Your personalised action plan
Thanks for answering those questions. Here are your personalised recommendations for the help you could get.
1. Keep your employees: but get help paying their salaries
If you’re worried about paying your employees, you can choose to furlough some/all of them under the Job Retention Scheme, so you get reimbursed 80% of their salary up to £2,500/month.
What does furlough mean?
It means that your employees are put on leave (for a minimum of 3 weeks, maximum until end of October 2020). So they are still employed by you, but can’t do any work for you (but they can do training).
How does the Job Retention Scheme work?
If you furlough an employee, you can get 80% of their salary reimbursed via HMRC. Up to a total of £2,500 a month for 3 months (starting on the date you put them on furlough).
You still have to pay them through payroll, then you get reimbursed by HMRC. So you still need cashflow to be able to cover payroll costs whilst waiting to be reimbursed.
What does it mean for employees?
Unless you top up their salary, employees will get 20% less salary each month. But they get to keep their jobs.
If you have employees who are paid more than £2,500 a month, then unfortunately this will mean a much bigger drop in income for them.
Do I have to cover the missing 20% of salary?
No, that’s up to you. If you can afford to, then great (and we would encourage anything that helps your employees cope financially), but it’s not compulsory.
What about employees on temporary, agency, part-time or zero hours contracts?
You can still furlough them. As long as they are paid a salary via PAYE, they can come under the scheme. If their wages differ month to month (e.g on zero hours contracts), their income would be calculated on the average of their monthly salary since they started work for you.
What if I already made employees redundant or let them go?
As long as it was after 28 February 2020, you can rehire them and put them on furlough. It can be backdated to 1 March 2020.
How do I do it?
Your employee has to agree. You can’t force them, but you can explain that this is your only alternative to letting them go, if that’s the case. You have to create a special legal document (a furlough notice) to vary your employee’s employment contract.
How do I get reimbursed by HMRC?
Click on the button below to start your claim. Once it’s been processed, you’ll receive reimbursement within 6 working days (assuming no issues with your claim.
2. Get cashflow: apply for a government-backed business loan
If you need cashflow, then one of the government business loans could help you. They’re open to any business (limited company, sole trader, partnership) that has a business bank account.
There are 2 main types for SMEs: Bounce Back loans aimed at smaller businesses, borrowing up to £50,000. And Coronavirus Business Interruption loans (CBILs) aimed at bigger businesses borrowing up to £5 million.
Bounce Back loans are quicker to get, so if you just need a smaller amount, that’s the route we’d recommend.
How much can I borrow?
Up to £5 million in a loan, overdraft, asset finance or invoice finance. It doesn’t have to be a loan. You could just extend your overdraft to give you more of a buffer for the next few months.
Up to 25% of your business turnover (maximim £50,000). The lowest amount you can borrow is £2,000.
Is my business eligble?
Your business must be UK-based with a maximum annual turnover of £45 million. The business must be viable. In other words, you’re only having financial problems because of coronavirus. Sadly, that means if you’re a startup that doesn’t have any revenue, or your business makes a loss, or your business was struggling before coronavirus, you’re unlikely to get a loan.
Your business has to be based in the UK and have started before 1 March 2020.
You can’t apply if you’re already claiming under CBILs.
What are the finance terms?
You could get up to 6 years to repay the loan (3 years for overdrafts / invoice finance). You shouldn’t have to pay interest or fees to the lender for the first 12 months – the government pays those.
Tip: Ideally look for the lenders who are not charging arrangement fees or early repayment charges. That way, once business picks back up, you can repay quickly so you’re not tied in to paying interest rates longer than necessary.
You get 6 years to repay it and no interest or repayments for the first 12 months.
You can repay it quicker.
After 12 months, the interest rate is 2.5%.
Do I need to give a personal guarantee/ security?
Not if you’re borrowing £250,000 or less. Otherwise, it’s up to the lender.
No personal guarantees. But be aware if you’re a sole trader or in a partnership, whilst they cannot take your house or personal vehicle, the bank could recover against other personal assets if you default on the loan.
How do I get it?
You apply via one of the 40 approved banks and lenders listed here on the British Business Bank’s site. If your bank is one of the ones listed, you might find it easier and quicker to apply to them (but do check the terms they are offering compared to other lenders).
Tip: We recommend applying online, as phone lines are incredibly busy.
You apply through one of the approved lenders on the British Business Bank’s site.
Tip: the digital banks, like Starling Bank, are often the quickest to process loans. But you will need a business bank account with them.
3. Defer your tax payments: keep money in your business for cashflow
If you need to keep some cash (whether to pay employees, or yourself), you can defer some of your tax payments. It’s not perfect, because you’ll still need to pay that tax at a later date. But if you need cash now, then it’s an option.
Defer your VAT payment (March – June)
You can defer your Mar – Jun VAT payment until March 2021. You still need to file your VAT return in the normal way. You just don’t have to make the payment. You won’t get charged interest or penalties.
You don’t need to tell HMRC that you’re deferring – just don’t pay it. Remember, if you pay by direct debit, you’ll need to cancel that payment.
Defer your July self-assessment tax payment
If you’ve got a self-assessment tax prepayment due in July, you can bump the payment until January 2021.
Again, you don’t have to tell HMRC, you just don’t pay. You won’t get charged interest or penalties.
4. Need money for yourself? Check what benefits you could get
If you don’t think the above will get you enough income to pay your mortgage, rent or other living costs, then check what benefits you could get.
Use a benefits’ calculator
The rules around benefits claims (specifically Universal Credit) have been changed to make it easier for self-employed people to get support. Although it takes around 5 weeks for your UC application to be assessed, you can request an advance payment, which will be paid quicker to tide you over.
Use EntitledTo’s benefits calculator to see what you are eligible for.
If you are eligible for Universal Credit (or any other benefits), we recommend applying online as phone lines are incredibly busy.