It’s a tough time for freelancers. If you need to cut back your outgoings, here are some ideas from finance journalist Felicity Hannah.
Weeks have now passed since Chancellor Rishi Sunak announced his plans for supporting first businesses and employees, then self-employed people.
The package of support should ease the financial burden for many self-employed people. At least, those ones who don’t fall through the cracks.
But it will be months until the Self-Employment Income Support Scheme pays out to those who qualify. Payments are not expected until June.
In the meantime, finances are likely to be very tight for lots of self-employed people. Cutting back expenses is going to be important to many.
That’s both about surviving the next tough few weeks and about what comes after on the road back to long-term financial security.
So here is a rundown of some ways to make your money stretch further in this really difficult time. And don’t forget that there’s a range of support and guidance available via the IPSE coronavirus hub, including webinars.
Understand your expenses
Before you can start cutting back, you need to know exactly what is coming in and going out. Some people use a budget all the time, even without a major global financial and health crisis. It means they have a much clearer understanding of their financial position.
Go through your old bank statements. They should be available via your online or app account if you don’t have paper versions. Work out what payments are taken and on what day.
Once you know what bills will come out and when, you make it less likely that you will be taken by surprise by any.
Pause what bills you can
If you subscribe to any non-essential services and you are worried about affording them, get in touch as soon as you can. Many companies are being very understanding about the situation so don’t assume they won’t try to help.
And if you’re trapped in a contract that has months still to run then see if you can pause the service, even just for a few months. You may not be able to get out of it early, but perhaps you can freeze it while we get through this.
Energy bills are clearly an essential, but if you’re struggling to pay then talk to your supplier ASAP. Providers have agreed to be extra helpful in this difficult time. You can read more about what help is available via the Ofgem website.
Water companies are also showing extra forbearance so if you’re struggling just now then talk to them sooner rather than later.
Take a mortgage holiday or talk to your landlord
If you’re a homeowner and that big monthly mortgage bill is going to be a struggle, then perhaps you should take the opportunity to apply for a mortgage holiday.
Your lender will probably have a straightforward way of applying for this break, most likely a form on its website.
You won’t have to make any payments during a three-month mortgage holiday, you don’t have to pay a fee to apply, and this will not leave a negative mark on your credit file.
Having said that, you should only apply for this help if you really need it. During the holiday your mortgage debt will still accrue interest, so this is short-term help with a longer-term cost.
For tenants the picture is slightly different. Your landlord can ask for a holiday on their buy-to-let mortgage but they have no legal obligation to provide a break for you.
But many landlords are doing whatever they can afford and yours may be able to provide you with some breathing space just now, such as a temporary reduction in rent for a fixed period or even a rent holiday.
Just be aware that most landlords who agree this will expect the rent to be repaid in the medium term.
Yes, landlords don’t have to help, but they won’t know you need support if you don’t ask.
Get the state help you can
If your work has simply stopped then you may be able to claim Universal Credit, and doing so will not stop you qualifying for the self-employed grant in the summer.
There’s a useful calculator to show you what benefits you may be eligible for on the Turn 2 Us website.
Talk to your bank
When this all first kicked off, it felt like a bit of a lottery over whether your bank would be helpful or not. Now the Financial Conduct Authority has agreed some standards for banks to follow and these may be really helpful just now.
Help on offer includes payment freezes on loans and credit cards if you’re struggling with repayments as well as interest-free overdrafts of up to £500 for people who have authorised overdrafts in place.
You need to contact your bank or lender to put this help into place so visit their website to see how best to do that. Note that the helplines are often very busy.
Use your saved-up taxes
One option of absolute last resort is to use the money you would be paying to HMRC in July. The government has said it will defer this payment to January 2021 and so if you are really struggling then you can use this money to meet essential costs now.
It’s pretty clear why this has to be the very last option: if you do spend it then you will have to save it up again ahead of January.
So, it’s worth knowing that you can make use of this, but only do so if you have no other choices, and make sure you’re clear about how much you will need to save up ahead of January.
Protect your business from just £8.50 a month with a Freelance Corner pack. With tax and legal helplines, business cover of up to £10,000 if a client goes into administration (subject to T&Cs), and other business-saving benefits, safeguard your business today at freelancecorner.co.uk