updated 20/10/20 and 22/20/20 and 27/10/20 and 01/11/20 and 02/11/20
We win a little more help
THE DETAIL of the help available from the UK government to workers affected by the covid-19 pandemic seems to change every other day. The Treasury in particular has grown accustomed to announcing rewrites of the rules at 5pm on Fridays.
Here we present a running summary of what's available to freelances. If you spot something missing, please email email@example.com now. First, follow these links:
- If you're a traditional freelance
- If your work is paid PAYE
- If you have a limited company
- If you are asked to self-isolate
- Loans, mortgages and rent
- Universal Credit and other benefits
- Community support and more
- Outside the UK?
1. If you’re a traditional freelance
A "traditional freelance" is our attempt at shorthand for someone who strives to make a living by selling work, or licences to use work, by the word, by the image, by the hour, by the day or similarly. For these purposes it does not include people who are paid through the Pay As You Earn (PAYE) system - see below.
The good news is:
- Established freelances will be able to apply for a grant from the Self-Employment Income Support Scheme (SEISS);
- The amount will be 40 per cent of the average "profit" you declared to Her Majesty's Revenue and Customs (HMRC) over the past three years, if you have been freelance that long;
- Payments are independent of the amount of your actual loss. You do not have to stop working;
- HMRC should have contacted you to invite you to apply;
- HMRC may have informed you of the earliest date on which you could claim. The deadline for making the first claim was 13 July and the deadline for claiming the second slice (whether or not you claimed the first) was Monday 19 October; and
- On 24 September the Chancellor announced a further scheme, to pay only 20 per cent of your "profits", and on 22 October announced that this would increase to 40 per cent of profits. This will be in two three-month slices, probably for six months from November. See here for details as we get them.
The bad news includes:
- The amount now on offer is paltry compated to the 70 per cent of profits you could claim in slices 1 and 2;
- If you have not filed a self-employed tax return for the tax years 2018 to 2019 you get no grant;
- If you only have a few months' self-employment on your 2018/19 return, this income will be counted as your profit for the whole year;
- Grants will be available only to people who got more than half their income from freelancing - so if 51 per cent of your income came from shifts paid Pay As You Earn (PAYE) and 49 per cent from pure freelancing, you will get no SEISS grant;
- The conditions for receiving a second SEISS payment were that you must;
- carry on a trade the business of which has been adversely affected by reason of circumstances arising as a result of coronavirus or coronavirus disease,
- have delivered a tax return for a relevant tax year on or before 23 April 2020,
- have carried on a trade in the tax years 2018-19 and 2019-20,
- have been adversely affected by covid-19 on or after 14 July 2020; and
- intend to continue to carry on a trade in the tax year 2020-21...
- Any grants you receive will be counted as taxable income.
You should be able to apply for the third SEISS slice whether or not you got the first or second SEISS slice.
In this context it seems that "profit" refers to the number in the box on your income tax return that calculates your turnover minus allowable expenses.
There is an eligibility checker on the gov.uk website: you need your 10-digit tax reference number and your National Insurance number.
SEISS 3: the return of the living grant
Update: In fact the Chancellor announced in a Tweet that the existing SEISS scheme will be increased to pay 80 per cent of declared profits, to cover November. There had been a plan to open applications for SEISS 3 in mid-December; this should be brought forward to mid-November.
On 22 October the Chancellor announced that the payment for SEISS 3 would be increased from 20 per cent to 40 per cent of profits declared in the qualifying period.
Many people are still racing to find out the details of the third (and, it seems, fourth) rounds of freelance support. According to Money-Saving Expert:
- SEISS 3 will start in November and last six months. It'll be paid in the form of two taxable grants - the first will cover from the start of November to the end of January; and the second from February until the end of April;
- The first grant will cover 40 per cent of trading profits for three months, capped at £3750. It'll be paid in a single instalment;
- You will need to declare that you are "impacted by reduced demand due to coronavirus in the qualifying period (the qualifying period for the grant extension is between 1 November and the date of claim)"; and
- Separately, self-assessment taxpayers will also be given more time to pay taxes due in January 2021.
The payments will be calculated on the basis of the same "profit" figures as were used for the first round.
Things still to be clarified include:
- The application date and deadline.
- The level of the second grant in the new scheme (the fourth slice).
When on 12 May the Chancellor announced an extension of the furlough scheme (below) the NUJ's General Secretary Michelle Stanistreet wrote to the Chancellor of the Exchequer calling for "urgent action over the many gaps in provision" for freelances, as part of a #ForgottenFreelances campaign. The NUJ later investigated a legal challenge to the exclusion of many freelances from SEISS, such as those paid PAYE and those with "service companies" as below. This has turned out not to be possible. Pamela Morton, NUJ Freelance Organiser, said: "the NUJ legal team evaluated the government's response to the different elements of the case we initiated, and advised that the case's prospects had weakened. We initiated the case because we believe that it is grossly unfair and wrong that individuals have been left out of support and we will continue to campaign on this and for rights and protections for freelances but we could not progress with the legal claim."
It seems to the Freelance that the criteria for SEISS are a database query rewritten in (a kind of) English. That is, the government is not giving people what we need. It's giving us what it can decide on without human intervention.
The NUJ has produced a template letter to HMRC to appeal against a decision that you are ineligible for the SEISS scheme due to your PAYE income. It challenges the regulations the government has put in place:
I ask HMRC to review the decision in my case that the PAYE income and tax that has been paid is not "employee" income because at no time have I been an employee or anything other than genuinely self-employed...
While we welcome the increase to 40 per cent from the previous 20 per cent in this deal, the self-employed support must be equal to the support the UK government is giving employees... We have raised our concerns with the TUC to take this up with the Chancellor, as well as our continuing dismay and anger that the government has failed to provide any support at all for the many PAYE self-employed individuals, those with less than 50 per cent self-assessed income, the newly self-employed, those who work via limited companies and those with self-employed profits of more than "50,000. There is still time for the government to put this right. We are also launching our new campaign for better rights and protections for freelances and calling on government and companies to stop giving so many freelances such a shabby deal.
2. If you do regular shifts, paid PAYE
Freelances who are paid through the Pay As You Earn (PAYE) system are excluded from SEISS (above). The government started by guaranteeing that employers would get 80 per cent of salaries for employees who are "furloughed", up to a maximum of £2500 a month. From 1 September it paid employers only 70 per cent and from 1 October only 60 per cent, though they still have to pay employees 80 per cent of their salaries. The furlough scheme ends on 31 October. Even the tapering-off of government payments has led to employers making workers redundant.
BBC Studios showed best practice by promising to include those on fixed-term contracts and freelances paid PAYE in this scheme. Other companies have not. The BBC itself says it cannot access the furlough scheme but set up a Covid-19 hardship fund.
On 24 July 2020 the BBC announced that it was extending its offer of support - matching the furlough scheme - to include 649 PAYE freelances who have worked for the corporation every month for the last year but had no bookings or reduced bookings during the lockdown. The PAYE freelances affected will receive their average earnings for March, April and May and the payments will be capped at £2500. For details see NUJ backs new BBC offer to support PAYE freelances.
26 October 2020
The BBC Covid-19 hardship fund has closed. We are looking for reports of any extension of the above scheme for PAYE freelances and have found none: check the BBC Coronavirus update for Freelancers (last updated 07/08/20 when we checked).
The NUJ's Freelance Office can offer advice on contractual matters and cancelled work: contact details are here. They have had some success in persuading companies to apply for the funding to furlough casual workers.
Some companies may still not know that they can apply to furlough workers - not just employees - who were on their payroll on 19 March. There is also provision for company office holders and for those who work through agencies. See here for the full government advice.
The Job Support Scheme
On 22 October the Chancellor announced an expansion of the Job Support Scheme. This reduces the number of hours workers have to do for their employer to get support, and increases the government's contribution. We have so far only a press statement.
In outline, while we wait for the actual regulations:
- The JSS applies to workers who are doing at least a fifth of their normal hours;
- For each hour you cannot work, you will generally get two-thirds of your normal pay - your employer will pay 5 per cent of your normal earnings, and the state nearly 62 per cent;
- We presume the state's contribution is capped, but the level has not been explicitly announced; and
- The state's contribution is capped at £1541.75 per month; and
- All small and medium-sized businesses are eligible, but larger businesses will be required to prove they've been adversely affected by coronavirus. The government notes, perhaps sarcastically: "Our expectation is that large employers using the Job Support Scheme will not be making capital distributions, such as dividend payments or share buybacks, whilst accessing the grant."
9 October 2020: The extension of the Job Support Scheme announced today applies only to employees of (or workers in) "firms whose premises are legally required to shut". We really don't want to go into the future circumstances in which this applies to journalists. Not this evening. Have a weekend!
3. If you have a limited company
Many freelances have been forced to register themselves as limited companies, some due to clients' superstition over "IR35" rules. A few chose to do so when the tax on income taken as a dividend from the company was lower than that on income taken as salary.
Self-employed limited company directors can be furloughed as employees of the company - only on their salary paid PAYE. They can't then work for the company, but can continue to perform their statutory obligations as directors - which would include effort to claim the support for the employee's pay. Earnings that they took as dividends do not count. A Treasury Directive issued on 15 April specifies that you (director) must agree in writing with you (employee) that you are on furlough.
In his online question and answer session on 22 May the Chancellor seemed to say that government databases simply couldn't cope with replacing dividend income for freelances.
4. If you are asked to self-isolate
People in England who are on low incomes and who are told to self-isolate because of covid-19 from Monday 28 September will be able to claim £500. You will claim from your local authority, and the government says it expects the claim process to be up and running by 12 October. Please follow this link to check for updates:
5. Loans, mortgages and rent
Government small business bounce back loans can be used to support your income, failing all else.
The loans are for amounts between £2000 and £50,000. They're interest- and payment-free in the first year, and at a very low 2.5 per cent annual interest after that. On 24 September the Chancellor announced that the repayment period is extended from six years to ten years. Also, you will be able to take payment holidays, or periods when you pay only the interest, of up to six months.
Fourteen banks have announced plans to offer these loans - see the moneysavingexpert page for an updated list.
The deadline to apply for these loans has been extended to 30 November 2020.
The Freelance would under normal circumstances advise getting professional financial advice before taking out a loan. If you have an existing loan that charges more than 2.5 per cent interest, however, that advice is likely to be "get one of these to pay that off."
All freelances who have mortgages can apply to defer payments. Doing so would of course mean increased payments later, or payments for considerably longer. You can also request payment holidays on credit cards and many types of loan, and on rent-to-own schemes (hire purchase).
The deadline to apply for a mortgage or loan payment holiday was 31 October 2020.
Those who rent can ask their landlord to discuss deferral. As far as the Freelance can tell, landlords have been able to initiate possession (that is, eviction) proceedings since 21 September, after an extraordinary last-minute extension. Also, tenants in England, Scotland and Wales must now receive at least six months' warning before they have to leave the property (12 weeks in Northern Ireland).
Housing charity Shelter said in June that the government must change the law to prevent a "tidal wave of homelessness", not just defer it to the Spring.
6. Universal Credit and other benefits
It may be worth trying to claim Statutory Sick Pay at £94.25 a week, backdatable to 13 March. For what it's worth, it is now payable from the first day that you need to self-isolate.
Everyone left out by the measures reported above - and who does not already claim another benefit - can apply for Universal Credit. The rules for this have been "relaxed" - but there are massive backlogs in a system that the Freelance believes was designed in the first place to deter and delay claims.
You can apply for both SEISS and Universal Credit. If you get SEISS it will be counted as income and your UC payments will be reduced; but it will often be worth joining the queue for both.
Warning: The BBC reports people who were receiving Working Tax Credit having it cancelled when they started an application for Universal Credit. They did not even complete that application, because they were concerned that their savings would make them ineligible. So if you receive Working Tax Credit or any other "legacy" benefit - take great care.
The government later updated this advice page to reflect this: "even if [your Universal Credit] claim is not approved it will affect your tax credits if you claim them, and may affect other benefits".
The Lord giveth and the Lord taketh away
Warning: OpenDemocracy points out today how complicated are the effects of SEISS payments on entitlement to Universal Credit. Under the "surplus earnings rules" a SEISS lump sum can entirely disqualify you for benefits in the month in which it is received.
Especially if you expect your income to be seriously reduced for some months, we strongly recommend that before you apply for the second SEISS slice you use the moneysavingexpert.com benefits calculator to check what the effect will be.
The "monthly standard allowance" for Universal Credit (UC) is £409.89 for a single person over 25 - and more if you have children, have a disability or "need help paying your rent". In response to coronavirus, the government is waiving the "minimum income floor" - the level of monthly earnings that UC simply assumes - from 6 April. The "floor" affected what self-employed people were entitled to.
25 September 2020
The UC rate quoted above follows an increase from £317.82 pre-coronavirus. But is it going down again in March? Up to 6m poor families could be £1000 worse off under Sunak's plan - Guardian
Only those who have illnesses or disabilities that affect their ability to work can get the old Employment and Support Allowance (ESA). This is £73.10 a week for the over-25s.
The NUJ and sister unions pressed for the rules on savings affecting eligibility for Universal Credit to be relaxed for the duration. Instead, we got an accounting clarification. To quote moneysavingexpert.com again: "We've checked with Department for Work & Pensions, who confirmed that while they'd expect business savings to be in a business account, nevertheless 'if someone has money in their personal account to be used for business purposes, it won't be counted towards their capital'."
If your household has more than £6000 of savings that are NOT provably earmarked for such purposes, your UC entitlement starts to reduce. While you have £16,000, you get nothing. It would seem that, if you need to claim Universal Credit, you should simply declare the savings which are "truly personal".
7. Community support and more
Mutual aid networks are being set up at street or neighbourhood level to help with shopping, picking up prescriptions and dog walking. Operating by email, Facebook and WhatsApp, they will have the word "mutual aid" in their title. Look out for flyers coming through your door or posted in shop windows locally.
8. Outside the UK?
Claims and advice
Discussion and lobbying
- 25 September 2020: we did a little light editing and noted the "qualifying period" for the SEISS extension, but didn't otherwise change the meaning.
- 10 October 2020: we changed the tenses to allow for the fact that the deadline for claiming the second SEISS slice has passed, but didn't otherwise change the meaning.