We completely understand that it’s been a worrying few-weeks as the COVID-19 crisis continues to develop. Less and less people were willing to go out, with some venues choosing to close their doors, and then it became an official lockdown with all venues forced to close their doors.
With no one to play for and nowhere to play, it is likely that you have already lost income and are unsure of when you can next play and earn some cash.
So, what financial help is available to you as the lockdown continues?
Self-Employment Income Support Scheme:
Last week, the Chancellor announced that the Government will roll out the Self-Employment Income Support Scheme, and the details are as follows:
- You could be paid 80% of your lost profits for March, April and May
- This is capped at £2,500 per month (or £7,500 in total)
- The full amount will be paid in June 2020
- The coronavirus situation will be assessed in June and the scheme could be extended
- The grant will be applied automatically using HMRC’s records – you will be contacted to fill in a form to confirm
Am I eligible?
You will be eligible if:
- You have completed a personal tax return for the year ended 5April 2019. The deadline to submit this to HMRC was 31January 2020 but, if you are late, the Government are going to give you until 23 April to submit it and to get the grant.
- Your profits are less than £50,000 in the 2019 tax return. If they were more in that year, then the average will be calculated over the last three years. If your profits over those three years are below the £50,000 threshold, you will then be eligible.
- Your self-employment income was at least 50% of your total income in your 2019 tax return. It’s to stop people getting the grant who are musicians as a hobby – they may be playing on weekends or earning some income through an occasional gig, while having a job as their main source income.
If you have only just started in self-employment and didn’t need to do a 2019 tax return, then it’s harsh as you won’t be eligible. They’re putting this in place to avoid lots of people suddenly claiming they’re self-employed. The 5 April 2019 tax return is the last official document that states whether someone is self-employed, so it’s the best they can do right now.
If you are a director of a limited company, you’re not going to be eligible for this scheme, because you pay yourself in salary, which is fine, but dividends do not count as self-employment.
How much will I get?
The grant will cover 80% of your average monthly profits, calculated over the 2017, 2018 and 2019 tax returns. If you didn’t need to do returns in all three years, they’ll use the average profits from one or two returns.
The most you can receive is £2,500 per month. You’ll get this if your profits were £37,500 per annum or more.
Can I still work?
Yes – you can. You’ll receive the grant even if you’re still working as a musician. You might not be able to play “real” gigs right now but you can be earning through recording or virtual gigs.
You simply need to confirm that coronavirus has affected your income.
How do I claim it?
HMRC will contact everyone who is eligible. They’ll check your eligibility by looking at your personal tax returns. When they do contact you, you’ll have to fill in an online form.
If you haven’t heard by 30 April, we recommend you give them a ring. For the moment, they’re very keen that you don’t contact them as it will delay the process.
Also, you should only fill in any details via the GOV.UK website. HMRC are warning of scammers who are likely to use this as an opportunity to contact you via phone/text/email to try and get you to give your bank details.
When will I get the cash?
The payments will be made in June 2020. You’ll get paid for all three months in one payment. This does cause some cash flow issues as you’ll get nothing until then.
Income Tax payment deferral
There will be a six-month deferral on your personal tax Payment on Account due on 31 July. The payment date will now be 31 January 2021.
This will still have to be paid but, for now, it should help you with some cash that can be used elsewhere.
Residential and Buy-to-Let mortgages are eligible for a three-month holiday if you apply for it. The Government are telling mortgage lenders to allow this, but commercial premises will not be eligible for it. It’s also going to have to be paid at some point alongside the interest.
Coronavirus Business Interruption Loan Scheme
The self-employed, sole traders and partnerships are all eligible for this scheme. You need to have a business bank account and the details are as follows:
- The government will cover 12 months’ worth of interest payments
- The government will back the loan – meaning it will be easier to get credit
- The government are not guaranteeing they will pay it off if you can’t (speak to the lender about this).
- The big four high street banks are saying they will not need a personal guarantee for loans up to £250,000 – but other lenders are still saying they would require one.
If you do want the loan, the first port of call would be your bank.
If you are VAT registered, you won’t have to pay any VAT in this quarter. Payments due between 20 March 2020 and 30 June 2020 do not need to be paid until 31 March 2021.
However, if you pay on a Direct Debit, you do need to cancel it so they don’t automatically take the cash.
Like the income tax Payments on Account, the VAT will still have to be paid but, for now, it should help you with some cash that can be used elsewhere.
If you have any queries about this, please get in touch with us at Jon Davies Accountants. You can email us on firstname.lastname@example.org or ring us on 0151 665 0900.