The coronavirus and measures to slow it down are unprecedented in our lifetime; people are worried and scared, they feel out of control. There are many things that are outside of your control, so concentrate instead of the things you can, and remember:
- This will be over one day;
- Help yourself and family first; and then your business
- Be prepared for when this is over.
This means having a plan for the things you can control. There is plenty of advice online about how to self-isolate and stay safe.
In this email I’m going to cover the things you should be including in your plan from a personal finance point of view. If these seem obvious bear with me: not everyone is good with money. Tomorrow I’ll have advice about what you can do to protect your business.
- Here are the facts
No one knows how many people have lost their jobs this month. It may well be millions. It is highly likely that many, and quite probably most, self-employed people have seen their incomes disappear, overnight. Almost none of those businesses can access any government support as yet. When they do, some might get small grants.
The government backed loan schemes will not be available to many of them. Vast numbers of those who lost their jobs will now be waiting weeks for their benefit. Those who are ‘furloughed’ may well not be paid until end April at the earliest, when the government can reimburse their employers who will not otherwise be able to pay them. Those who are still working but on fewer hours have no safety net.
The self-employed still have no idea if they will get any help at all and the indications from the Chancellor today are that this could be months, and not weeks, away. An amendment to the Coronavirus bill, to give the same support to self-employed people as for employees, was tabled in Parliament. There are those who think this may become law. I do not. As written this is far too simplistic to use; there are no anti-abuse provisions, and no flexibility with regard to reduced rather than any income. There is also no recovery mechanism in the case of over-payment. What the amendment does, however, is bring pressure to bear on the government to deliver a scheme for the self-employed, but do not get your hopes up just yet.
And all this is despite the fact that over 6.5 million households are in debt, or face the prospect of falling into debt within a month, should they lose their jobs. Over 40 per cent of non-retired households have too little saved to pay even a month’s worth of household bills.
The Executive Director of The Equality Trust, Dr Wanda Wyporska, said: “Over a third of households owe more in debt that they have saved, and millions more face falling into trouble in the event of a financial shock they cannot avoid. Many households are barely clinging on, with high costs, low incomes, and reduced government support. This is not just a financial issue, we know that inequality means that our trust in others is lower.”
Unless the UK government can get cash to people – employed, self-employed and unemployed – very, soon then there is a risk that social order in this country is going to break down. The time for emergency cash injections has arrived. They may not need to be big – but something has to happen, and very soon.
- Protect yourself first
You cannot help others unless you are safe, so help yourself and your family first – you cannot pour from an empty jug.
Now schools and nurseries have closed their doors it will be women who take on most of the unpaid care work, reducing their hours or giving up paid work to look after their families. Many women are on the front line, delivering essential services in hospitals, care homes and supermarkets. It’s women who are also more likely to care for older or disabled relatives and neighbours. It’s mothers who will prioritise feeding their children if food runs short and with most children at home there will more food consumed. Put their needs first.
- Conserve cash
None of use knows for how long this virus will keep us in lockdown or how many people will get seriously ill before it’s over. We are all going to need to conserve what cash we have for as long as possible. This means stopping all unnecessary and discretionary expenditure immediately.
Banks and building societies have already started taking applications for mortgage breaks of three months; these will have to be extended but if you have a mortgage do this now. If you have other debts, loans, HP etc. you can contact your lender and ask for help in the form of a repayment break or reduced payments. Councils have schemes to help if you will have difficulty paying your council tax. Landlords cannot evict tenants who cannot afford to pay their rent and utility companies cannot cut you off if your bills are unpaid.
You can get more advice on my website at: https://guilfordaccounting.co.uk/resources/coronavirus-benefits-sick-pay-and-lost-hours-your-rights-in-the-uk/
If you’re fortunate to have a credit card use this to pay for essential supplies (but be aware that interest will be payable if you don’t pay the credit card bill in full).
- Tax payments
The government has announced that if you have an income tax payment due in July you do not have to pay it and will have another six months before it is due. There will be no interest or penalties for late payment.
There are also tax breaks for businesses which I will cover tomorrow.
- Help others if you can and it is safe to do so
In most communities there are groups being set up to help the most disadvantaged and vulnerable. If you are able to, and when you have taken the necessary measure to protect yourself and your family, why not see what you can do for others?