The rise and spread of Covid-19 around the world has had an unprecedented impact on global economies as well as our day-to-day lives. When news of the virus first emerged in December, many people, myself included, were quick to shut down the potential effect that coronavirus would have on us as individuals. Prolonged sick leave periods and stricter guidances on social distancing have meant that many workers have had their income reduced, or in some cases stopped completely; disproportionately affecting gig-economy workers, those on zero hour contracts and the self-employed. Over the last few weeks, the UK Government has been slowly introducing a number of measures to soften the financial impact to affected individuals and businesses. In this article I take a look at some of the different aspects of the “financial package” that may affect you.
On 20th March, the UK Government announced the introduction of the Coronavirus Job Retention Scheme. This opt-in scheme for employers has been introduced to prevent workers being made redundant due to the Covid-19 crisis, subsequent business closures and hit to the economy. The government will reimburse 80% of an employee’s wages, up to £2,500 of pre-tax salary a month, and will include the usual benefits and deductions, such as Employer National Insurance, minimum pension contributions and income tax. Employers can top this up to 100% if they wish, however they do not have to. The scheme will backdate to March 1st and is set to run for three months, but this may be extended if necessary. For an employee to receive this, they must be placed on furlough, which essentially means that your job is still there but you are not working.
While this is a must-have intervention, and adds job security for many in these unpredictable times, the scheme does not offer anything to help those that were made redundant prior to 28th February. If, however, you were made redundant on or after 28th February due to the crisis, it is worth speaking to your employer to see if they will take you back on 80% of your previous wage as a furloughed worker.
As of 26th March, landlords must give all renters three months’ notice if they intend to end their tenancy; this was previously one month. Additionally, any pending evictions will be suspended. This buffer period applies to most private and social renters and will be in place until the end of September 2020.
Renters are still liable for rent and are advised to speak with their landlords if they foresee difficulties in making rental payments. I have heard a number of stories, through friends and social media, of landlords forgoing rental payments for the next month or so, however this is completely down to your landlord as there is no Government requirement to do this.
For those that are not fortunate enough to have one of these kind-hearted landlords and have difficulties paying rent, a £500 million hardship fund has been made available to provide council tax relief to the most financially vulnerable. If this applies to you, please contact your Local Authority for guidance on how to apply.
On 19th March, the Bank of England announced a second interest rate cut within the space of 8 days, reducing it to its lowest level in history: 0.1%. While this is bad news for savers, it could mean that your mortgage has gotten cheaper. Tracker and variable-rate mortgages should see a 0.65% rate reduction, which works out as ~£40 a month saving per £100,000 of your outstanding mortgage. For fixed-rate mortgages there will be no change.
On March 17th, the Government made an agreement with banks that they will offer those with financial difficulties the option to take a three-month mortgage ‘holiday’, meaning that customers will have a temporary break from making repayments.
As an example, if you have 22 years and 3 months left on your mortgage and were able to take a 3 month break, you would not pay anything for the next 3 months. When repayments resume, your monthly payments would increase, as the total would be spread over the remaining 22 years. This will include interest from the three-month holiday.
Mortgage holidays must be agreed with your lender first and any stop in payment that hasn’t been agreed will result in late payments, which would cause you to be in arrears and affect your credit score. To apply for a mortgage holiday, check your Bank’s website for the next steps.
The self-employed were the latest to receive new measures to support their financial security. On 26th March, the Self-Employment Income Support Scheme was announced, allowing self-employed individuals to claim a taxable grant worth 80% of trading profits, up to £2,500 a month, for the next 3 months.
To be eligible for the scheme, an individual must have at least half of their income from self-employment and have this registered on their 2018-19 tax return. This should have been filed in January, however an exemption has been made for those who missed this deadline, giving 4 weeks to file and therefore qualify for the grant. Individuals must be earning under £50,000 a year and have been operating for at least a year. If you qualify for this grant, you will be contacted by HMRC on next steps.
Similar to the Job Retention Scheme, this grant for the Self-Employed has been a vital lifeline for many, but again the measures still leave some people without support; mainly those that have been operating for less than a year. While the self-employed earning over £50,000 a year will have been in the top 10% of earners in the UK over the assessment period, their incomes are just as susceptible to volatility as those earning under the £50,000 threshold.
The Government’s financial response has undoubtedly been welcomed by many; criticisms on both the time it took to release these measures and whether they are widespread enough are still justified. Individuals that have already been made redundant, renters, and the recently appointed self-employed will be hoping that additional measures will be introduced to support them as we navigate of the most unusual and testing times as a nation. Keep an eye out for my next article on the different Government financial responses to Covid-19, comparing how the UK Government has fared.
For more information on how you can get financial support, please see the below links:
Self Employment & 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.
Employment & Support Allowance - You can apply for Employment and Support Allowance (ESA) if you have a disability or health condition that affects how much you can work.
Citizen’s Advice - If you don’t have enough to live on, you might be able to get help from your local council or an interest-free loan from the government. If you're waiting for benefit payments to start, you might be able to get your benefit paid early.
Emergency Funding - A cash crisis could be caused by anything from delayed benefits to job loss that leaves you severely short of money that you need for essentials like food. If you find yourself in this situation help is available.