Coronavirus and Debt

Coronavirus – Personal Financial Considerations

For many people, the shut-down of services will affect their ability to work as well as how much they earn. Claiming benefits is also challenging due to the high volume of claims.

To offset some of the adverse effects the nationwide quarantine has had on businesses and employed and self-employed individuals, the Government has, alongside banking institutions, announced plans for financial aid.

Here’s a quick run through of some of the personal financial considerations.

At risk of redundancy?

Amidst a growing number of businesses that are forced to close down, there is a rising threat of redundancies, particularly for small and medium companies. In an attempt to curb that, the Government announced a job retention scheme. Any individual who is classed as a furloughed worker will guarantee that they are kept on your employer’s payroll, rather than laid off. Under the scheme:

• HMRC will pay 80% of an employee’s wages to the employer who can then pay them to the worker;

• There is a maximum £2,500 payment cap per month;

• The pay can be back dated to 1 March 2020; and

• Workers can claim the money for three months – a period that may be extended.

Workers, who are at risk of being made redundant, are advised to ask their employers to contact HMRC to discuss the scheme and see if it can be applied.

Even if a person has already been made redundant, they can approach their former employer to see if he or she chooses to pursue this scheme instead.

The Self-Employed Income Support Scheme

The Self-Employed Income Support Scheme has now been announced and will allow such individuals to claim a taxable grant worth 80% of an individual’s monthly earnings calculated using an average from the last three years up to £2,500 a month.

To be eligible for the scheme individuals must have trading profits of less than £50,000 a year, make the majority of their income from self-employment and have filed a tax return for the year 2018/19 with HMRC.

If an individual has missed the tax return filing deadline of 31st January 2020 the Government will allow a further four weeks from 26th March to submit the relevant Return in order to benefit from this scheme.

Access to these Grants will be available from June 2020 so the Government are encouraging those who need it to look at the Business Interruption Loan Scheme and/or applying for Universal Credit to give the additional support.

Applications cannot be made for the scheme yet. HMRC will contact individuals if they are eligible and send an invitation to apply online.

Individuals do not need to contact HMRC now and doing so will only delay the work being undertaken to introduce the scheme.

Once HMRC has received the claim and confirmed that the individual is eligible for the grant the HMRC will contact the self-employed individual to advise the amount to be paid and the payment details.

In work and need to self-isolate?

People infected with the coronavirus who need to self-isolate should be aware of changes to the Statutory Sick Pay (SSP) scheme. Under the new changes, SSP will be payable from the first day of sickness rather than the usual fourth day of sickness. People who are not infected but are caregivers to someone in the same household who shows symptoms of coronavirus and has been told to self-isolate, also fall under the new SSP scheme. To learn more about these and other changes, visit the GOV.UK website. As of the present moment,

• SSP is £94.25 per week and is payable for a period of up to 28 weeks. To qualify, a worker must earn at least £118 per week.

• Workers who are not eligible to receive SSP can claim Universal Credit and/or contributory Employment and Support Allowance instead.

Contributory Employment and support allowance can now be claimed from the first day of the illness.

• You can now apply for Universal Credit without physically visiting a jobcentre if you have been advised to self-isolate.

Visit Turn2us for more information on benefits and how to claim them.

Check insurance policy terms

Check if you have an insurance policy which offers income protection or covers payments on essential items such as your mortgage. To determine what financial aid you are eligible for, you should contact your insurer. You may be entitled to:

• payment protection;

• mortgage payment protection; or

• accident, sickness or unemployment relief.

Already claiming benefits?

People who are already receiving Universal Credit at the time of infection, may need to meet certain requirements to continue to receive the benefit. These could be job searching, periods of time at work, or attending regular meetings or assessments.

In the event that you are too sick to perform any work-related activities, you should contact the office paying the benefit and give a reason why you can’t go.

People who need to be self-isolating due to the coronavirus are not required to attend a Jobcentre Plus to claim benefits. They can arrange it over phone instead.

People who are already receiving sickness and disability benefits are not required to attend face-to-face assessments for the next three months. This applies if you receive Personal Independence Payments (PIP), Employment and Support Allowance (ESA), Industrial Injuries Disability Benefit and possibly Universal Credit.

The Government has also announced special arrangements for people who receive benefits and cannot attend reassessments or jobcentre appointments due to being quarantined at home. This applies to anyone:

• Disabled or sick who cannot attend a reassessment for Personal Independence Payment (PIP), Employment and Support Allowance (ESA) or Universal Credit. In this case, the person will continue to receive payments while the assessment is rearranged; and

• In need to claim ESA or Universal Credit because of coronavirus will not be required to produce a fit note.

More details on the specific requirements and exemptions are available on GOV.UK.

New claimants will also no longer require face-to-face assessments. More information on that can also be found on the GOV.UK website.

Further updates from the Government specify that:

• People who have tested positive for the coronavirus are eligible to apply for Universal Credit and can receive up to a month’s advance up front without physically attending a jobcentre; and

• the 7 waiting days for ESA for new claimants will not apply for those infected with the coronavirus or who are required to stay at home – so it will be payable from day one.

Important:

if you are already claiming Universal Credit
You need to submit an explanation in your online journal for not attending as expected.
There are temporary changes in the way the Universal Credit is calculated for self-employed people on low incomes. For more information, you can contact the Universal Credit helpline on 0800 328 5644.

Benefit increases

As of 6 April 2020 the standard allowance in Universal Credit and the basic element in Working Tax Credit will be increased by £20 per week. The change will apply to both new and existing claimants. The exact amount will depend on each person’s individual circumstance.

For private tenants, the maximum amount of financial aid available through Housing Benefit or Universal Credit will be increased to 30% of the average rents in all areas of the UK. This is known as the Local Housing Allowance.

To find out more about the new changes, please visit Turn2us. You can use their benefit calculator to find out if and how much you may be able to claim.

Your bank may be able to help

Customers of some banks, including TSB, Lloyds, Halifax, Bank of Scotland, NatWest and Royal Bank of Scotland may be eligible for an extension if they are struggling with their mortgage payments due to the coronavirus.

UK citizens and residents are advised to contact their respective banks and inquire about the options available to bank customers. Each individual scenario is reviewed on a case by case basis.

Some banks and lending institutions are also offering extensions on loan and credit-card payments or allowing people to access their fixed-savings accounts without a commission.

Consult with your bank to determine the best course of action for your situation.

It is recommended to limit taking out loans or using fast credit services unless you are confident you will be able to pay the money back in the specified period.

The Government has announced that consumers with a mortgage who have tested positive for COVID-19 are eligible for a three-month payment holiday. This means a gratuitous period of three months during which you are not required to make a payment. However, interest will continue to accrue during this time.

Consult with your bank to find out if this is an option.

Help with your mortgage

• Your lender will look at your individual circumstances and offer support on a case-by-case basis.

• You will need to cover the payments that have been deferred, possibly over the remaining term of the mortgage.

• You can only get a payment holiday if you have not defaulted on your mortgage and are up to date with payments.

• If you are eligible for a payment holiday, it should not affect you credit rating.

Lenders have announced that no repossession action will be taken for a 3 month period starting from 19 March 2020. If your lender has already started repossession action, speak to them to get a confirmation that this action will be suspended.

If you are at risk of repossession and your lender is not working with you to resolve the issue, contact Shelter on 0808 800 4444.

Help to Buy customers

The Government has confirmed a possible three month repayment holiday for coronavirus patients who have Help to Buy loans.
For more details contact the Help to Buy: Equity Loan administrator on 0345 848 0236. If the loan was taken out in Wales you should contact Help to Buy (Wales) Ltd on 029 2080 3451.

Help with your rent

The Government has made several steps to protect tenants with temporary laws. As of 26 March 2020 until 30 September 2020, landlords must give at least three months’ notice before they can start court action to evict a tenant.

If your landlord has already started court action, contact the court that is dealing with your case and ask if it will remain open. If they are open, the court may arrange a phone or video hearing. Some courts are postponing current eviction action until June 2020.

Tenants who cannot afford to pay rent, or already have missed payments are advised to contact their landlord as soon as possible to discuss the situation. If your landlord is unwilling to assist in resolving the situation, contact Shelter on 0808 800 4444.

More information can be found on the Shelter website.

Help with your Council Tax

Councils in England have been briefed from the Government on use of funding to assist households in their area.
If you are currently receiving financial aid from the Council Tax Reduction scheme (also called Council Tax Support) and are of working-age, you may see your council tax bill for 2020-2021 reduce by a further £150.

• You do not need to have been directly affected by the coronavirus to be eligible

• You do not need to apply to the council for this extra reduction. Councils already have details of households that get help through the Council Tax Reduction scheme and should contact you directly.

Help from your energy provider

Energy providers are suspending disconnection of credit meters completely. People in self-isolation who are unable to top up their pre-payment meter, can:

• nominate a third party for credit top ups;
• have a discretionary fund added to your credit; or
• have a pre-loaded top up card sent so that the supply is not interrupted.

Energy providers are urging their clients to contact them directly if they are struggling with repayments due to the quarantine. Under the Government’s new guidelines, your debt repayments and bill payments could be reassessed, reduced or paused if deemed necessary.

More information can be found on the GOV.UK website.

If you are a vulnerable person, you could ask your energy provider to place you on the Priority Services Register. The Priority Services Register can assist you in receiving all the appropriate support you need. You can find out who may be classed as vulnerable and what help is available by visiting Ofgem.

Debt advice

If you are overwhelmed by your current financial situation and unable to manage your debt, we may be able to help you find a suitable debt solution. Call us on 0800 169 1536 or complete our online enquiry form and one of our advisers will get back to you.

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"Become Debt Free" is a trading name of Re10 (Finance) Ltd (company number 4651137) with offices based in Leeds and London. We specialise in providing and administering Individual Voluntary Arrangement (“IVA”) solutions to individuals based in England, Wales and Northern Ireland. We do not administer Debt Management Plans, Debt Relief Orders, or any other debt solutions.  We only provide advice after completing or receiving an initial fact find where the individual(s) concerned meets the criteria for an IVA, therefore, all advice is given in reasonable contemplation of an insolvency appointment. Re10 is regulated by the Insolvency Practitioners Association.

To qualify for debt write off in an IVA with us, you must have a minimum of £7,000 of qualifying unsecured debt owed to two or more creditors. A debt write off amount of between 25% and 75% is realistic, however the debt write off amount for each customer differs depending upon their individual financial circumstances and is subject to the approval of their creditors.

Andrew Bowers FIPA FABRP is authorised by the Insolvency Practitioners
Association to act as a Licensed Insolvency Practitioner.

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