How Are The Self-Employed Affected By Winter Economy Plan?
Chancellor Rishi Sunak today unveiled the government’s plan to protect jobs and support businesses over the coming months, with the updates for the self-employed also featuring.
Whilst there is still some confusion surrounding just how it will affect the self-employed in the long term, several points were raised relating to contractors and freelancers. Here’s an overview of some of the key takeaways:
- Income tax has been deferred, with the Chancellor announcing that those with a tax debt of up to £30,000 will be able to set up a payment plan over 12 months to January 2022. This will help with immediate financial problems, but the self-employed are expected to find the money eventually.
- The Self Employment Income Support Scheme Grant (SEISS) will be less generous than it had been previously. It will now cover 20% of average monthly profits (compared to 80% previously) up to a total of £1,875 between November and January. Further details will be announced for the three months that follow.
- ‘Pay as you grow’ scheme was announced for businesses, allowing them to extend their bounce back loans from six to 10 years, therefore reducing their payments. This is good news for both full time and self-employed staff.
Speaking of the announcement, Matthew Langhan, Accounting Team Leader at Gorilla Accounting, said: “As part of the announcements made by Rishi Sunak today, the Chancellor confirmed the extension of the SEISS, which is a welcome step in continuing to help support the self-employed through this difficult period, but may not go far enough for those worst hit by the pandemic.
“Further payment deferrals have been granted for the previous VAT liabilities that were deferred between the 20th March and the 30th June, giving small businesses the option to spread any amounts due over an additional 11 months and an option to pay any self-assessment tax liabilities over an additional 12 months, both interest-free, which could benefit up to half a million small businesses.”
Away from the self-employed, Rishi Sunak also announced there will be a replacement for the furlough scheme at the end of October. The Chancellor announced a new ‘jobs support scheme’ which will subside the wages of people in work. The new scheme will run for 6 months, starting in November; here’s how it will work:
- Businesses will have the option of keeping employees on shorter hours, rather than making them redundant
- Employees must work at least a third of their usual hours – this will be paid for by the employer as usual
- For the time they are not working, the government will cover a third of their usual pay, with their employer making up a further third
- This means that in total, employees will receive 77% of their usual pay each month
- This means that the government is dropping its contribution from 80% to 22% of employee’s wages at the end of October
All small and medium-sized businesses are eligible, with larger businesses required to show how their turnover has fallen during the crisis if they apply. Businesses that had not previously used the furlough scheme will also be eligible to use the scheme too.
Referring to the new Jobs Support Scheme, Matthew Langhan said: “The announcement of the new Jobs Support Scheme, which is designed to replace the existing Jobs Retentions Scheme, is unlikely to help those individuals working through their own PSC’s, who have found themselves out of work since the crisis began, due to the nature of the scheme requiring them to work at least a third of their usual hours, to be eligible to claim.
“Although we would have liked the Chancellor to go further in his support for the self-employed, we welcome the provisions that have been made.”
This was posted in Bdaily's Members' News section by Matt Hartley .