AXBRIDGE CHAMBER OF COMMERCE NEWS: details of the ‘bounce back loans’ – help for some small businesses and income support for limited company directors and some self-employed

Government advice for the self-employment who don’t qualify for the various loans so can claim Universal Credit

Universal Credit is a monthly payment to help with your living costs. You may be able to get it if you’re on a low income or out of work.

You can usually claim universal credit if you’re aged 18 or over and on a low income.

You can be in or out of work and you must:

• meet immigration and residence conditions
• have less than £16,000 in savings

Your partner’s savings also count if you claim as a couple.

If you live in Northern Ireland, go to Universal Credit in Northern Ireland.

Find out if you’re eligible for Universal Credit.

If you’ve lost income because of coronavirus, you may be able to claim a grant through the coronavirus (COVID-19) Self-employment Income Support Scheme when it launches. HMRC will contact you if you’re eligible.

Providing information about your earnings

Everyone claiming Universal Credit needs to report their self-employed earnings at the end of each monthly assessment period. This includes company directors, even those paying themselves by PAYE.

You’ll need to report payments into and out of your business in the assessment period. This includes:

• total amount your business received
• how much your business spent on different types of expenses, such as travel costs, stock, equipment and tools, clothing and office costs
• how much tax and National Insurance you paid
• any money you paid into a pension

How your Universal Credit payment is worked out

Your Universal Credit payment will be based on the earnings you report at the end of each monthly assessment period.

If you’re already getting Universal Credit

Since 30 March 2020, the way your Universal Credit payment is worked out has changed because of coronavirus (COVID-19).

Payments are no longer calculated using an assumed level of earnings, called a Minimum Income Floor. They are now based on your actual earnings.

If your payments were calculated using the Minimum Income Floor, they may change.

If you’re both self-employed and employed

Your Universal Credit payment will be calculated based on your combined earnings from self-employment and employment.

IPSE, the Association of Independent Professionals and the Self Employed

Given that there are now more than five million self-employed people in the UK, accounting for over 15% of the workforce, we have been campaigning to make sure the government does not treat this group as an afterthought in its preparations and public communications in its response to the coronavirus.

In the daily 5pm briefing on the 26th March, the Chancellor announced that the government will pay self-employed people who have been adversely affected by Coronavirus a taxable grant worth 80% of their average monthly profits over the last three years, up to £2500 a month. This scheme will be open to people across the UK for at least three months and will be extended for longer if necessary. However, it does not include all self-employed people and IPSE are continuning to engage with the government on the support for those who miss out.

The Chancellor said that this scheme will be available at the beginning of June at the latest. If you are eligible, HMRC will contact you directly and ask you to fill out an online form, and then the money will be sent directly into your bank account. Crucially, anyone who missed the deadline in January, has four weeks from the announcement (March 26^th) to submit their tax return. For more details on these measures, visit the government’s Self-Employment Income Support Scheme web page.

Martin Lewis Money Saving Expert

Small businesses struggling due to the Coronavirus can now apply for a new 100% state-backed loan worth up to £50,000, with no interest charged or repayments needed in the first 12 months. Here we take you through the loans, bank by bank, and how they can be used to provide income support for those who aren’t covered by other schemes – plus the Treasury answers your questions.  

The Bounce Back Loan Scheme has been launched because of fears small businesses can’t access coronavirus funding quick enough. While we don’t normally cover business loans, Martin’s made an exception here, because he believes it provides a potentially useful backdoor support system for those who have fallen through the gaps of other measures. For example, if you’re self-employed but don’t qualify for the Self-Employment Income Support Scheme, or for limited company directors (see Martin’s limited company directors’ help video too).

The info below is the latest we have as at 8pm on Tuesday 5 May. However this is a developing story that we’ll keep updating as more info come in, and try to answer. Please let us know if you have any queries about the guide. 

Bounce back loans in a nutshell

Bounce back loans are separate from the Coronavirus Business Interruption Loan Scheme, which is for larger amounts, but not 100% state-guaranteed. If you’ve already applied to that you can apply to have it switched to this scheme if you prefer. 

Here’s what you need to know about bounce back loans:

• You can borrow between £2,000 and £50,000. Though the amount is capped at 25% of your total turnover (usually for calendar year 2019, or new businesses can estimate).
• No interest will be charged and no repayments will need to be made in the first 12 months.  
• After 12 months, all banks will charge a fixed 2.5% annual interest. This is far cheaper than a typical personal loan. 
• You can repay the loan early without penalty. Or with some banks you can part-repay or overpay too.      

• The loans are set up to last for six years. So that’s a year interest-free and the rest at 2.5%. However, as you can repay at any time that gives you flexibility, of course, the sooner you repay once interest is charged, the smaller the overall cost. See how the loans are repaid.
• The loans are unsecured. While this sounds bad, it’s actually good. Secured loans include mortgages, where they can take your home if you don’t repay. Here you don’t give security (the Government does) so it’s far more difficult for them to take your assets if you can’t repay.
• Your business must have been established before 1 March 2020. It must also still be trading as a going concern (temporary cessation due to coronavirus doesn’t matter) at the point of application – and the reason for any issues must be due to coronavirus.
• Credit ratings (business or personal) won’t impact your eligibility – so most should be able to get these loans. You don’t need to prove the viability of your business and the application process is relatively straightforward. 

• The loan will likely go on your business credit report, but not on your personal one.
• At least eight banks are offering them. See our full bank-by-bank list. 
• You need a business to set these up but don’t need a business bank account. At least some of the banks offering these loans don’t require you to have a business account with them. 
• Bounce back loans DON’T affect your eligibility for other Government personal support. You can still apply for a bounce back loan and get the self-employment income support grants, and you may still be eligible for universal credit.
• Bounce back loans can be used to repay existing finance. We’ve confirmed this with a number of individual lenders, we’re still checking whether there are any whose specific terms prevent it.