SINGLE mum Kimberley Palmer has been been pushed into debt and forced to apply for Universal Credit as a loophole in the government's help scheme for self-employed workers means she can't get a grant.
Kimberley, who is in her forties, told The Sun she's had to put £4,000 on her credit card to cover the cost of bills and food for herself and her 12-year-old son during the coronavirus lockdown.
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She's also has to freeze her mortgage payments for three months as she says benefit payments don't cover the cost.
Kimberley launched her company, Gap Presents, which supplies models for fittings at major high street fashion brands, ten years.
But as she set up her firm as a limited company it means she's locked out of the government's help scheme – and she says she has no savings to fall back on.
'They say we're all in this together but we've been left out'
"They say we're all in this together, but we're not," Kimberley told The Sun.
"We do our accounts and pay our taxes the same as everyone else, so I don't know why we've been left out.
"We're safe and we're healthy and for that I'm grateful.
“But the stress of not knowing how we'll get through this has impacted my mental health and I'm so worried.
"I would love to be working but I can't as I need to look after my son who can't currently attend school. I don't know what the future holds."
Coronavirus help for the self-employed
HERE'S a round-up of the main coronavirus government schemes for the self-employed:
- Grants of up to £7,500 under the Self-Employment Income Support Scheme
- Deferral of Self Assessment Income Tax and VAT payments
- Grants for businesses that pay little or no business rates
- Business Interruption Loan Scheme
- Bounce Back Loans
- Furlough pay of up to £2,500 for some company directors
And sadly Kimberley's not alone. Figures from the Office for National Statistic reveal 700,000 of the UK's 5million-strong self-employed workforce are sole directors of limited companies.
But the government's self-employment income support scheme (SEISS), which offers non-repayable grants of up to £7,500 (subject to income tax and national insurance), doesn’t cover company directors.
Company directors can furlough themselves instead and get paid 80 per cent of wages up to £2,500 a month under the coronavirus jobs retention scheme.
But Kimberley she's better off claiming benefits as she only pays herself the minimum wage, and takes the rest as dividends.
The mum also doesn't want to take-up the government's varying small business loan schemes as she's worried it will push her into even more debt.
1.1m sign up for grants in two days
Around 1.1million people signed up for self-employed grants worth £3.1billion in two days since the scheme opened this week.
But company directors aren't the only people missing out.
To qualify, you need to have submitted a tax return for the 2018/19 financial year, which means start-ups lose out.
What is furlough?
THE aim of the government’s job retention scheme is to save one million workers from becoming unemployed due to the lockdown.
Under the scheme, the government will pay 80 per cent – up to £2,500 a month – of wages of an employee who can’t work because of the impact of coronavirus.
Workers will be kept on the payroll rather than being laid off.
The government will pay the associated employer national insurance contributions and minimum automatic enrolment employer pension contributions on top.
The scheme has been extended to run until the end of September (although businesses will be asked to chip in from August) and can be backdated to March 1 2020.
It’s available to all employees that started a PAYE payroll scheme on or before March 1, 2020.
If you’re between jobs, have started at a new place of work or were made redundant after this date then you can ask your former employer to rehire you to be eligible for the scheme.
Employers can choose to top up furloughed workers’ salaries by the remaining 20 per cent but they don’t have to.
Firms who want to access the scheme will need to speak to their employees before putting them on furlough.
While on furlough, staff should not undertake any work for their employer during the scheme.
According to the ONS, 151,000 people have only been self-employed since the start of the April 2019 tax year – and this data doesn't cover those who became self-employed in 2020.
Another group of people losing out are those who earn more from other income than they do from being self-employed because, for example, they also have a part-time job, or they earn money from a pension or investments.
'I've got bills to pay. I can't afford to not work'
Those with trading profits of more than £50,000 in 2018/19 or more than £50,000 as an average between 2016/17 and 2018/19 also lose out.
Sound engineer Mike Murray falls into this category. The 51-year-old from Manchester told The Sun he worked 60-hour weeks a few years ago, which takes him over the earnings threshold for the grants.
However, in the last financial year he made less than the threshold and says he's had to go onto £133 a month Universal Credit and live off the limited savings he's built up.
Mike, whose wife is a key worker at a nearby supermarket, said: "What I earned two years ago is no reflection on today's earnings.
"I shouldn't be penalised for working hard, building my business and putting money into the economy. Why does someone who earns £49,000 get £7,500 and someone who made £50,000 two years ago get nothing?
"It's wrong. The system itself isn't fair as it's a cliff edge. Just because someone had a good year a few years ago doesn't mean they don't need help now. The scheme is also far less generous than the help for employees who all get some form of assistance if they've been furloughed.
"If I could go back to work again I would – I've got bills to pay and I can't afford not to work. But 80 per cent of my income comes from installing sound systems in pubs and they're all closed."
Self-employment grant: who can claim?
YOU can claim if you're a self-employed individual or a member of a partnership and you:
- have submitted your self assessment tax return for the tax year 2018/19
- traded in the tax year 2019/20
- are trading when you apply, or would be except for coronavirus
- intend to continue to trade in the current tax year (2020/21)
- have lost trading profits due to coronavirus.
Mike too is fearful of the government's bounce back and business interruption loans as he doesn't want to take on debt without knowing when he can work again.
'A whole year of my work isn't being taken into account'
And even those who do qualify for the grants may find they get far less than they're currently earning or what they were on track to make.
Potter, Jenni Jacques-Williams, says she gets just 5 per cent of what she earned in the 2019/20 financial year under the grants scheme, which has forced her to claim Universal Credit.
But the 41-year-old from Warrington says it won't come close to covering the mortgage on the home she shares with teacher husband Alex, 46, and their four children aged between nine and 12.
Jenni set-up her pottery making, teaching and community outreach business, Lemon Studio, two and a half years ago.
But as the government's scheme only covers trading between 2016/17 up to 2018/19 she feels she's being penalised as a start-up when high set-up costs meant she made a loss in her first year.
She says she knows several artists in a similar position.
"A whole year of my work isn't being taken into account," Jenni said. "And that was my best year. It's a joke.
"I used redundancy money from my last job to set-up my company and at the start I had to buy a kiln, and equipment and that's all counted against me.
"I've tried to sell online in the meantime but people aren't buying at the moment and lots of my suppliers have run out of materials, such as clay.
"Even when I do go back my income is likely to take a hit as I'll probably have to run much smaller classes so people can safely social distance."
Jenni too has avoided the government's loans schemes and the mortgage holiday help on offer as she's worried about being unable to repay this debt further down the line.
Of course, while some lose out others will benefit. Think tank the Institute for Fiscal Studies (IFS) says those whose profits fall by less than 80 per cent as a results of the coronavirus and those whose profits were falling, will be better off with a grant than they would have been without coronavirus.
A Treasury spokesperson said: “More than a million people have already applied to our scheme – which is one of the most generous in the world and targeted at those who are most reliant on their self-employment income.
“Those who are not eligible have access to a range of our other support measures, including loans, mortgage holidays and tax deferrals.”
For further help, we've rounded-up 21 ways to fix your coronavirus-hit finances.
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