Dipping into tax funds ‘only option’ for many self-employed
Sunak announced that self-employed people facing financial difficulties will be able to have 80% of their monthly earnings covered by the Government, calculated by average profits over the past three financial years.
The scheme is scheduled to begin at the start of June at the earliest, with the Chancellor pointing to Universal Credit as a way to pay bills and living costs until then.
ABC Finance expert Gary Hemming said there was still a lot of uncertainty for many about how to access support in the meantime.
He said: “I would never normally be one to suggest dipping into funds saved for tax but, as it stands, that might be the only option for many.”
Self-assessment payments for income tax payable on 31 July 2020 have been deferred until January 2021.
Hemming added: “The other options are to look at borrowing money, most likely through the Coronavirus Business Interruption Loan Scheme because the Government pays the first 12 months’ interest. The only issue with this is that as so many businesses are applying, lenders are struggling to cope with the demand.”
He said: “It’s a difficult situation for a lot of self-employed people at the moment, and the reality is that a lot of people feel like they’ve been left to fend for themselves.”
Too slow
Hemming continued: “It’s important to remember that the Coronavirus Job Retention Scheme portal for business owners to access reimbursements of furloughed staff members’ wages hasn’t yet been set up either, with no date set for that. So a lot of self-employed people may be in line for support, but that support won’t come quick enough.”
There is a five-week wait for the first payment of Universal Credit. However, Chancellor Sunak told journalists those who could not wait until the summer for financial support would be able to apply for an advance payment, which could be paid within days.
The Government has upped the Universal Credit standard allowance but the amount you will get depends on your circumstances.
Thomas Lawson, the chief executive of the national poverty charity Turn2us said while the scheme was a positive step, more needed to be done to help people with immediate costs.
Tax recoup
He said: “For the millions of self-employed people who have had no income since February due to the coronavirus pandemic, waiting till June for Government payments is too long and waiting five weeks for Universal Credit is too long.”
Self-employed people using dividends as well as salary to pay themselves and, operating through the PAYE system, can register for the furlough system through the Coronavirus Job Retention Scheme, which is expected to begin quicker.
Hemming added: “I think that the tax that isn’t paid this year will have to be paid back at some point. The Government is spending huge amounts at the moment and they will need to recoup as much of that money as possible as quickly as possible.
“The underlying economy is strong and these measures are designed to prop up the country in the short term during this crisis before we can return back to where we were – not to support us forever.”
