COVID-19: Tips to help prevent and manage money worries

by | Apr 9, 2020 | Blog, Covid-19

Tips & advice on personal finance

Whilst your health and wellbeing are undoubtedly the priorities at present, thoughts will inevitably turn to money and what you might do if your circumstances change.

With Government support encouraging and helping many supply chains to cover up to 80% of your pay for the next three months, we hope that many employers will be able to maintain their contractor workforce for the foreseeable future.

However, none of us know what the future might hold, so it’s worth looking at the financial impact, should your work be furloughed or, worst case scenario, your contract terminated sooner than you were expecting. We hope these preparations won’t be needed, but it will significantly reduce any money stress if you know where you stand if your income is affected.

A brief reminder of Government schemes:

Government schemes – for more detail click here but in summary

PSC (limited company) contractors

  • You should be aware that if your company has no work for a period, due to Coronavirus, you may be able to claim some government support covering 80% of your salary through the Coronavirus Job Retention Scheme.
  • If, like many, you take your tax-free allowance as salary each month and the rest of your income via dividends, you will receive 80% of the salary element only. This is certainly better than nothing, but will represent a significant reduction in income for most.
  • Please see our separate article on what it means to be a furloughed and contact us if you need help to review your company’s finances to understand what funds are available, what your tax liabilities are and how to use the scheme.

Umbrella employees

If you are an Umbrella employee it is anticipated the Coronavirus Job Retention Scheme would apply which would mean you receive 80% of your normal salary, subject to a monthly cap of £2,500. However, there is still significant uncertainty around how this will work. We are working – as a matter of urgency – with industry bodies such as the FCSA to press Government for clarification. Public sector organisations that use Umbrella contractors have been issued with guidance from Government that says they can continue to process payments for contractors who are temporarily unable to work as a result of Coronavirus.

Self-employed people & members of the Construction Industry Scheme (CIS)

  • If you are self-employed or use the Construction Industry Scheme, and you have average profits of £50k or less, then you can also apply for a grant equal to 80% of average self-employed profits up to a maximum of £2,500 per month.
  • To be eligible, you must have submitted a 2018/19 tax return (or do so before April 23rd 2020).
  • The grant you are entitled to will be determined by your average monthly earnings based on your last three years’ tax returns, or less if you have not been trading for three years to April 2019.
  • If you have been trading since April 2019, there is no explicit support for you outside the welfare system but you may be able to receive a grant if you can prove your earnings. . HMRC will contact you in the coming months to tell you if you qualify and how much might be available in your circumstances.

Alongside these measures, a number of other initiatives have been announced by the Government to help ease money worries – here’s our summary of cashflow help for those affected by Coronavirus.  These initiatives include extended deadlines for VAT payments for businesses and an extension to ‘time to pay’ arrangements for other tax liabilities. Also, personal tax payments on account due in July 2020 are now due instead by January 2021.

With these income protection and tax deferral schemes in place, the Government hopes to minimise the impact on the UK workforce, but what else can you to do manage your personal finances at this uncertain time?

Managing your personal finances

The first thing our team of accountants would advise is to get a clear picture of what your financial status is now. Ask yourself, how long could I sustain my lifestyle if my income drops? What amount do I need to cover my basic needs such as mortgage/rent, utilities and food?

Many banks offer budgeting tools but there are lots of great apps available, like Money Dashboard, which help you track your finances and see what you’ve got coming in vs what you’ve got going out. (If you’re a limited company client of JSA, don’t forget to continue to use your FreeAgent portal to track and monitor your company accounts).

It may also be worth checking with your bank to see what help they have available. For example, Barclays run a Money Mentors scheme to enable people to access tailored advice and support – you don’t have to be a Barclays customer to access it.

If you have other loans which you’re worried about, such as car repayments, then it’s important to speak to your lenders if you think you’re going to miss payments. However, as mortgages and rent are likely to be your biggest financial commitments, please be aware that:

  • The Government instructed banks to provide mortgage holidays for customers affected by Coronavirus. Most high street lenders have schemes in place to enable you to defer payments, some for up to three months, should the need arise, and there are some that are offering lower rates for some borrowers. Decisions are being made on a case-by-case basis, so speak to your lender in the first instance.
  • Added protection is now available if you rent your home too, with an extended ‘buffer period’ in place until 30th September which means your landlord must give you 3 months’ notice if they want to end the tenancy.
  • Some councils are offering council tax holidays and deferred payments for those who are struggling to pay, though there is no standard approach among local authorities so check what’s allowed in your area.

Another way to take control of your personal finances at present is to review your pension contributions, savings and investments to check whether they are affordable for the foreseeable future. Everyone’s circumstances are different so it’s important to take independent financial advice, but you may be able to temporarily cease or reduce contributions to ease the strain on your personal finances in coming weeks, if necessary.

The same goes for other expenses, for services or insurance. You should check what policies you have in place and whether they still meet your needs. This review may highlight gaps but equally you may be paying for facilities or supplies which you don’t really need, or which no longer offer good value for money. Again, it’s important to take tailored advice on anything complex, but a little bit of time spent on reviewing what you have in place could save you money in the short-term and give you peace of mind.

How can we help?

Whilst we cannot provide advice relating to your personal finances and investments, we can help you navigate the various government schemes designed to protect your income during the Coronavirus pandemic.

If you are a limited company contractor, a self-employed contractor or an Umbrella worker, we will do our best to answer any questions you may have. Our phone lines are very busy at present but please do keep trying our lines or you can email us [email protected] or request a callback via our website.

We hope that you and your families stay safe and well during this difficult time.

Useful links
Money Advice Service
Money Saving Expert

JSA Group

Specialist outsourced accountancy and payroll services for recruitment agencies, freelancers, contractors and umbrella workers. We’ve built up expert knowledge and experience within the industry by supporting tens of thousands of customers for 30 years.

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