COVID-19 Coronavirus financial update.

Mortgages

If you are struggling to pay your mortgage as a result of your finances being impacted by coronavirus, you can apply for a three-month payment holiday.

Interest accrued during the period will be added to the outstanding balance of your loan and can be repaid over the rest of the mortgage term.

To apply for the payment holiday, you need to contact your lender, either by telephone or online. You do not need to prove that you are in financial difficulties.

If you bought your property through the help to buy scheme, you can also apply for a three-month payment holiday on interest on the equity loan.

Renters

If you are renting and you're worried you cannot pay your rent, there is help for you too.

Legislation  has been put in place to stop you from being evicted for at least three months.

To take advantage of the scheme, contact your landlord as soon as possible and explain what your situation is.

As with mortgages, you will have to make up the payments you have missed, and landlords have been instructed to work with their tenants to create a repayment plan.

Buy-to-let landlords are also able to apply for the three-month mortgage payment holiday, as long as they pass on the benefit to their tenants.

In addition, the Government has increased the local housing allowance for people who are unemployed, on low incomes or claiming certain benefits to cover at least the bottom 30% of market rents in your local area.

Wages

If you are not able to work due to the impact coronavirus has had on the business that employs you, the Government has agreed to step in and pay 80% of your salary up to a maximum of £2,500 a month, as long as you are kept on the payroll.

You do not have to make a claim for the money. Instead, companies will apply directly to the Government for grants, and then pass on the cash to their employees.

While the scheme is not expected to start paying out until the end of April, payments can be backdated to 1 March.

It will initially run for three months, but the Government has said it will extend it if necessary.

Self-employed and freelancers

The Chancellor Rishi Sunak has announced new measures to help you if you're self employed

The self-employed and freelancers can now apply for a grant worth 80% of their average monthly profits.

The money - up to a maximum of £2,500 a month - will not be paid until the start of June at the earliest but will be backdated to March.

For now, you can claim universal credit a benefit for people who are unable to work or who earn low incomes. People who are self-employed can claim it at a rate that is equivalent to statutory sick pay, which is currently £94.25 a week.

The minimum income floor that is used to work out entitlement to the benefit has been suspended.

The Government has also said it will delay the next set of self-assessment tax payments until January 2021 to give you more time to pay your bill.

You also have longer in which to pay VAT bills, with money due from now until the end of June deferred until April 2021.

Utility bills

If you are struggling to pay your gas, electricity or other utility bills, contact your supplier, as they have been instructed to support customers who are in financial difficulties through reducing, pausing or reassessing payments.

They have also been told to help customers who have pre-payment meters but cannot add credit to them.

Support available includes using a discretionary fund to increase customer’s credit or sending you a pre-loaded top-up card so that your supply is not interrupted.

Debt repayments

Many lenders are offering payment holidays on unsecured debt, as well as waiving late payment charges for people whose finances have been hit by coronavirus.

As with the mortgage payment holiday, if you are struggling to keep up, contact your lender as soon as possible.

Unlike the mortgage payment holiday, however, this is not a formal scheme announced by the Government, so individual lenders can make their own decision on whether or not to grant you a pause in repayments. 

You may also have to provide proof that your finances have suffered.

Increased benefits

In a bid to help those on low incomes, the Government has increased certain benefits.

The universal credit allowance is being increased by £20 a week for all new and existing claimants. 

The rise, which is in response to the pandemic and comes on top of already planned annual increases, will start  on April 6 and last for 12 months.

Those who are still eligible for the working tax credit will also see the allowance increased by £20 a week.

Small business Coronavirus Help.

Hi Everyone

Here is the link to the government website for help to small business.

https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses

Few points to mention

  • There should be a major announcement in the next 48 hrs for help with self-employed income.
  • In regards to staff, normal contracts apply so if you are considering making people redundant check staff contracts e.g do they need to be paid for a full month/ redundancy pay.
  • In relation to the point above look at the employee retention scheme that runs from the 1st April avoiding those issues.
  • For those limited companies corporation tax bills are due 9 months and 1 day after the end of their business year. These can be negotiated with HMRC into some kind of payment plan
  • Make sure you apply for the rates relief with your local council
  • Commercial mortgages can also be requested for a 3 month repayment holiday however from personal experience the process seems more complicated as they have asked for my business accounts like a ‘normal’ commercial loan process. Residential mortgages are a case of contacting your lender directly usually through an online form.
  • Self-employed and other people in the Self Assessment System will not have to pay their July payment on account but this will be due 31 January 2021 - this is automatic
  • VAT payments this quarter may be deferred over the remainder of the year but VAT returns still need to be prepared and submitted on time - this is automatic
  • Under the Coronavirus Job Retention Scheme, all UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis - the application process is being devised - my reading is that you need to pay the employee and then claim back the 80% that has been widely publicised so people considering stopping wages should think carefully - rules around sole director companies are unclear.  My understanding is that the grant will be based on February's PAYE submissions.

Things you may already know:

  • a statutory sick pay relief package for SMEs - this will not be claimed via the PAYE process and the refund process is still unknown
  • a 12-month business rates holiday for all retail, hospitality and leisure businesses in England - this will be automatic
  • small business grant funding of £10,000 for all business in receipt of small business rate relief or rural rate relief - as it stands this would not be available to people who run businesses at home or those who do not pay business rates.  This will be automatic
  • grant funding of £25,000 for retail, hospitality and leisure businesses with property with a rateable value between £15,000 and £51,000 - the process will be via the local authority
  • the Coronavirus Business Interruption Loan Scheme to support long-term viable businesses who may need to respond to cash-flow pressures by seeking additional finance - this is accessed via the British Bank website
  • the HMRC Time To Pay Scheme - If you are concerned about being able to pay your tax due to COVID-19, call HMRC’s dedicated helpline on 0800 0159 559
  • Mortgage holidays for 3 months - I'm already hearing positive comments about banks providing this relief and if you are in difficulty you should contact your bank
  • IR35 for contractors has been placed on hold until April 2021
  • Companies House filings can be delayed due to Coronavirus

Pension seminars

Martin Lewis of Money Saving Expert fame has described 2020 as a ‘savings horribillis’ and it is hard to argue! A major high street bank has cut its main savings rate by 0.5% with cash savings rates at record lows. Most people’s average savings earnings are now around 0.4%!

Often people are unwilling to invest cash savings yet are happy to invest in pension. This is despite many of the underlying assets and risks can be similar. There seems to be an acceptance that pension ‘has’ to be invested but savings don’t?

There still remains a great deal of confusion with investors in regard to pensions and what options are available with their pension, on retirement, in regard to income and lump sum. The danger of pension freedoms is that many people are considering cashing in pensions, paying large amounts of tax and then putting that money in a bank when savings rates are at record lows!

For this reason Approachable Finance will be running some free, no obligation Retirement Seminars at our offices at 6.30pm on Tuesday 31st March and Thursday 23rd April. This is a perfect opportunity for anyone to come along in a group environment and get some information on retirement and savings planning. We look forward to seeing you and if it is of interest please RSVP as places are limited.

Seven pension myths busted

 

  1. It’s not worth having a workplace pension

Not true! Most people receive more back than they contributed. They also receive contributions from their employers and in most cases tax relief.

  1. My property is my pension

Not everyone wants to sell their home when they retire to live somewhere smaller. Bills still need to be paid.

  1. I’m too old to start a pension

If it’s a workplace pension, you’ll miss out on “free money” in the form of a contribution from your employer. Secondly, saving into a pension is probably the most tax efficient way to save

  1. I’m too young to start a pension

Starting early makes a huge difference thanks to the magic of compound interest.

  1. I can’t afford it

With auto enrolment, if you opt out you’ll be re-enrolled again every three years when hopefully your financial situation will have improved.

  1. My pension will be lost if I die before retirement

What happens to your pension when you die depends on the type of scheme you have. Many schemes allow the full value to be transferred to a love one / dependent.

  1. The State Pension will be enough for my retirement

The full amount of new State Pension is currently £168.60 a week – that’s just over £8,750 a year. For most people, this won’t be enough.

Flexible Access to Pension

A common enquiry over the last few years is a request for us to ‘sign a form’ to cash in or transfer a pension in its entirety into a bank account.

Often, we are contacted by people who simply do not understand that there are often better ways of taking pension. Whether it be using ‘guarantees’ associated with their pension that they were not aware or exploring options such as buying an annuity or flexible drawdown.

Whilst it may appear like the easy option of cashing in your pension, you have to consider that a full encashment will often mean a large ‘emergency tax’ bill of at least 20% of the fund value (after tax free cash).  Often the cashed in pension will sit in a bank account earning little or no interest. Not to mention the ‘opportunity cost’ of reducing the figure that gains interest by 20% paid out in tax.

If your pension is in a ‘pot’ which is invested on the stock market, it usually means it can be switched into a ‘Flexible Access’ or ‘Drawdown Pension’.  This means that the pension becomes flexible, meaning it can provide an income, or lump sum, or both. It is also accessible for the term of the pension and doesn’t tie money up like an annuity.

It is always recommended that at the point of retirement, it is worth speaking to a good independent financial advisor about your options.

New year, new protection

A new year often means that you are setting yourself goals to achieve in the coming year and in financial planning it is important that your family is looked after if anything should happen to you. If you are in a couple and have kids, the focus should be on whether both incomes would still be required if either party was to pass away or become seriously ill?

All ‘protection planning’ should be bespoke to an individual’s circumstances. The three main covers are life and/or critical illness that tend to pay a tax-free lump sum and income protection that pays out an income if you cannot work due to accident or illness.  A general rule of thumb is to take out life and/or critical illness cover for any mortgages you may have, to make sure your house is paid for. However often this is insufficient in itself as it does not take into account how the running costs are to be met by continuing to live there.

It is also important to make sure any pensions have a completed ‘Nomination of Beneficiaries Form’ so that benefits are paid to the correct person on death. As a general rule all of the above should be covered off within a Will.