Archive: MoneySavingExpert's Money Tips Email

Martin's coronavirus update

19 NEW need-to-knows, incl for self-employed, ltd co directors & employees, £500 0% overdrafts now on, cheap energy ending?, child benefit, uni credit changes

While coronavirus has united the nation in support of the NHS, it has led to stark division over the financial impact. This high contrast inequity was shown by the 77,000 who voted in my Twitter poll last week; 39% said they'd be worse off, 36% no change, while 25% thought lockdown would improve their finances.

With the economy predicted to shrink by a third this quarter, the number who have hit dire straits sadly needs little explaining. Yet the fact one in four people will see improvement probably does; for many still working, locked in at home, their income is stable, and expenditure vastly cut. It even leaves some starting to save for the first time.

My aim in these weekly need-to-knows is to ensure, regardless of your situation, you're tooled up with all the new info, discovered by us and announced by Govt, so you can support yourself and your families as best as you can. As always, everything we learn gets added into the huge wealth of information in our six constantly updated guides... 

And finally, while we strive for 100% accuracy, as things are changing all the time, please give us just a touch of wriggle room.

1) CONFIRMED: Self-employed? If you've savings put aside to pay tax, it NEEDN'T reduce your universal credit. Universal credit (UC) payouts are reduced if you've savings (or technically capital). The drop starts at £6,000 savings and by £16,000 you can't claim.

Right now, for the first time, there are hundreds of thousands of first-time self-employed UC claimants. Many of whom, rightly, as I've long warned, save 1/3 of earnings to pay tax. The problem is this normally sensible planning means you're due less UC.

As Dee tweeted me: "@MartinSLewis I'm self-employed and put money aside to pay my tax, which put me over £16k. If I pay my tax now, would I be eligible under universal credit?" And indeed this and many similar questions started me off checking what was possible.

I discussed it with the Department for Work & Pensions, and we clarified a much better route. This is the written confirmation from a spokesperson, just confirmed: "Most commonly, we'd expect people to have business assets in a business account, including savings for tax liability, which would not be counted towards their capital limit.

"However, if someone has money in their personal account to be used for business purposes, it won't be counted towards their capital, but they may be asked to prove that the money is for business purposes."

To translate: if you've got savings to pay tax, put a note of this in your online UC journal, and tell them when they call, and it should be discounted from the calculations. See help claiming universal credit.

2) NEW. Limited company director coronavirus tips / wriggle room video. Those who work via small limited companies that they're directors of (as many firms ask them to) will know already there's very little state support available, as dividend payments aren't covered. I've no grand solution, but have found some wriggle room, which I explain in my 10-min small limited-company director coronavirus help video.

3) Urgent. Lock in cheap energy NOW as prices are at their lowest for 3yrs, but the oil price is rising. Save £350+/yr. In the last few weeks, the coronavirus slump means oil prices hit a 17yr low, but on Sunday, Russia, US, Saudi Arabia et al agreed to cut production massively, to bolster the price. While this is just one element of our domestic energy prices, it's an important one.

The cheapest energy deals for switchers are at their lowest for about 3yrs - though in the last few days, some of the cheapest have been pulled. So use this energy club link to compare specifically cheap FIXED tariffs (with decent service) which lock in today's rates. Of course, things could reverse and get cheaper, but that seems unlikely for now.

Savings for someone on a Big 6 standard tariff with typical usage are £350ish/yr. The reason I've put comparison links is that your exact winner and saving depends on usage and location. If you don't want a fix, use our whole of market comparison to compare all tariffs. Best to stick online for this - firms' call centres are busy dealing with vulnerable customers.

PS: Switching almost always means NO ONE VISITS - it's the same gas, same elec, same safety, only service and price changes. Your supply won't be cut off. So don't overly worry during the pandemic.   

4) Employer refusing furlough as it doesn't have the cash for salaries in the meantime? You can agree to delayed pay. The state will cover furloughed employees' salaries from March to May. Firms should be able to apply for this cash next week, and receive it hopefully days after that. Many people have reported to me that their firms are so short of cash to pay now, they won't furlough but instead offer unpaid leave/redundancy.

So many have asked if their firm could delay their pay. The Govt told me that's a matter between employer and employee. So you and your employer can agree it can pay you a little later (it's better than nowt), though best it's done via a formal agreement.

5) You can now ask for the first £500 of your authorised overdraft to be interest-free for 3mths. Emergency measures by regulator the Financial Conduct Authority (FCA), which came into effect yesterday (Tue 14 Apr), require banks to ensure for those struggling due to coronavirus...

- On request, the first £500 of authorised overdrafts can be interest-free for 3mths (for overdrafts under £500, the entire balance will be 0%). This won't affect your creditworthiness. See bank-by-bank overdraft help and updates for how to get it.

- Those with accounts that have an overdraft facility can request one of these 0% overdrafts, subject to a credit score.

- And for the next 3mths, no one (whether struggling or not) should be charged more under the new c. 40% interest rates, which came in on 6 April, than they were under the prior system.

Some banks are doing more... For example, HSBC, TSB, Lloyds, Halifax, Bank of Scotland and Santander are automatically giving ALL overdrawn customers up to a £500 interest-free overdraft.

6) Card & personal loan providers must now, if asked, give 3mth payment holidays to those struggling. The emergency measures by the FCA that came into effect yesterday (Tue) also require banks to give those struggling due to coronavirus, who ask, payment holidays of up to 3mths on personal loans, credit and store cards and catalogue debt. 

Don't just stop paying though - agree it with your lender first. Then these payment holidays can't hurt your creditworthiness, nor can there be any penalties or charges if you do it (and thankfully the FCA took our suggestion on board so you won't lose a 0% deal either). See full lender-by-lender credit card and loans help and update.

- Is it worth taking a payment holiday? Yes if you have an emergency cash flow need, no if not. That's especially true if the interest rate is high, as it'll still rack up during the payment holiday, and as you're not making repayments it can be hefty. So only do this if you need it.

- Does this apply to peer-to-peer loans? Surprisingly no. They're technically a different category from personal loans. I've suggested to the FCA it reconsider, as I don't believe these loans were marketed as substantially different. Though big provider Zopa is voluntarily following most of the rules.

7) Urgent. If you're self-employed, you must submit any already late 2018/19 tax return by Thu 23 Apr to be eligible for help. In early June, the Self-Employment Income Support Scheme will pay 3mths of grants worth up to 80% of self-employed profits, capped at £2,500/mth. To be eligible, you must have filed a 2018/19 tax return.

Most have, as we're already way past the usual 31 Jan self-assessment deadline, but it's been extended for coronavirus support purposes to 23 Apr. Miss it and you're not eligible for support. See self-assessment help or the charity TaxAid can give those on low incomes support if struggling to do it.

8) Car finance announcement likely this week or call me Eileen. I'd be so surprised if the FCA doesn't announce consultation proposals this week that if it doesn't, slap me with a wet fish and call me Eileen. What it'll say though is harder to guess. For updates and info when it happens, see car finance help.

9) Parent whose income has dropped? Are you eligible for child benefit? Child benefit is worth £21.05/wk for one under 16, £35/wk for two. If no one in the household earns over £50,000/yr, you're due it all, above that you get less, until at £60,000/yr you're not due any (and yes, it's crackers that two parents earning £49,999 get it, but one earning £60,000 doesn't - but that's for another day). 

So those earning about or just above these boundaries who have been furloughed, made redundant or put on unpaid leave may now be able to claim. Eg, someone on £60k who earns nowt for 3mths would be entitled to it all. You can backdate claims up to 3mths too.

As most don't know how long their income will drop for, just put in a claim now. It's easy, if you (hopefully) earn more than expected, you just end up paying it back through the tax system. More help in child benefit if income drops.

10) Fallen through the gaps, not supported? I'm sorry, don't expect major change. A fortnight ago, I wrote my Nine things the Chancellor could tweak to help people blog. It now includes his responses to five of those. Just a few problems I highlight include...

- Limited company dividends not being covered.
- New employees after 28 Feb can't be furloughed.
- No help for the self-employed who started biz in last year.
- No help if firms refuse to furlough, but do lay-offs instead.

I'm constantly being asked for news of change on these and other gaps. So I need to be plain - barring minor guidance clarifications, there aren't any. And the strong signals I'm getting from key sources is THERE WON'T BE ANY, certainly not unless, as isn't expected, lockdown extends beyond the original 3mth financial limit.

Of course, that isn't a reason to stop campaigning for change (MSE and I are doing that too), but it is a reason to plan your finances on the fact things won't change, to apply for universal credit if you haven't already and to do what you can. I'm sorry to bear this unwanted news.

11) Employer unsure about furloughing you? Use our cheat sheet, including template letter to make it easy for them. Last week, I drafted a Coronavirus Job Retention Scheme cheat sheet - 12 simple furloughing need-to-knows for employees and small firms. It's a simple way to be prepared if you're trying to persuade employers to furlough you. It was popular, so I wanted to remind you about it.

Plus as furloughing sometimes involves both parties agreeing a contractual change, employment specialist ACAS kindly sped up drafting its furloughing template letter for employers so we could include it. It's an easy legal way to furlough someone.

12) Income dropped due to furlough, redundancy, business struggles? Do a budget. With millions facing sudden income shocks, it's crucial to try to budget and plan expenditure. Even if income is only 20% lower, as it is for many being furloughed, that's a big change to your discretionary spend.  

Of course in some cases right now, it's simply impossible to balance a budget, but even then it's important to understand the limits. Use our free budget planners to go through it. Plus give yourself a money makeover to ensure you're on the best deals, so you have the lowest outgoings on everything.

13) Register newborns for child benefit without registering their birth. Normally, you have to go in person to register a birth before getting child benefit. For obvious reasons this has been relaxed - just tell HMRC when applying that you haven't been able to register your baby's birth due to coronavirus. See full claiming child benefit for newborns step-by-step help.

14) Can I apply for universal credit if I'm going to get the Self-Employment Income Support Scheme payment? Yes. Many are also worried how they interact. In a nutshell, apply for UC now, then when you receive the Self-Employment Income Support Scheme payment, it's counted as earnings, so your UC will drop then, but I've been told they won't be looking at retrospective clawbacks due to this.

15) Overtime earnings, bonuses & possibly sales commission count towards furlough pay. I've been asked this a lot by people trying to budget. With furloughing your work is put on hold and the state covers 80% of your salary, up to a max payment of £2,500/mth.

The definition of salary is 'regular, contractual pay', which includes basic wages, compulsory commission and past overtime. Yet it excludes discretionary commission (eg, tips), 'tronc', bonuses and benefits in kind.  

Previously we'd thought sales commission didn't count, now it seems (though we're waiting for an official answer, so it's still TBC till next week) if it's in your contract, eg, you get 10% of each sale, it's covered.

As for how much overtime/commission you get, again it's TBC, but normal furlough rules of variable income is the higher of the same month the prior year (eg, March to March) or average over past 12mths. For more see How is furlough pay calculated?

16) You can now claim a train refund online/remotely. Nearly all train tickets bought before 23 Mar have been refundable since then, though you may need to pay a £10 admin fee on season tickets. A few firms were, ridiculously, saying you must go to a station office to sort it, now train firms allow all passengers to get refunds remotely, usually online. See rail refund help.

17) One in nine mortgages are now on payment holidays. Need it? Do it. The bank trade body UK Finance just announced over 1.2m mortgage payment holidays have now been granted. You can apply online for a mortgage payment holiday with ALL major lenders. Do apply though, don't just stop direct debits - that'll kill your credit file.

When you're on a payment holiday, the interest and cost is added to the rest of the term. Sounds harsh, but isn't for most, eg, on a £700/mth mortgage with 20yrs left, take a 3mth holiday and after that you'd pay in the region of £710-£715/mth for the remaining 19yrs and 9mths. So if you need it, do it. 

It can be costlier for those with higher interest, and shorter time left. Use a mortgage payment holiday calculator to work it out.

18) Universal credit online applications - 'don't call them, they'll call you'. The Department for Work & Pensions has processed 1.2m claims in the last three weeks alone, 10x normal demand. To try to unjam the system, now once you've completed your online application they'll call you back (and, in some cases, may not need to call and verify at all), freeing up phone lines for those who can't get online to claim. See full universal credit help.

19) Really struggling? Is there a grant to help you? This won't work for most but if you're really struggling it's worth two minutes on charity Turn2Us's grant finder. Most individual grants aren't specifically for coronavirus, but for those on low incomes, so may help - they tend to be targeted at specific areas, eg, young entrepreneurs who are struggling, those in education, or musicians.

After three successive one-off coronavirus live 'Ask Me Anything' specials - where we've managed to cover huge topics and had 10,000s of questions - ITV asked if I'd do the show for the next 6 weeks.  

I agreed, provided I could do it from home, so we're going to try with two remotely operated cameras and Mrs MSE kindly agreeing to be the location director. Fingers crossed, it'll be interesting. Do watch or set the Betamax.