Chancellor's Financial Announcement- HEADLINE POINTS
As you may now be aware, yesterday afternoon the Chancellor outlined further financial measures, following the now implemented new nationwide restrictions that we all must endure for what is likely the next six months. Unfortunately, and as to be expected, the measures outlined have yet to have the small print released- and if you have been following our emails to you throughout the post-COVID world, you will know that the devil is ALWAYS in the detail and so unfortunately we cannot at this point offer our full thoughts and recommendations.
We did believe, however, that it would be worth sending you across an email so as to ensure that you are aware of the headline points of the measures announced, and what they could possibly mean for your household. With that being the case, please find these below:
Bounce Back Loan (BBL)- RELEVANT TO BOTH LIMITED COMPANIES, SOLE TRADER & PARTNERSHIPS
We have good news for those of you who have applied for (or soon to apply for) and received this Government backed loan; even more flexibility has been added to this already highly attractive loan (if a loan can ever be called this). For ease, see below the updated breakdown:
· You can apply for up to 25% of your turnover - from £2,000 to £50,000
· Loan cash is aimed to be paid within days if you apply to the same lender that you already have a bank account with. You can of course apply to any of the other lenders (see below), but it may result in longer wait time for cash to be paid into your account
· Focused towards smaller businesses with fewer than ten employees
· Loan repayments not needed to be made until after twelve months and during this 12 month period there is NO interest payable
· However after twelve months, interest will be payable at 2.5% and loan repayments will need to be made
Updates to BBL
· The maximum loan term for the BBL HAS BEEN INCREASED FROM SIX YEARS TO TEN YEARS
· The closure date for applying for the loan HAS NOW BEEN EXTENDED TO 30TH NOVEMBER 2020
· You are now able to take ONE payment holiday:
- Will allow a payment break for up to six months (i.e. no payments need to be made in this period) during the time that you have the loan
- In order to qualify for the payment holiday, you must have made six monthly payments before being able to utilise this
- By taking advantage of this holiday, much like if you took a mortgage payment holiday, it will increase the amount of interest that you pay over the term of the loan. That being said, this could prove invaluable should we go into a full lock down again, or your work dries up
· You are able to pay the interest only element of the loan:
- This can be utilised three times throughout the loan, each period lasting up to six months
- As with the payment holiday, you need to have made six monthly payments
- Again, as with the payment holiday, this of course will increase the length of your overall loan and cost you more money, but could be a real life-line should cash-flow become a major issue
There will be many of you who have felt let down by the financial support provided to you up to this point (either due to not being eligible for the SEISS if you are a sole trader, or by receiving pretty negligible furlough payments if company director). This loan has been a valid lifeline for many of those that we look after, and we have little to no horror stories- unlike the initial Business Interruption Loan that was offered originally.
We would hazard a guess that the vast majority of households in the nation are feeling financially vulnerable, and so if you are facing cash-flow issues or simply would want a financial safety net during these incredibly uncertain times, we would have no reservations or concerns with you applying for this loan based on the (even more so) favourable repayment terms now offered. As the BBL’s repayment terms are all standardised amongst the banks, we would recommend using your existing bank to apply as will likely be easier and quicker.
That being said, please see link to find a complete list of banks that do offer the BBL: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-schemes/bounce-back-loans/current-accredited-lenders-and-partners/
Job Retention Scheme (JRS)
As was expected, the Chancellor confirmed that the plan for the current furlough scheme would continue it’s course until the promised 31st October 2020 termination date. If you are a Limited Company, the following schedule will continue to apply:
· September 2020 Reduction to 70% of wages covered
· October 2020 Reduction to 60% of wages covered
· November 2020 JOB RETENTION SCHEME CLOSES
NEW!!! Job Support Scheme - RELEVANT TO LIMITED COMPANY DIRECTORS AND PAYE EMPLOYED
This will most definitely require a review of the small print when it is released, as all seems very ambiguous. In short:
· Will effectively replace the JRS, with a significantly reduced amount of financial support from the Government
· Will run from 1st November 2020 through to 30th April 2021
· Higher barrier to entry to claim the allowance
· Scheme is focused on employees (or company directors) that are working at least a third of their ‘normal’ working hours (and percentage of Government support actually reduces if you work more than this)
· The golden number that we are seeing so far is that a maximum of 22% of total salary (capped at £697 per month- see below) could be subsidised by Government but we strongly suspect that there will be much higher hurdles to jump in order to get the 22%,
· Limited Company Directors- do not get your hopes up with the £697 per month; it is highly likely that your salary is around the £8,000-£11,000pa mark and so the maximum pay-out here from the Government would stand at around £200pm
We will of course keep you updated as to how we believe this scheme can be applied effectively to those businesses that continue to be impacted by COVID between November 2020 through to April 2021.
Self Employed Income Support Scheme (SEISS)- RELEVANT TO SOLE TRADERS & PARTNERSHIPS
Some unexpected, (relatively) positive news for those who are eligible for the SEISS grant- there will be two further grants paid out should your business be ‘adversely impacted’ by COVID:
· Both grants will be at a significantly reduced level of 20% of your average profits- worth up to a maximum of £1,875 per grant
· The third (next) grant will cover November 2020 through to January 2021, with the fourth and final grant covering February 2021 to April 2021
· The 20% is much lower than the first grant of 80%, and the second grant of 70% (see below), but as this scheme was almost certainly due to end, this comes as an unexpected but welcomed surprise
IMPORTANT- IF YOU HAVE NOT YET CLAIMED FOR THE SECOND GRANT, OR HAVE NEVER CHECKED YOUR ELIGIBILITY FOR THE GRANT, PLEASE FOLLOW THE LINK TO OUR ORIGINAL POST WITH MORE INFORMATION :
VAT Deferral- (Effectively) Extended
For those of you who deferred their VAT bills between March and June 2020, you will already be aware that the outstanding balances needed to be settled with HMRC by 31st March 2021.
· Announcement has confirmed that this instead can now be spread over 11 monthly, interest free, repayments- meaning that the final balance will now instead be due by 28th February 2022
· Note that this does not state that a one off payment can be made by 28th February 2022, and so it is important that you have enough in the bank account to agree a monthly repayment plan with HMRC closer to the time
Income Tax FURTHER Deferral- IMPORTANT FOR ALL TAX-PAYERS
Along with the VAT deferral, this is perhaps one of the most useful measures to be announced as will no doubt take a huge weight off of many peoples minds:
· If you had opted to defer your July 2020 personal tax payment, this was provisionally due to be paid by 31st January 2021. This has now been extended by twelve months to 31st January 2022
· For those of you who have/will have a January 2021 tax payment- this can now be deferred also until 31st January 2022
· Though of course these tax bills will eventually need to be paid (and as it stands, on top of the future tax that you will owe at the same time also), this will be seen as an incredibly important lifeline coming into the winter months
· Bear in mind that if you take advantage of the July 2020/January 2021 tax deferrals, your January 2022 tax bill may be VERY LARGE and so please chat to us before making any concrete decisions so that we can give you our thoughts based on your circumstances
Autumn Budget - Cancelled
Thankfully, the Government have realised that a budget full of changes that will significantly impact our short and mid term future may not be quite what is required right now, given the current uncertain circumstances we all are facing. The news of the cancelled Autumn Budget is no doubt a big sigh of relief for all of us, especially considering the heavy speculation in the lead up surrounding increased tax rates hitting all of us in some fashion.
Summary
There is an awful lot to take on-board here, and so please do get in touch with us to discuss any of the above in more detail. As has been offered all the way throughout this ordeal, should any of your friends/family need some general advice then we are happy to help out (regardless of income/industry) – we can all play a part in counteracting the doom and gloom that we are subjected to on a daily basis via the news outlets. Alternatively, feel free to copy/paste this post without our name attached, or copy the link direct to our blog - https://www.blue-skies.tv/blue-skies-blog if you believe somebody may benefit from this post or any historic ones.
Many of the government measures that have been implemented throughout this pandemic have focused on the short term survival of the UK workforce, with an overall approach of households owning debt that can be managed in the long term, as opposed to financial bail outs. These new measures, though welcome in most cases, are no different. As mentioned at the start of our email, it is almost certain that taxes, in some form or another, will increase to bolster the nations pockets- this will be more important than ever to the Chancellor after seeing the forecasted reduction of taxes to be collected over the course of the coming years due to decreased taxable profits and the likely millions of payment plans agreed between HMRC and tax-payers.
For those households that believe they are likely to be carrying what could be a very significant amount of debt, through no fault of your own, this will be no doubt be both daunting and anxiety inducing. It is therefore so important that you take advantage of our expertise in this field; we are only a phone call away to discuss cash flow management, financial concerns, business strategy or simply if it’s all getting a bit too much and you need to let off some steam.
Get in touch to book a call in with us - this is exactly what we are here for!