The UK budget: How it affects self-employed contractors during the COVID-19 pandemic
Chancellor Rishi Sunak recently announced his first budget, which includes new provisions for self-employed contractors and a spending package to support the UK during the coronavirus (COVID-19) outbreak. So, how do these provisions apply to you if you're self-employed, and how could the economic impact of the COVID-19 outbreak affect your job prospects in the short term? Let's take a look.
How the UK budget affects self-employed contractors
The UK government is taking numerous steps to boost the country's economic growth during this viral pandemic, including introducing a £12 billion support package for small businesses, and a £30 billion cash injection into the economy.
What's important is that businesses, including sole traders, can stay operational in the short to medium term. So, how are self-employed contractors affected by the crisis, and how does the UK budget protect them?
Around 5 million people in the UK are currently registered as self-employed, meaning they play a significant role in the UK's economy. The UK government recognises this and set out two clear goals:
1) Offering financial support for affected businesses
2) Making it easier for self-employed individuals to access benefits and sick pay
Based on these goals, self-employed contractors and the smallest UK companies, including sole traders, can access new funds to support them through the pandemic.
The key budget provisions for self-employed contractors are:
A cash grant of up to £3,000 for small companies – this will help businesses, including sole traders, meet their existing costs.
Easier access to bank lending through the Coronavirus Business Interruption Loan Scheme – companies can apply for loans and overdrafts more efficiently.
'Time to Pay' arrangements to make it easier for the self-employed and small businesses to pay outstanding tax.
A relaxation in Universal Credit (UC) eligibility, meaning self-employed contractors can apply for Employment and Support Allowance (ESA), payable from day 1 rather than day 8, helping contractors get support when they need it most.
Ways for companies with less than 250 employees to reclaim the cost of any employees taking time off for COVID-19 or self-isolation.
So, what does this all mean for contractors, and how can you get the support you're entitled to?
Let's keep the UK budget simple. Basically, if you're a contractor who needs to self-isolate, you can claim SSP from day 1. You can also apply for ESA much quicker than before, and you may have access to UC.
Tips for surviving the COVID-19 crisis as a contractor
It's inevitable that the COVID-19 outbreak will cause some short and long-term job losses, which could be bad news for contractors.
Here's what to do if you experience job losses or serious cash flow problems through the crisis:
Speak to HMRC about a 'Time to Pay' arrangement to reduce your tax burden. Look into whether you'd be eligible for a loan or a cash grant at this stage. Review your skills and build new relationships with possible business contacts. Cut back on unnecessary spending so far as possible.
For self-employed contractors the goal right now is boosting your cash flow while cutting your expenses, which is where the UK government's new measures are particularly helpful.
Whether you're already losing income, or you're worried about possible income cuts in the near future, start preparing now – you'll save yourself stress down the line.