Excluded from financial help

[Sertchgi123]

Over 3 million taxpayers – 10% of the UK workforce, find themselves excluded from financial support, due to Covid restrictions. Two of my family members are affected by this and there's literally nothing on offer.

Rishi Sunak is effectively ignoring and excluding 3 million from any help, yet he bangs on about how he's helping all of us. It makes me sick.

I'm sure there are many others on Mumsnet affected, or know someone who is. What can we do? I've already written to my MP and signed a petition.

@Hothammock

People can take the grants and continue earning which seems really unfair but the chancellor has already said people should be putting some of that aside for the future. There are very hard times ahead and those who are enjoying the ride now will pay the price later on down the line. Unfortunately you can't have a perfect system and there will be people who fall through the cracks. It's really scary.

I have advised my clients to take the grants offered, as we have absolutely no idea what is going to happen long term. For millions of people reality hasn't kicked in yet as they're still being supported but eventually that will have to stop.

I've told them to put the money in a separate account and if it's not needed it can be repaid to hmrc at a later date. You'd have to be pretty stupid to blow it on hot tubs and holidays.

All those whinging about self employed setting up limited companies need to remember that it was Gordon Brown who wanted that to happen. He gave tax reliefs to limited companies only, he changed the dividend rules, he brought in lower rates of corporation tax than income tax, he brought in a zero rate band for limited companies. In the early noughties, anyone self employed would have been crazy not to convert to a limited company and likewise anyone setting up from scratch or buying a business. The changes he made meant that it was limited company all the way. Gordon Brown didn't want the self employed to operate as sole traders - he wanted them to be limited companies. That's why we are where we are. Gordon Brown wasn't stupid enough to do all that by accident - it was a deliberate plan. Over his term, he also kept increasing both employee and employer NIC which made it very expensive for limited company owners to pay themselves via wages/payroll.

Prior to Gordon Brown, limited companies were really only for the larger business. There was no real benefit for sole traders to convert to limited companies and the costs/bureaucracy easily outweighed the small tax benefits. Brown cut the costs/bureaucracy and introduced lots of tax incentives.

HMRC and The Treasury have been fully aware of the complications of the limited company versus sole trader situation for many years, but successive governments and successive HMRC/Treasury chiefs have put it in the "too hard" pile and failed to address the problems. They are clearly aware of it because they set up the universal credit system to treat limited company owners/directors as sole traders for benefit purposes.

They'll have to address it now.

Rishi has had 10 months to rectify his knee-jerk mistakes made in a rush last March. It's an absolute disgrace that he's sat with his fingers in his ears going "la la la" rather than admit to his mistakes.

@Jessi1972 regardless if you are on JSA/ESA your income has not been affected. The extra £1000 a year was to help with lower earnings.

@Jessi1972 I do think JSA and ESA at the standard rate is far to low and should be higher, but that’s a separate issue.

@ShrikeAttack

I'm pretty sure you can apply for a bounceback loan and use it to pay yourself in these circumstances.

Santander - my business bank - specifically state that you can't use it to pay yourself wages.

@Babyroobs

No one is excluded from universal credit unless they have capital over 16k.

In my case, that £16k was the result of a decade of scrimping and saving towards a house deposit. It is not, and never was, a slush fund, and nor did it come easily.

My landlord has been able to get a mortgage holiday, while demanding rent in full from me. I don't get any help to pay that rent.

If I'd managed to save up slightly more and had got a mortgage pre-pandemic, then I would have got both a mortgage holiday and Universal Credit. Instead, I receive nothing.

If I had spent the money on fancy holidays, a brand new car or just lots of nights out, I would have received Universal Credit. Instead, I'm being punished for being financially responsible enough to save up for a house deposit.

I'll also note that no one who received either furlough or SEISS was asked about their savings.

@littleone7 for many small ltd companies the shareholders are the director and sole employee, which is often the partner. We didn't choose to run a ltd company, it was the only way we could continue in our field.

If I had spent the money on fancy holidays, a brand new car or just lots of nights out, I would have received Universal Credit. Instead, I'm being punished for being financially responsible enough to save up for a house deposit.

This with big fucking bells on. It's just so wrong.

[quote MoreMorelos]@littleone7 for many small ltd companies the shareholders are the director and sole employee, which is often the partner. We didn't choose to run a ltd company, it was the only way we could continue in our field.[/quote]
I understand but when people speak about 'directors dividends' it's incorrect as it is only shareholders who receive dividends. If a director of a company chooses to declare a dividend to a shareholder, that is based on the profit of a company and is not the directors remuneration. Unfortunately dividends have been used as a way to pay less tax (I know now it works out at roughly the same as PAYE) and that is why it was done. If directors wanted to receive furlough money, they should have been on the payroll, taken a proper wage and paid NIC and PAYE at the rate all other employees do.

I think a lot of it is down to accountants recommending to directors of ltd companies to operate like this without explaining the full implications and that being a director/shareholder/employee is very different to the other.

For those who say just rely on universal credit/you have savings, you should also be aware of this.

I am self employed. Started 06 April 2019, so when the pandemic hit, I was 10 days short of the first tax year. I'm entitled to nothing.

I'm a freelance sole trader and in July, my income disappeared almost overnight. I had built up about 9k in my business account - of which about £7.5k was earmarked for my Jan tax bill - the first year full tax payment plus my first balance on account - so essentially paying 1.5years tax in one go.

My husband is also self employed. He also had money set aside in his business account to pay for his tax bill (think a similar amount).

So technically, we each had £9k savings = £18k savings to fall back on according to universal credit. So not considered eligible.

However, of that 18k, each of us needed to pay £7.5k to HMRC, giving us only 3k savings. And we all know that HMRC is going to make sure they want this money on time.

I've submitted my tax return back in August. I also paid the bill in December so I knew it was over and done with. It still means that I'm now panicking about income over the next few months because Rishi has made it clear that freelancers are a group he deems unworthy

If directors wanted to receive furlough money, they should have been on the payroll, taken a proper wage and paid NIC and PAYE at the rate all other employees do.

Considering that the word furlough wasn't even in the UK tax system pre covid, they'd need a pretty good crystal ball wouldn't they? Pre covid, there was NO reason whatsoever why a director would pay themselves more in wages - there were NO links between amounts paid and benefits they were likely to receive. State pension was the main benefit of paying NIC and that wasn't linked to wage levels nor amounts of NIC paid.

@user1497207191

If directors wanted to receive furlough money, they should have been on the payroll, taken a proper wage and paid NIC and PAYE at the rate all other employees do.

Considering that the word furlough wasn't even in the UK tax system pre covid, they'd need a pretty good crystal ball wouldn't they? Pre covid, there was NO reason whatsoever why a director would pay themselves more in wages - there were NO links between amounts paid and benefits they were likely to receive. State pension was the main benefit of paying NIC and that wasn't linked to wage levels nor amounts of NIC paid.

I agree no one could foresee this but for years directors have not wanted to put themselves on the payroll so they did not have to pay as much tax. Directors who are not on the payroll will have been paying less tax than a normal employee so why should they be entitled to the same help?

The situation for the self employed (ie sole traders) is very different to directors' dividends and I believe a lot have been excluded when they should be receiving help from the government.

@pinkunicornwithacatonitsback

For those who say just rely on universal credit/you have savings, you should also be aware of this.

I am self employed. Started 06 April 2019, so when the pandemic hit, I was 10 days short of the first tax year. I'm entitled to nothing.

I'm a freelance sole trader and in July, my income disappeared almost overnight. I had built up about 9k in my business account - of which about £7.5k was earmarked for my Jan tax bill - the first year full tax payment plus my first balance on account - so essentially paying 1.5years tax in one go.

My husband is also self employed. He also had money set aside in his business account to pay for his tax bill (think a similar amount).

So technically, we each had £9k savings = £18k savings to fall back on according to universal credit. So not considered eligible.

However, of that 18k, each of us needed to pay £7.5k to HMRC, giving us only 3k savings. And we all know that HMRC is going to make sure they want this money on time.

I've submitted my tax return back in August. I also paid the bill in December so I knew it was over and done with. It still means that I'm now panicking about income over the next few months because Rishi has made it clear that freelancers are a group he deems unworthy

Money set aside to pay a tax bill can be disregarded when considering capital on UC.

I agree no one could foresee this but for years directors have not wanted to put themselves on the payroll so they did not have to pay as much tax. Directors who are not on the payroll will have been paying less tax than a normal employee so why should they be entitled to the same help?

How much paid in tax in the past has never had any relationship with how much benefits are paid in the future. Why would that start now? But, as others have also said, there's not actually much difference now in tax re dividends as the company pays corporation tax and the recipient pays income tax, set at a level to roughly remove the tax differential set in place by Gordon Brown! The difference is NIC and that's because a self employed limited company director pays circa 25% national insurance as opposed to an employee paying 12% or a self employed sole trader paying 9%. If you were self employed, would you really pay 25% nic for no good reason as it didn't give you any higher state pension, and pre Covid, furlough nor any other similar wages related benefits simply didn't exist.

Money set aside to pay a tax bill can be disregarded when considering capital on UC

Useful to know, however it doesn't make what's happening to so many right. I know so many on furlough, who are being looked after having family members who aren't is painful beyond words.

Many of the 3 million are newly self-employed people who set up business after 6 April 2019, and therefore do not have a tax return for the required three-year-period between 2016 to 2019.

It's not just company directors, in fact they are in the minority of the 3 million.

@Sertchgi123

Many of the 3 million are newly self-employed people who set up business after 6 April 2019, and therefore do not have a tax return for the required three-year-period between 2016 to 2019.

It's not just company directors, in fact they are in the minority of the 3 million.

Exactly. Nonsensical and unfair, just like the mind-mumbingly stupid 50:50 rule which bases 2020 support on what you were doing in 2018. Have they no understanding at all that peoples' circumstances change? I.e. moving from employment to self employment, or moving from sole trader to limited company (or vice versa), or even people being excluded under the 50-50 rule by taking a one off pension lump sum back in 2018? And yet Boris and Rishi still don't understand or accept that their schemes are completely unfair. Last March, they had to do something quickly, but that doesn't excuse why they won't accept the schemes have flaws and correct their errors - they've had 10 months to do it.

My brother didn’t pay a penny in tax. He formed some dodgy umbrella company to avoid tax completely. Then his drug taking got the better of him and he stopped working. He spent nine years at home drinking and strumming a guitar.

When covid hit, his benefits were increased.

But people paying masses of tax in the past ought to be excluded from help?

Ok!

Oh god, are people still banging on about limited companies and tax avoidance on this thread? Once again, for the hard of thinking:

• Most of the Excluded don't come into the category of company directors, but are newly self-employed/newly laid-off/people who mixed self-employment and PAYE and had substandard crystal balls, etc.

• Those that do are highly unlikely to have set up a limited company for tax avoidance reasons but rather because of the particular requirements of their field or their clients (e.g. IR35 contractors).

As well as parading your ignorance, you are all sounding like really unpleasant people.

And no, not everyone who doesn't qualify for UC is sitting pretty on savings, so you can fuck off with that one too. In this household we are about £60K down on the year and really, really struggling, but because I qualified for a tiny bit of SEISS, we're not eligible for anything else.

Oh and no, mortgage holidays were not extended for another six months in November. Anyone who has already had a six-month mortgage holiday has to resume paying as usual at this point, or lose their home. Nothing else is getting any cheaper either.

I don't begrudge anyone furlough money, nor people who were eligible for more from the SEISS system but, as OP and pp have said, there's been ample time for the Chancellor to refine a system that we all accept was devised in haste. His failure to do so is clearly a choice, and one that is financially ruining a whole section of the population completely unfairly and for no clear reason.

And can we please stop calling him 'Rishi', like he's our friend or something. He's not!

^ Yes