PAYE furlough scheme but for sole traders/partners (owners) only.  To qualify you must have:

  • self-employed profits of less than £50,000 which must constitute over half your taxable income i.e. before property income, investment income and pension income
  • submitted an income tax self-assessment in 2018-19
  • traded in 2019-20
  • be impacted by Covid-19 and intend to trade on 2020-21

If you qualify, you’re eligible for a taxable grant of up to 80% of your average profits from the last three years, dating back to 2016-17, with the amount capped at a maximum of £2,500 per month for three months. Payable in one payment directly to your bank account.

For example:

  • Average taxable profits of £40,000 per annum at 80% = £32,000
  • Equates to a monthly sum of £2,667 capped to £2,500
  • This amount will be added to your Sole trader income from the rest of the year and taxed as normal

HMRC will contact you directly if you are eligible and invite you by post only.  Note: They will not text, call or email.

If you have not filed your 2018-19 self-assessment you can do so up to the 23rd April 2020 without incurring late filing penalties.

Staff Furlough

Employees you can’t afford to pay due to Covid-19 can be “furloughed”. The objective is to keep people employed during lockdown and ensure the UK workforce can return to work in numbers and accelerate economic recovery.

HMRC will provide 80% of employee gross salary up to £2,500 for three months, commencing 1st March 2020.  To be eligible, your employee must be on leave of absence.  They can’t be employed elsewhere, unless they are a part time worker for you.  Neither can they work on your business for free. HMRC estimates the portal will be available from 20th April.  Speak to your payroll provider for further advice.

Mortgage deferment

This is available for up to three months to anyone not in arrears.  Apply to your mortgage provider online.

VAT deferment

VAT registered businesses with a quarterly balance due between 20th March and 30th June, can defer until 31 March 2021.  This is a 12 month interest free loan from HMRC.  If you pay VAT by Direct Debit, you MUST cancel it before payment is due to take advantage of the scheme

Income Tax instalments 31 July 2020

If you pay by instalments, HMRC has offered to waive the second instalment due 31 July 2020 to 31 January 2021.  You do not need to notify HMRC, they will assume you won’t pay.

Business Grants

This is ONLY available to Retail, Hospitality, or Leisure businesses using a property for business, e.g. shops, gyms or pubs registered as rateable by the local authority. Rateable values of £15,000 to £50,999 could receive a grant up to £25,000; less than £15,000 up to £10,000.  There’s no application and your Local Authority will be in contact if eligible.

Business Rates Relief

Again, this is ONLY available to Retail, Hospitality, Leisure, or Nursery businesses. You will not have to pay rates until 1 April 2021.  There’s no application and your Local Authority will be in contact if eligible.

Government guaranteed loan scheme

Coronavirus Business Interruption Loans (CBILS) of up to £5m will be 80% guaranteed by the Government with a 12 month interest and capital repayment free period. The loans will be provided through regular high street banks.  The application process is on-line but is taking a long time.

Interest rates after 12 months are variable and you may have to give personal guarantees for loans over £250,000.  The order of guarantee call-off, should you default, is: 1st personal guarantee; 2nd government; 3rd bank.  This loan may not be the best choice if you have other sources of finance.

Loan capital repayment holiday

Where you, or your business, already have fixed term debt it may be possible to arrange a repayment holiday. Halifax and Santander are two examples of banks offering this scheme.

As you can see, there is now a good deal available to sole trader businesses, but each option does come with its own pros and cons.

We are living in extraordinary times. It’s up to each of us to do what we can to get through and come out the other end focused and raring to go.

Mount Business Services are financial experts who support owner-managed businesses that do not have the time or resources for a “fully staffed back office”, as well as growing businesses that do not want the overheads and distractions of a normal administration function. For more information,  contact Andy at