UKC

The government information for self-employed people has been remarkably confusing. Stark warnings and instructions to stay inside, coupled with almost zero support and now Matt Hancock telling us we can go to work if we can't work from home and are able to stay 2m from others. 

I run a dog walking business, and closed yesterday after government instruction to stay home apart from essential work (with some government information saying ONLY key workers to work). With Hancock's latest advice and Sunaks inaction, I don't see how I can't email my clients AGAIN to begin work (despite a considerably quieter work schedule). 

What are you doing? I feel totally left out in the cold by this government. 

I'm in exactly the same boat, I effectively shut up shop with my window cleaning business, only to find later the same day I could carry on

https://www.gov.uk/coronavirus 

Updated to say we can work if the work cannot be done at home. Clear but ridiculous.

I'm in the same boat as, in self employed and unable to work now.

Listening to various 'experts' on 'serious' news programmes on Radio 4 it appears that trying to sort out a package for the self employed is incredibly difficult as self employment comes in so many forms that even defining it can be problematic.

Then there's the problem of defining how much people actually earn given that people can be entering and leaving self employment on a regular basis and incomes can vary wildly from month to month and year to year. And there's the issue of defining who can or can't work at the moment.

The various suggestions currently in circulation all have flaws.

The good news is that there are apparently a lot of people working long hours trying to put a package together so I guess we'll just have to wait a little longer.

Never has the general advice that you should have enough savings to tide you over for at least six months been more pertinent.

If you are not a bank or working for a large corporation this does seem to be good advice. 

I guess they could look at last years tax returns. 

That's one of the problems, not all self employed were self employed last year and some were only self employed for part of last year. Others have incomes which vary wildly from year to year, as an example I recieve my main source of income on average about every 12 to 15 months with only smaller amounts in between.

Some years I can be 'paid' around 5 times more than other years, not because I have really good and really bad years, its just the nature of what I do. It all averages out over time but in all honesty I couldn't tell you what I earn because I don't actually know. I'd need to look at my returns from the last ten 10 years or so and average it out which I've never done. And that doesn't take into account that sometimes I make capital gains which are taxed differently and isn't strictly income.

The more you look into self employment the more you realise how many forms it takes and how complex it can be.

I guess capital gains are not really income.  Basically a lot of self employed people have very low tax returns.

If you can prove how how much you have earn't over the last few that should be enough for most people i would think?

I am self employed too

Most as in more than half, then probably yes I'd imagine but the numbers moving in and out of self employment with little history to justify earnings are very high. The other issue is proving you can't actually work now.

Again, on the news this morning we are told something will be announced very soon. I'm sure whatever they choose will miss some people but I can understand why its taking a while.

The self employed more than anyone really should have some savings to fall back on, the ideal is 6 months (or more) but a few weeks at least. Even in the best of times people can fall ill and suchlike.

Yes, if you're threatened with poverty it's always good advice to be better off.  Your logic is sound but you're not quite taking it far enough - if everyone who catches this virus would just stop being silly and not get ill we wouldn't be in this mess in the first place!

As I said, I think this is what Boris was very blunderingly saying in his original broadcast, with an inept and fuzzy use of English, much suited to giving a useful impression with which to spread ideas and influence people on matters of interest to him, like Brexit.

It's done for my wife's job though!  BASTARD

But we have the comfort of knowing that some employees will have income protection to the tune of 2.5k per month to keep us warm while we get no help

I'm self employed in hospitality and started the business decline in early March. So much for the Cons having a handle on it! the Labour party chancellor {shadow, or is he now the force behind the impending emergency package?} had to point out the lack of understanding. Hope it is rectified soon.

the dwindling savings disqualify from help - you are expected to become destitute and then people will tell you you should have had savings when you are in the gutter.

yes, my wife gardens at a hotel but the evening announcement worried them so much it made their minds up - can't blame them as their financial situation needs protecting - they are good employers

You are correct, we should (and I personally do) have savings to fall back on. That should go for the employed too. However, these savings should not preclude us from receiving Government help in such situations. We have to 'save' to be able to pay our tax twice a year, for many that'll severely dent the UC help they're likely to receive if they apply as was originally advised. Yet an employed person receives a full handout regardless of what they've got tucked away. A level playing field is all we ask.

I agree. The range of savings, particularly for women, will be huge and running down savings cannot sustain a business of sole traders in all its ranges or allow people to continue once the crisis is over. Reinvestment may be required[ start up costs} incurred because advertising may need to intensify to try and pick up lost customers or the business may have completely collapsed in the meantime and a new direction required.

There is a discussion in my household about the Conservatives being the party of business and I'm laughing away at this misnomer. The only people voting for cons I ever knew had investments they lived off and inherited wealth. Gordon Brown did more for enterprise than that lot.

Sometimes you have to step back and think in the current crises how any  govt ( it will be the same in other countries)manages issues like this on a day to day basis.

Putting together in an instant a scheme to satisfy the requirments of the self employed and too have it up and running straight away is probably unrealistic.

Even the scheme for employees/employers for furloughed/laid off  staff will not be out until the end of April.

Its going to take time and yes the Gov ( Sunak acknowledged it when he made his announcements) knows that will be tough and that people will fall through the system.

If something can be designed and works for 80%-90%  of the working population then that in its way will be a success,

The MTA has created a Template to send to your MP to ask him/her to raise the issue in Westminster.

https://www.mountain-training.org/membership/mountain-training-association/...

Robin

The govt schem on furloghed or laid off staff is not perfect and is definetely not a full handout as you describe.

They were slow off the mark. It was obvious what was coming our way quite a while ago. I was preparing for it and saw it. I became frugal a while back cause I saw No income.Slow, slow slow.Ponderous.Plodding.

Thank goodness for the input of McDonnell and Sturgeon.

For all you know critical planning was going on in the background. Its your assumption tha nothing was being done.Just remember that the Imperial team have been working 24/ for over 2 months now ever since this was identified..The data etc will have been filtered through.

This  wish or view that any  Gov can instantly solve problemsfor everyone  like this overnight is just farfetched..

Good that you were on top of it.

No of course, and having posted it I realised it did sound that way. But taking my own example, I'm currently entitled to bugger all through UC despite being unable to work, as my wife is a reasonably high earner and I have savings. If my wife were to be stopped working, she'd be entitled to the 'full' £2500 regardless of what savings she has etc.

I was self-employed until Monday when I became unemployed. Where do I go to look for help/claim benefits whatever? It's been so long since I did this that I really don't know where to start.

You cannot cover every situation and the reality is that in your household you have and will still have an income.Thank goodness.That really should be the main criteria at this stage.

I'm a gardener / landscaper so while I can't get materials for the landscaping side I can continue cutting grass and hedges with no contact with anyone. Clients leave the gate open, I go in and do the work then leave and they pay me into my bank account.

I'm lucky in that respect but the lack of clear guidance or support for the self-employed in general is terrible. I wish everyone the best of luck with getting through this safely, I think we're going to have to look after each other as I have little faith in boris doing anything that he isn't forced into sadly.

Unbelievable. This government will cause many to die that might not have done.

I really feel for the self employed. there needs to be action today to sort out some kind of compensation it doesn't effect me directly, but my Girlfriend is in a hell of a mess with huge expenses she can't escape easily (Rent etc) and no income.

Why this can't be 80% of earnings as declared in self assessment forms or something similar? I guess the issue is due to some people closing their businesses since SA deadline unrelated to CV, and some only just starting up, but surely we sort out the majority, and then deal with the details over the next couple of weeks.

The three you need to look for are:

Universal Credit

Statutory Sick Pay 

Employment Support Allowance 

All have eligibility conditions. I'm not eligible for any.

According to Martin Lewis, the government are to announce something today, though he thinks it will be Friday.

Good luck navigating any or all of the above. You'll need it. 

Most people aren't looking for an instant fix, but maybe a promise that self employed earners will have wages protected just like salaried earners might help people isolate and not stress? Something, anything? But today just further obfuscation, delay and mixed messages from the PM saying you shouldn't leave the house unless absolutely neccessary to keep the country safe. But you can work if you can't work from home.

Yes, I absolutely agree. My posts have simply been to point out that it's taking time, for understandable reasons, to work out a package.

The employee package was only announced last week, I would hope the self employed one is unveiled very soon, this week really. In reality governments rarely move that fast on anything.

The point about savings is simply that people in self employment, which is necessarily precarious, really should have enough savings to tide them through more than a week.

I don't qualify for UC because of my savings, which ultimately are also my pension and I too would resent seeing people who are both paid more than me and have better job security and a pension scheme getting 80% of their salary whilst I get nothing.

I'm just prepared to wait a days to get it.

There's some links to benefits calculators here

https://www.gov.uk/benefits-calculators

Good luck

Although this does not apply to many gig workers, a good segment of the freelance population earns a considerably higher hourly/day rate than traditional employees and benefits from preferential tax treatment. It has long been the response to those who find these benefits unfair that freelance work is unreliable and intermittent. So these benefits literally provide the means to save for a rainy day and, the argument goes, are designed for that purpose.

However, the current situation is so extreme that some support seems perfectly justified in my view, not least because the economy needs these workers to remain consumers as well as fed.

Intermittent work, no sick pay, no holiday pay, no premises, no transport, same rates of income tax as everyone else. Median self employed income is usually half that of the employed. Yes many are well off, but to frame the self-employed as privileged is simply wrong. 

I didn't. I started my post by acknowledging the contrasting working conditions faced by the less fortunate freelancers and finished it by agreeing that support was needed. I also distanced my personal view, which was only expressed in the final sentence, from the general justification outlined in the first paragraph. Have another read.

Incidentally the rates of income tax are lower for the self-employed, effectively owing to their right to offset overheads/expenses and actually by the differential taxation of dividends. And I don't know who gets free transport, untaxed, as an employee.

As a rejoinder, I express complete sympathy for any freelancer who is suffering from the shutdown. I hope the government's package is comprehensive.

Well you know you are going to be shafted tomorrow thursday 26th when the chancellor announces what help he is going to give the self employed.

How do i know this  well Boris said the chancellor will announce a FAIR DEAL for the self employed 

fair deal means (make it hard for them to claim and give them as little as possible)

I just wonder if it would be better just to get the virus deliberately and hope you get through it so that we can get back to work and feed our families

or just go to work and hope you dont infect anyone if you have it

Employees can also offset expenses, that's not unique to the self employed. It's a common misconception that employees can;t offset expenses probably because for ease of bureaucracy those expenses are normally directly paid in/for by the employer in the form of company cars if transport is needed, providing the equipment and disposables necessary to do the work, etc.

Divdends would be a different ball of game as they are tied to the profits of a limited company.

Someone with a ltd paying themselves paye up to the personal allowance will get 80% of that with the PAYE scheme anounced, and then whatever other business help the government makes available, whether that be grants, loans or whatever.

Those aren't just 'self-employed', they are employees and shareholders of their own company. As the former they already have some protections in place, as the later a range of packages to protect businesses are already being put in place.

Another common misconception. A self emplyed person cannot claim 'commuting' costs as expenses.

There's directions from HMRC as to what is classed as commuting and what is not. Likewise, when employees are having to travel in a way not classed as 'commuting' those expenses are paid by the employer and/or classed as expenses at the time of taxation.

Yes I can't fault the government on their progress so far, given the circumstances (never thought I'd hear myself say that!). My posts are merely a plea for equality rather than a 'get your skates on'. 

Lets look to the future. Are the self employed going to accept a levelling up of the tax system after this?

There was an incredible amount of furore when Hammond tried this.

I don't want to be boxed into a position where anyone assumes I am against providing support for freelancers. I just thought I'd highlight some of the nuances. Meanwhile, although most of what you write below is sound, it is all, as I say, nuanced. It so happens that I've engaged tens of thousands of freelancers on contracts for services, very much at the high end of the segment (£500 per day at today's prices) so I am not clutching at straws of experience.

They can but the range of expenses available to be offset by the self-employed, particularly when running a PSC, is much broader, eg any work equipment such as a laptop, the costs of their spouse "working" as company secretary at an income below the tax threshold, the "cost" of a monthly board meeting etc

They are however the normal and majority source of income derived from a PSC and charged to income tax at a different rate

Yes, this is a very good point, although to benefit, anyone running a PSC will have to make temporary changes to their payment policies, hardly a disincentive.

Fair point.

A levelling up? Scrap Class 2 NICs and add 3% extra to Class 4s? Only if I also get the perks PAYE employees do

Or maybe they should just offer 77% rather than the 80%? 

Got any vacancies going?

Thing is, other than the laptop example, which in an employment situation if an employee requires a laptop to do the work then the laptop would be provided by the employer, the rest in your list are examples of tax evasion. Tax evasion can be done by any company, regardless if that is your local plumber or a multi-million pound corporation.

To claim that the self-employed can illegaly evade tax easier than an employed as a perk is a bit like saying fishermen or lorry drivers have the perk of being able to smuggle goods more efectively

Yes, dividends get taxed at different rates of income tax and involves a load of extra fiddling around with corporation tax or whatnot. But my point is that people with ltd's going that particular avenue with regards tax aren't self-employed. They are employees and directors/shareholders of that ltd.

Also to bear in mind, a lot of the self-emplyed aren't so for tax efficiency purposes. Many like me is simply because that's how the industy works. You want to work in the industry, you have to be self-emplyed.

That is for practical reasons. You can't expect a company to 'employ' you for 2 days, then release you and file a P45/60 for that plus the whole hassle of working out the tax, tax codes, etc. Hence nobody wil give you work unless you are self employed. Likewise other companies will only give work to PSC, so you got no option but to set one up. It's a requirement by the contractors so as to reduce their own paperwork and liabilities.

Yet at the end of the day that is not what matters.

PAYE people are not getting up to £2500/month because they paid 3% more in NIC's.

For that extra 3% or whatever the employed get sick pay, holiday pay, contributions based JSA/ESA, contributions based pension, maternity/paternity leave, etc.

That's the deal both the employed and self-employed signed up for.

The help offered now to the employed and businesses is not a benefit relying on NIC's or any such.

Trying to justify the difference in government help on that percentage is not gonna cut it.

Not to mention people using the tax loophole of paying themselves dividends instead of a salary will have credit issues when it appears they have only been earning minimum wage. I doubt any scheme proposed by the government will take dividends into account either so their relief will be low. 

Corbyn actually wanted to close the dividend loophole, which I'm in favour of as it it's clearly massively abused, but obviously that won't come to pass. 

Someone had better let Corbyn know that lower rate earners benefit still, but the dividend loophole, for higher earners, was compromised by George Osborne, when he did away with the corporation tax credit and re-modelled the tax bands. The benefit progressively whittles down to effectively zero as the relative proportion of basic rate earnings to higher rate earnings diminishes. There is a level where a substantial earner pays more tax overall by the dividend route than they would by paying themselves via PAYE, although that is subject to variation according to the rate of CT.

It's worth doing some model calculations if you feel like letting go of one of your preconceptions of the tax advantages enjoyed by fat cats like me. Or, to put it another way, everyone is quick to assume that the other has it better 

I don't think I or anyone else is. The whole rationale for the support is twofold:

Firstly, the shutdown is an imposition by the government that, in any democracy and by any reasonable judgement, requires financial redress for the sufferers.

Secondly, the economy is vulnerable to a prolonged demand shock and there is a strong argument that the cost, in the form of a prolonged recession, of not providing financial support to maintain the velocity of money will be far greater than price of the aid.

For all I know, Boris is true to character ,as Macron found , lives by the seat of his pants, shotgun decisions and his thought patterns should be longer but are invariably short and not far seeing. 

Dividend payments have already been taxed at source at approx 20%.  If a company director goes over the higher tax threshold then they start paying additional tax at a rate of 32.5%, increasing the more they take in dividends.  This is on top of the additional costs/responsibilities of running a Ltd company. 

Yes things used to be very good years ago but over the years they have been significantly eroded and right now really are pretty much on a par with being employed on PAYE - all without the safety net in place.  So company directors take all of the risk right now but without really any of the benefits.

All very true

That i have a tinfoil suspicion might be why the government is weaseling its way around making building sites shut down.  They wouldn't have a foot to stand on for refusing assistance to the self employed if they did, so they keep them open even after several demands from MP's, unions and the Mayor of London himself to do so

Building sites cover a wide range of infrastructure and cart Blanche closing them all down is just ridiculous. 

The tax bill for this is going to be shall  we say high. I doubt 3%. Barely scratches the surface. 

Basic rate tax payers pay 7.5% on dividends no?

So say my business makes a profit of £45,000 - I pay myself a tax free salary of £12,500, and the remaining £32,500 I issue as a dividend, £2000 is tax free in my allowance and £30,500 gets a 7.5% tax. 

All in all on £45,000 I would pay £2,287.50 in tax, as opposed to £6500 that a sole trader would pay on the £32,500 over their allowance. 

Or have I completely misunderstood?

Your calculations are correct but don't forget the business will also have paid 19% corporation tax on those profits.

It actually ends up just being paid in different ways, the amount paid is fairly similar by the time all the different taxes are paid.

Ah yes, when you factor CT it's a different picture. On £45,000 I work out the total tax percentage paid by a single employee using the minimum salary+dividend system to be 16.4%, whereas the total tax percentage paid with income tax to be about 14.4%, so I see what you're saying

Did you add in the extra NI that is paid via income tax? If you include that it's probably even closer.

It's certainly not the gold mine some people suggest but there can be benefits to it.

There are huge lifestyle differences in working as a self employed person rather than an employee (talking in the case of a job where both options exist, like a lot of IT roles), and if you like those differences then they’re benefits.

I would be reluctant to be someone’s employee again now for a long list of reasons that have nothing to do with money. That said, if the money was not better then it’d be lunacy to be self employed rather than an employee, because you need something to offset the additional work, large periods of unpaid time, zero legal protection and financial risk that go with it.

In any ordinary situation I think the self employed should be looking after their own contingency, as that IS part of the trade off. However this is a totally exceptional circumstance and when the government is throwing support packages around to the tune of hundreds of BILLIONS of pounds I think you need a pretty good reason why the self employed are less deserving than every other segment of society.

Another thing to consider is that someone’s got to pay for all this eventually. The tax regime in this country may have to change dramatically for all of us in a few years to fill this hole in. Presumably the self employed will be considered fair game along with everyone else again at that point, so we should get the same support now. 

On your last point.

Not sure how that works for businesses who for example like mine will not be using the govt " furlough" scheme.Are you saying we should be exempt from future tax rises as we will not be tapping into the scheme?In which case I am all for that.

Fortunately I’m not the chancellor so I don’t have to have a good response for that However the fact remains that there are at least schemes available to you, which isn’t true for the self employed at present.

Our kids now can’t go to nursery, and my wife works, so can’t do full time child care. I’m a contractor and I can’t foresee getting part time, stay-at-home contract work so I’ve effectively been put out of work by this virus.

I doubt I’m personally going to benefit from whatever this scheme is though, as I do have contingency savings and as usual I expect that the people who’ve bothered to prepare for a crisis will be expected to blow it all looking after themselves, while the people who didn’t bother will get a handout. Such is life. 

I lost my contract because of the virus, finish in a weeks time, seems to be plenty of jobs around that need doing...

Tescos here i come...

Good on you.. I am sure it will be a stop gap measure for most people. And tbh its better than sitting at home.

So your big issue is probably "tearing your hair" out looking after the children  You have my sympathy.

A contractor covers a wide range of sins- is it IT related?

cheers, excuse to get out as well....

I also hear that agricultural industry is now concerned that food will rot in the ground this year with no one to pick it.....

Sunak annouces 3 months of wages postdated to March, to possibly arrive in June. Good - but what the hell is all this language about self-employed needing to chip in with the rest of the employed once things are back to normal? I didn't realise we get so many tax breaks compared to the employed? The theory that there is some disdain for the self-employed in the cabinet is solidifying in my mind...

So now you are “complaining ”having been bailed out. Not sure I get where you are comming from. 

its going to be a big tax bill after for all of us 

He means that if, and I'm sure there aren't, anyone has under-declared their earnings, then they'll be in a spot of bother now.

If you don’t have any tax breaks, there’s nothing for you to worry about, is there?

I presume he's talking about the fact that we pay NI at 9%, whereas PAYE workers pay it at 12%.  As I understand it this has always been justified by the fact that we don't get sick pay.

Largely good news, though.  I'm waiting to see how the details of this work out. I'm not totally without work - I'm doing about 5% of what I'd normally be doing at this time of year - it's not at all clear if the income I am scraping in will be deducted from the grant?

My gods I pity anyone who set up as SE this year though.

He used language that suggests the self-employed aren't paying their way like the rest of the country. I'm happy to have the support, as I said - good, but I'm shocked by the palpable critical tone in his language. 

Plus he didn't offer support for people earning above 50k like the rest of the employed which I don't really mind as these are tough times, but why is there a barrier for the SE but not other very well off people working at big companies? 

I'm not just trying to complain, I'm just genuinely shocked at the way I've been talked down to like a parent bailing out a child - "Later we are going to have to have a talk about things going forward".

Maybe closing tax havens for billionaires should be a bigger concern than a small proportion of the population paying a few percent less NIC's? 

It’s a material proportion of the workforce and much more valuable to the exchequer than a few billionaires, whose loopholes have mostly been closed, by the way. Do some googling if you don’t believe me.

I would more normally be found on the other side of this debate but I think here you should be focusing on the support not the implicit consequences. Imagine how the employed segment who pay higher NICs would react if there were no sense of future reckoning. He has to strike a balance.

That was always a criminal offence, so I don't think he can have meant that. 

Though obviously anyone who qualifies who has 'minimised' their declared income over the last few years has also minimised the support they'll be getting, because it's based on the net income on their last three tax returns.

It's not the consequences, it's the tone. It wasn't 'we are all in this together', it was 'the self employed need to start pulling their weight'. It's outright offensive. 

Regarding tax havens, do you have any recommended reading? 

Only briefly scanned it. A grant? They're taxable is that correct? 

Yes, it will be a taxable grant (so I think should be FAIP treated like normal income), for people earning under 50k that have at least 1 tax return filed, due in June. 

As I stated in the previous post, the comment was aimed at the employed segment of society in order to head off complaints that the self employed were having their cake and eating it. I don’t think he quite got the tone right and I can see how that might have made you bridle. But jeez, cut the guy some slack. The UK has moved policy further (not the same as offered more) than any other nation on the planet to provide for its citizens in this global crisis and Mr Sunak has been exemplary in addressing all challenges and in the clarity of his honest and forthright answering of all questions, not to mention exceptionally generous with the public purse. You and everyone else have been bailed out big time. Save your grumbles because they will not go down well outside your segment of the workforce.

I'll qualify on all counts and it's more than welcome. We're a long way off destitute but it'll be tight so this gives us some room.

He did somehow manage to get through his other speeches without making any snarky comments about the beneficiaries though, didn't he?

On the whole I do agree though, I think he's doing a good job and building a pretty strong prospect of being Prime Minister at some point in future for himself, particularly if the memory of these support actions lingers with the centrist Labour voters.

I don't really give a toss. I work hard for my money and have had my biggest tax bills on record this year, with more on account due in July. I am grateful for the help, but I'm just another tax payer and have every right to criticise. The comment he made didn't head anything off, it fueled and vindicated the anti-SE feeling, just look on social media. You telling me to be quietly grateful just goes to show that clearly this country has an issue with the SE workforce, and it all seems to be coming out of the woodwork. 

Seems a pretty decent offering in the circumstances, actually in any circumstances. Will stop me having to erode my savings/pension (having always tried to do the right thing) as not means tested. One lesson for everyone from this, employed or self employed is SAVE for a rainy day.

People who've been underdeclaring income will be kicking themselves now. One surprise is how they still seem to be waiting on a lot of people to file a tax return. The deadline was 2 months ago, how does that work? Bet they won't be underdeclaring this time!

It seemed pretty clear to me he was using unsubmitted tax returns as a reason to delay the scheme by 3 months. I don't see any reason why people that submit late couldn't just claim late. 

https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-...

So if read this right and apply to my circumstances (my profit is well below £50k on any year... ever!).

HMRC will contact me. I'm eligible via the three year option. They'll work out a mean of the three years 16/17, 17/18 & 18/19. They'll calculate 80% of that figure and I will receive 3/12 of that figure (three month lump sum).

Sound correct? 

Interestingly no payment for those who run a limited company and pay themselves via dividend.

I'm not complaining about that, just pointing it out.

Directors of PSCs can pay themselves a salary temporarily and claim their £2.5k. Clumsy but effective.

I didn’t get that impression at all. Far from it, it felt as though he was going the extra mile for those who had been delinquent with their tax returns. Are you being a tiny bit sensitive here? I think the general delay is far more about how incredibly difficult it will be to achieve all of this in such short order.

Does anyone know know how it works if you have some employment (zero hours) and some self employed? Do you get 80% of the self employed earnings?

Yes I thought that, a kind of penalty for late submission.

That's how I understand it from both the link and Sunak's speach. I'm sure there'll be plenty of expert analysis available soon.

From the link in Stuart (aka brt)'s post just upthread it says you're eligible for the self employed help if over half your income is from self employment. How that affects the eployee help I don't know.

In the questions after his speech, Sunak said all the people who would be working on this were already working flat out on the employee help scheme which explains some of the delay.

I missed that bit. Should be included then, I'm about 75% self employed

If he had used logistical reasons as the main reason for the delay then that would have made sense, but he made a strong point that one of the main reasons for the delay would be to help people who were several months late filing their return. 

That's a crap excuse, not me being sensitive. 

"So why the 3 month delay?" "Well we really want to make sure all the people that didn't file their tax return had an extra 4 months to get it sorted" 

You're joking right? 

Stop whining. You should be happy that there is any support.

This whole package self employed or not self employed is waaay too generous in my view. We’re not really encouraging self-reliance.

I'm fine with the delay; we've already been told our June tax bill is deferred, so people can use the sums they'd normally be putting aside to pay that to live on, and then when the grant comes through it can partly be used to cover the tax bill. 

I'm astonished that those who haven't yet sent in their last self assessment - it was due in January fer chrissakes - are being given extra time to submit it. Surely this is just an opportunity to inflate the last year's earnings in order to up your grant? I'd have said instead that it should be based on the last three years' returns if you have submitted them on time; if the latest one is overdue then just base it on the previous two.  

No sympathy for the habitual under-declarers whatsoever.

Piss off, I'm not whining. I said logistical complications are more than enough reason for delays, just that the tax return issue seemed totally irrelevant to the support delivery turn around. 

Your real name's not Jacob Rees Mogg or Ian Duncan Smith is it?

For what it's worth, I did get that impression.

No they can not, well not unless they can travel back through time.  The government website says:

"the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should not be included."

Not everyone has been bailed out by a long shot.  The government has sh*t on the self employed and those small businesses operating through limited companies from a great height today.  We are no longer all in this together! 

Meanwhile we hear of larger companies furloughing staff (having their staff wages paid by the government), yet who still have those staff working from home.  Their staff are not supposed to be working at all if furloughed!

Can I ask therefore what you would say to the 1,000's of freelancers in the corporate events, exhibitions and meetings industry who operate through limited companies who through no fault of their own have had the government close down their entire industry?  All work across the industry has been cancelled - 100% with no exceptions.  The industry pretty much shuts down over the summer every year anyway so no prospect of any further work until September at the very earliest.  Even then, should they get work it will takes most corporate clients 90-120 days to pay their small suppliers these days.  So that's Xmas by the time they get paid again.

I'm not trying to gain personal sympathy here.  Myself I'm fairly okay and can probably last on savings until Xmas if I have to.  The same though can't be said for most of the hardworking limited company freelancers in our industry who are now facing total a loss of income probably for the next 6-12 months.  Could you deal with that?

A three month mortgage holiday or a delay in paying VAT or corporation tax will not keep them or their families from the wolves.  I know one who is practically suicidal right now and we are all trying to support him as best we can.

I'm just trying to say that the government really should play fair.  Rather than seeing self employed directors of small limited companies as fair game to be hung out to dry, they should look to support small businesses as well as the large ones.  And before you say it, no the tax breaks by being a small limited company are not what you probably think they are any more - very far from it.

No, unlike those two I believe in a strong welfare system to help the weak and the poor, and a good safety net.

I just don’t agree with bailing out people on nice salaries who should have built up savings.

A lot of people asking for mortgage holidays right now are people who normally earn 50k or more. Ridiculous.

That’s useful detail. I wonder if that is a legal prescription or simply a guideline as to practice.

The aim of these unprecedented levels of support isn’t to exclude any workers, it’s to stimulate the economy in the broadest fashion while it goes through a forced hiatus so that we can recover swiftly thereafter. If any groups have been excluded then it underlines the complexity of providing for the sector outside traditional employment, and the associated delay in announcing measures. I do expect anyone left out and with a legitimate claim to be considered in due course.

Have you any evidence for this incredibly serious fraud or are you speculating?

I have great sympathy for their circumstances As it happens, I’m a direct shareholder in Informa, the world’s largest exhibitions and conferences company, whose revenues have been wiped out this year. Am I being compensated for the complete loss of dividend income and halving of my capital? They are owner of an exhibitions company whose income stream has dried up for exactly the same reason. Should I be receiving support?

Well I’m at a stage of life today where I live off the dividends from my investments. And since every company on the planet has cancelled their dividends for 2020, I shall have to do without too. We genuinely are in it together!

But I’ve been a company owner for 25 years and I made sure that at any stage over those years I could survive more than a year without income. In fact in 2009 (GFC) and 2011 (post 9/11) I had to do just that. And in 2020 I shall again.

I’ve engaged tens of thousands of PSCs in my time. I know the tax laws. I was explaining how they are not very beneficial just a couple of days ago on here. You don’t need to educate me.

Notwithstanding all the above, I do agree with you that wider support is necessary. I think a distinction can be drawn between genuine entrepreneurs with high potential rewards and those who are forced by industry practice to incorporate on relatively low earnings. My sympathies extend further than actually suffering the consequences and I agree with you far more than my earlier paragraphs might have led you to expect.

Received my email this morning. Everything seems consistent with what was said last night. That said one sentence stands out:

"HMRC will contact eligible customers by the beginning of June, inviting them to apply."

I'd presumed that the process would start ASAP and payment on the beginning of June. 

To be clear I am not nitpicking. It's a huge task. It might be useful for others to know about in terms of forward planning. 

The industry pretty much shuts down over the summer every year anyway so no prospect of any further work until September at the very earliest.  Even then, should they get work it will takes most corporate clients 90-120 days to pay their small suppliers these days.  

Surely by your own logic these people will be living on the income they generated some time ago and is now being paid.

I am in this situation and that is exactly what I plan to do, accounts functions still seem to be operating albeit probably from home for many companies.

I neither want nor expect a bailout from the government, if I have wanted a regular even income I would have taken PAYE employment. Surely anybody operating as a PSC should expect peaks and troughs and have a contingency to live on for a while?

Companies' cash flow is well and truly borked, even assuming the will is there in many cases they're simply not able to pay.  Freelancers aren't in a position to chase the money too aggressively, because they can't extract what isn't there and if the company goes to the wall they will most likely end up with nothing.

I do a large chunk of my work for a little family firm who are lovely people but have never been the fastest to stump up.  It's difficult for them because the much larger companies they sub-contract for make them wait for months to be paid in turn and at any given time they own a large cohort of freelancers what seems to me like an awful lot of money. 

I wonder what cash reserves those much larger companies have..  Funny how Rom the Banker is ranting continuously at the foolishness of freelancers and zero-hours workers in the 'gig' economy who don't have enough put by to go on living normally without income for six months or more but saying nothing about the big corporations who suddenly can't afford to pay their staff.

Yes you would think so and as a freelancer working for multiple clients you would expect that if one client went quiet, you would pick up work with others.  Or that if the industry suffers a general downturn, as has happened many times before, that work will become slimmer pickings.  But that's not what has now happened. 

The Brexit process over the last 2-3 years has already disrupted the industry massively with clients cutting budgets across the board and becoming far more cautious in committing to marketing spend.  Margins are much tighter now and at the same time, large clients have extended their payment terms from a reasonable 30 days to a new norm of 90 days and that affects smaller companies proportionally much harder than the larger players.  So margins and cash reserves were already much depleted, but we were hanging in there relying on things getting better after the Brexit thing settled down.

And then this, not a further recession or downturn in work but a government led 100% cancellation of ALL work across the whole industry for the foreseeable future.  That's not something that even having a years worth of savings in the bank can prepare most people for.

No one wants a bail out from the government and so far in my life I have never taken so much as a single penny in benefits, yet have paid in many £100's of thousands in tax.  So when you see others being bailed out you wonder why?

Anyway I think you are totally missing the point why people pay themselves dividends rather than salary.  Many years ago it used to be mainly because it was the most tax efficient thing to do.  These days there is really very little difference.  For a sole director the company pays the tax rather than them personally but if it is their own company then it really all comes out of the same pot at the end of the day. 

The big difference still there with payment in dividends though is that it allows the company to pay you at times when there is surplus money in the business - i.e. when the business can afford to pay you.  At times when the business cashflow is tight then you can choose to delay being paid and keep more money in the business to cover these more difficult times, or to invest in the business where needed.  A larger PAYE salary restricts your ability to do this making it far more risky when times are lean.  This is particularly important in light of poor client payment terms these days.

Yes I do (well so much as a phone call yesterday with someone who had been asked by their company to be involved would be classed as evidence).  I was quite shocked, but regardless I am not going to post the full details on a public forum.

You still paye a lot less tax than an employee. Even taking account corporation tax in full. That’s even before you count all the things people put on « business expenses » which tend to include part of rent for the place they live, the fuel for daily shopping, the computer the whole family uses... etc etc.

Rom, you clearly have your own axe to grind here and I won't even attempt to change someones ingrained bias.  You are perfectly entitled to your opinion.  What I would say though is perhaps you should try building up your own Limited company, dealing with big corporate clients and you will get an idea how tough it is.  It's not the land of milk and honey you believe it is.

#1 You clearly don't understand the difference between being self-employed and being the director of a company. If he's paying corporation tax he's probably the director and an employee of his company. Sole traders (self-employed) often file simple books (ie profit vs expenses). If you really think laptops, fuel and home office costs are making us rich, your head is in the clouds. Even if I did claim all that (which I don't), my van was essentially written off 3 weeks ago. Now I have to buy a new one, do you know how much vans cost? I don't think you have any idea how expensive it can be to run a small business. 

#2 Any business in the UK, even the one you work for, can claim costs for laptops, fuel to the shops, home offices etc as business expenses. Why are you aiming your nonsense at small businesses? You think only they are the ones avoiding tax and fiddling their expenses? 

Rom, the tax break remains worthwhile for a basic rate taxpayer. However, as I explained earlier on maybe this very thread, Osborne's tax changes of 2015(?) mean that the benefit of paying oneself via dividend rather than PAYE diminishes rapidly with rising income such that a point is reached that a high earner is very marginally better off paying himself via PAYE.

Hard to believe but confirmed not only by my own calculations but also my accountant as we prepared my annual accounts back in 2015. If the rate of CT were to have continued falling, this new paradigm would not have been sustained, but we can forget about that possibility for a long while.

As far as I can tell, Rom is self-employed himself, either in a freelance or incorporated capacity, and he works exclusively for big corporate clients. Whether there's an intermediary smoothing the way, and the payment issues, he'll have to tell you. But I'm pretty sure he has a good idea what peaks and troughs of demand feel like and the principles of making tax deductions. And one thing is for definite, he knows the difference between self-employed and incorporation.

It's entirely understandable that you have your different frustrations with the current situation, and you might legitimately disagree with counterpoints expressed here, but it could be self-defeating to question the knowledge and experience of participants in this thread.

That's true, but (and I have no idea if this applies to Rom specifically) I am continually stunned by how many people running businesses, whether by Ltd company or not, know bugger all about what they're doing.

As you'll be well aware (but many reading this thread won't), one of the major differences between employee and self employed/business owner is that as an employee or normal member of the public the system does make it as hard as possible for you to mess things up and break the rules accidentally. Operating as a business, it's up to you to find the rules, understand the rules and apply the rules. And if you mess it up the first thing you're likely to hear about it is when somebody notices (potentially many years later) and sends you a cripplingly large bill, potentially with a punitive element.

As such there are a huge number of self employed people out there who are totally out of compliance with the rules, either deliberately or accidentally, and think they've found a genius loophole/don't even realise. You only have to go on to any forums aimed at that community to have your eyes opened. It's extremely annoying if you're someone who does do their best to comply with all the rules, because the punitive actions that the chancellor hinted at are going to hit us all.

The Lib Dems, incidentally, have a complete revamp of the taxation model for small businesses/freelancers in their manifesto; something I would be wildly in favour of. It's ridiculous that I have to run a company to be able to be self employed doing what I do, but it would be all but impossible to get work without the vehicle of a limited company to do so - literally nobody would engage with you.

A simple back of the enveloppe calculation tells me it’s not really true. There is about 10% difference for a higher rate tax payer. More than that if lower.

I suspect your accountant would not include employers NI in the calculation. Which would make sense from their point of view, but isn’t really a fair comparison.

I agree strongly with everything else you said above on the thread.

Actually, my own experience is that the vast majority of the tax fraud in this country is committed by very small business and the well-off self employed. And not in a small proportion

That is just what I have seen with my own eyes. I could be wrong. But I really don’t think I am.

A higher rate taxpayer at around GBP60k is not what I had in mind when I talked about high earnings. As I said, the benefit diminishes with increased earnings and you have to go quite high to find the convergence. If you can be bothered, try the calculation at different levels and you'll see how the two schemes converge, or they did in 2015/16 when CT may have been a little higher. I would have been a percent or so better off under PAYE if I had been so motivated. If you aren't getting the same result, either you've missed a vital detail or I need to sack Deloitte.

You should, and I and my accountant did, include employer's NI in the PAYE calculation as that's a real drain on the disposable cash.

Thanks. Although I've been sympathetic to both sides of the argument so you might have missed some of my comments

I would be very surprised if the cash economy was not the greatest source of tax fraud. Impossible to quantify of course, since, by definition, there are no records. But who hasn't paid a self-employed tradesman cash, and often, cash for less? It's worth noting that such transactions not only rob the public purse of 20% VAT but also the 20%-40% income tax on the conveying of that cash into the tradesman's own pocket.

Going cashless would be a good way to crack down on this. Don't get me wrong, I know it's a problem, but using crime as a reason to punish the honest isn't how we should do things in society. The way the SE are getting hammered on social media at the moment is frankly sickening, I always thought I was a valued member of society but at the moment it feels like I'm looked at by the government and much of the public as a scrounging tax dodger. 

well do the calculation yourself, I did for a revenue of 170K, in the case of the employee calculated income tax, employee NI + employer NI , and for the owner calculated dividends tax + CT

I find circa 51% overall tax rate for the employee and circa 41% for the owner. Don’t have the exact number in front of me but could find it again later.

I don’t think I’m wrong about that, this has been the whole point of IR35 in fact, to try to prevent people from exploiting these differences in jobs that are really just disguised employement.

I suggest you do it yourself quickly in excel and you’ll see. Maybe I missed something but I really don’t know what.

Exactly, when the real tax avoiders seem to be the large employers, you know the ones who have avoided most of their tax liability over the years through complex avoidance schemes, but who are currently being bailed out by being able to furlough a significant proportion of their PAYE staff.  This makes some very interesting reading:

https://www.theguardian.com/world/commentisfree/2020/mar/27/tax-avoiders-co...

Rom, once again you are missing the point that there are many legitimate self employed people operating through one person limited companies where it is not a tax dodge.  If you are not limited then the industry you work in will just not take you seriously - meaning you would have no work.  If you payed all your income via regular PAYE then your company would not have the flexibility to cope with late payments and/or erratic work schedules.

What's more as a one person limited company you have two tax returns to fill in, the first for your company, the second as a personal tax return.  A lot more complex if you are working across multiple clients, and in my case multiple countries, plus dealing with multiple suppliers too.  The costs for doing this are approx £2,500 a year in accountancy fees whereas a sole trader can often complete their own tax return at home using an online platform for free, or if they feel like paying someone, use a book keeper to do this for around £300.

Like I said above, most self employed operating via limited companies have been structured in this way so that the big corporate clients they work for take them seriously.  And big corporate clients simply do not do cash payments.  All payments are online and have a paper trail of PO's, invoices etc.  Therefore as it is all but impossible to not declare any income. 

If you want to look at self employed people avoiding tax by un-declaring their income then look at the self employed who take cash, the tradespeople and other common paid in cash sectors.  Yet this sector of the self employed was deemed worthy enough to received a massive bailout like the large companies paying their staff PAYE?  Meanwhile a whole raft of people fall through the cracks and despite paying probably far more tax (overall amount not percentage) than the average PAYE worker, and collecting VAT for the government for many years, have simply been told they are worthless and thrown to the wolves.

We are not all in this together!  See here:

https://www.theguardian.com/politics/2020/mar/27/chancellors-coronavirus-ba...

In my experience with consultants and IT contractors, paying significantly less tax is almost always the reason behind this cumbersome structure.

In fact since IR35, a lot of these people suddenly went back to flood the permanent employee market. Odd isn’t it ?

Rom, yet again (for possibly the 3rd or 4th time now) you miss my point. I’m not talking about contractors working long term for a single company who really ought to be PAYE. I’m talking about people running proper limited companies, proper businesses that are selling to or working for multiple clients where they just happen to be the sole director and sole employee, i.e. self employed.

Aren’t you having your cake and eating it here? You’re arguing that those are proper businesses, which I agree with. And the government may be supporting payrolls but it isn’t magically replacing lost revenues for businesses other than the grants and loans that have recently been made available. Thousands of businesses in the UK and millions worldwide are at risk of collapse and the owners of those businesses, like you and me, are having to tough it out. By this reasoning alone, there is no justification for extra support, much as I sympathised in previous posts.

Indeed, the support that is being given to the wider economy during the lockdown is specifically designed to ensure that demand for your services and the products distributed by my diversified investments picks up again as quickly as possible so that in the long run we both still have economic assets.

It isn’t “fair” but for most of the last few decades we business owners have been envied for our tax advantages and flexibility, not to mention our higher incomes. Every now and then, an event  comes along that reminds you why you should always put some fat on in the good times and roundly ignore those who complain how easy you have it. You’ll get through this and be a stronger businessman for it.

PS I still think a bit of extra support wouldn’t be out of place. But I don’t see a legal justification for it.

OK in that case this is a proper business but the point is that there is a risk inherent in running your own business, but also potentially higher rewards.

It’s not right in my view that we are asking the taxpayer and wider society to cover the risk business owners take. That’s a risk they have taken and should own.

That is valid for small and big business.

That said these are extraordinary circumstances and we should provide some stimulus/help. But I think we are going quite a bit too far. We are rewarding lack of resilience too much IMO.