New Financial Update from Government- Translation

Hi there,

I hope that you and those you love have been keeping well, and have had a chance to enjoy some much needed UK sunshine.

It goes without saying that the past few months have been an incredibly difficult time for so many of you, with uncertainty surrounding all facets of life as we know it. Based on the conversations that we have had with many of those that we look after (and we hope helped in some way) over the course of the lockdown, there does seem now to be an air of ‘normality’ resuming in day to day life. Unfortunately the same cannot be said when thinking about the industry, and the impact that this will have in the long term for us all.

Along with numerous other vulnerabilities within the industry that COVID-19 has allowed us all to see, it’s clear that the biggest concern that the majority of people have had is, understandably so, their finances.

With the recent (and not so subtle) implications by the Chancellor that there looks to be tax equalisation around the corner, it is important now more than ever to know what you are entitled to as a freelancer in this period so that you can make the decision, if you want to, to claim accordingly. As well as that, we strongly recommend that both now and in the future, you take full advantage of our expertise in cash-flow management and allow us to help with you with managing your finances, to place you a in more comfortable position should anything like this happen in the future.

Now, onto the most recent update from the Chancellor. In positive news, the Government have announced the extension to both the Job Retention Scheme (i.e. furlough scheme) and the Self Employed Income Support Scheme (SEISS). For ease, we have listed below the headline points for you:

Furlough Scheme

·         Scheme open to those that work at a company (either their own Limited Company or an external employer) where the employer operates a PAYE scheme

·         Opened with effective date 1st March 2020, the Government have subsidised furloughed workers PAYE salary up to £2,500 per month – though company directors in most cases will be aware that in reality this monthly figure is significantly less than this

·         The Chancellor has confirmed that this scheme will continue until 31st October 2020, with a gradual tapered reduction in financial support from Government, and the financial burden being gradually increased onto employers

·         The furlough contributions are now as follows:

-       Up to 31st July                     No changes- Government to pay 80% of employees monthly salary

-       From 1st – 31st August          Employers now required to pay for the employer NI and pension contributions.

-       From 1st – 30th September   Employers then required to pay further 10% of salary costs, with Government support reducing to 70%

-       From 1st – 31st October        Employers then required to pay 20% of total salary costs, with Government support reducing to 60%

-       November onwards             As per current guidance from Government- scheme then closed and no further financial support

·         The furlough scheme will be CLOSED to new entrants from 30th June – and so this means that the last date for employers (i.e. if you are a company director, your own Limited Company) to furlough workers (for Limited Company directors- this means yourself) will be the 10th June. Therefore please speak to your team member before this date so we can ensure that we apply for furlough status by the end of the month if you have not been working

·         From 1st July, employers can allow their furloughed workers to work part time. The employer would pay the ‘normal wage’ of employee when working, and the furlough grant would then applicable for the time that worker was truly furloughed. More details to be announced on this on 12th June

·         In reality, most company directors will not see any financial impact from the above changes until the September furlough payment from the Government

SEISS- Self Employed

·         Initially opened to sole traders and partnerships for the period 1st March to 31st May 2020 with a maximum monthly grant of £2,500, of which lump sum was paid to applicants last month

·         The Government have confirmed that this grant will extend for another three months, for the period 1st June 2020 to 31st August 2020

·         The criteria has remained the same- meaning that if you were not entitled to the grant originally, this unfortunately will still be the case

·         The maximum pay out has been reduced from £2,500 per month to £2,190 per month- this reflects the Government’s reduction in financial support from 80% of trading profits to 70%

·         Applications for the second grant is not open until August, and so no action is required at the moment

·         If you were eligible to claim this grant originally due to trading profits being below £50,000, but DID NOT claim as was not at the time impacted by COVID 19:

-       You are still able to claim for the second grant period, if it is the case that during the extended period you began to be adversely impacted

·         If you were eligible to claim this grant originally, have not yet applied but WAS IMPACTED by COVID 19 between March and May:

-       The deadline to submit your claim is 13th July and so it is vital you apply for the initial grant ASAP

·         Regardless of what happens after August, the Chancellor has confirmed that this will be the final grant payable to the self employed

For those of you who are/were NOT eligible for the benefits outlined above, please read below

While we are happy to see that the existing financial measures provided by the Government have helped some of you, it unfortunately is the case that there are many more that have not. We have heard countless traumatic stories from people of all circumstances that have been neglected within these measures, and if this is you, we can completely understand that this is a particularly bitter pill to swallow.

We have, in prior emails, provided our recommendations as to other measures that can be taken to help your immediate cash-flow- the link to these emails is here: https://www.blue-skies.tv/blue-skies-blog. In terms of immediate cash boosts however, take note of the below:

Universal Credit

·         Both Limited Company directors and sole traders/partnerships are eligible to claim for this and claims can be backdated

·         Major obstacle for many is that you cannot have more than £16,000 in personal savings/assets

·         We believe that due to a recent change for self employed, the £16,000 savings cap previously mentioned does not apply to your savings held for tax. With that being said, if you do not have a dedicated business account to hold your tax money (which is likely), the DWP may still have issue with the savings BUT it is still worth trying

·         Alternatively, if you are on the borderline of the £16k, a potential option could be to pay an advance payment to HMRC for your future tax (which is the polar opposite of what you may have been planning to do – which is make use of existing Government measure to defer July tax until January 2021), as this would reduce the savings in your bank account

Child Benefits

·         If your profits typically were over £60,000 per year, you may well have opted out of child benefit previously received as there was no financial benefit in receiving them any more (as had to repay 100% of benefits received on the following January tax bill)

·         This is worth £21.05 per week for the first child, and a following £13.95 per week for each child thereafter

·         It is highly likely that your profits will be lower in the 2020-21 tax year, and so this may give you the opportunity to opt-in again for child benefit, without having to repay some or all of the benefit received

In summary FOR ALL

I know that we sound like a broken record when saying this but again- please, please do get in touch with us should you have any questions or concerns at all about anything, including the updates above. During difficult times especially, it is hard to see the wood from the trees and this is where we can provide you with clear, specific advice about your individual circumstances. As a reminder, along with all of the services that you’d expect us to offer, we are also here to:

·         Help with dispute resolution and mediation (e.g. landlords or company that you are working with etc)

·         Review your contracts to ensure that you are protected, and either negotiate on your behalf or help you in the background

·         Have a chat with! The world is a strange place at the moment and so if you fancy a chit chat to take your mind off of the madness- give us a call and lets have a virtual coffee break

·         Help you connect with others in the industry that may be a good fit. We cannot of course guarantee this, but the industry needs everybody within it to work together for the benefit of all (wishy washy we know- but this is the sentiment that we have always carried and will continue to do so)

·         Bounce ideas across with - both business and personal

·         Provide our thoughts/advice (in as much as we can legally) with HR/legal/employment issues

·         Give you our guidance with cash management and how to better utilise your finances

We will, as always, keep you posted as to any further updates from the Government, and our subsequent recommendations for both your household and business, and look forward to chatting with you soon.

Best Wishes

Team Blue Skies