The UK is one of the 199 countries being severely affected by the outbreak of the COVID-19 pandemic which started with just a single person living in the city of Wuhan, China. Since then over a million people all around the world have been affected by the corona outbreak and thousands have died. Apart, from severely affecting global health, the pandemic has brought down the global economy to its feet.
The outbreak in the UK has massively hit the contractor workforce of the UK. However, the government is trying its best to make things better and the UK Chancellor recently announced the budget, which includes a job retention scheme from which contractors may benefit. Also, the new tax rates for self-employed workers are in effect from April 6th, 2020.
Everything contract workers should know about:
Job Retention benefits for contractors paid via PAYE:
The job retention scheme offers benefits to individual workers that aren’t employees as per the employment law but are paid via PAYE. Such employees are eligible to be furloughed wherein the government will be covering 80% of their monthly wages (up to £2,500 a month) alongside covering the Employer National Insurance contributions as well as Minimum Automatic Enrolment Employer Pension contributions on employee’s wage. Here are the guidelines:
Office Holders and Company Directors:
Contract-based officeholders and salaried Company Directors(under the Companies Act 2006) are eligible to be furloughed under the scheme, after an agreement between the operator of the PAYE and the officeholder.
Agency Workers including the ones employed by umbrella companies
Agency workers(contractors) employed by umbrella companies and paid via PAYE are also eligible to be furloughed. However, such contractors shouldn’t be performing any work for, through or on behalf of the agency that has furloughed them.
Limb (b) Workers
Limb(b) workers who are paid via PAYE are also eligible to be furloughed under the scheme. Workers who pay tax on their trading profits through Income Tax Self-Assessment would, however, be eligible for the Self-Employed Income Support Scheme (SEISS), announced by the Chancellor on 26 March 2020.
Statutory Sick Pay (SSP)
Directors of an LLP who are self-isolating themselves and are on company’s payroll can claim SSP which is £94.25 per week for the first 2 weeks, However, they should be earning more than £118 per week. Same goes for contractors who are working under an Umbrella company.
Time to Pay Arrangements
Individuals who are unable to pay their taxes due to the ongoing crisis can apply for HMRC’s Time to pay arrangements(TTP) and once approved, individuals can pay their tax liabilities in the form of monthly installments.
Self-employed contractors who currently have no income can get in touch with Universal credit support wherein they are entitled to receive a support of £1,000 per month for the next 12 months.
Financial support for self-employed:
- Income tax self-assessment payments have been deferred for six months and are now payable until 31st January 2021.
- Self-employed who aren’t eligible for sick pay can now claim the Employment and Support Allowance (ESA) from the very first day of the illness
- IR35 reform has been delayed until next year which was supposed to be extended to the private sector.
Tax Rates for the year 2020/21 for Self-employed:
|Category as per earnings||Tax rate 2020/21|
|Small profits threshold – Earnings below this threshold incur no NICs.||£6,475|
|Class 2 NICs – for those earning above the Small profits threshold||£3.05 per week|
|Lower Profits Limit – Earnings up to this limit incur only Class 2 NICs. Over this limit incurs Class 4 NICs.||£9,500|
|Upper Profits Limit – Earnings up to this limit incur:
|Earnings above the Upper Profits Limit Any earnings above this limit incur:
A few tips to help yourself and your family fight this pandemic:
- Stay home
- Maintain social distancing
- Wash your hands frequently
- Cover your cough and sneeze
- Avoid touching your eyes, nose, and mouth
- In case you have fever, cough and difficulty breathing, don’t hesitate to seek medical care asap.
- Self-isolate if you feel even the slightest of symptoms