How will lockdown affect your personal finances and what support is available?

From the furlough scheme to payment holidays and business loans, additional help is out there

Costs are soaring and times are tough, but there are ways to fix your finances. Here's how, says James Daley

With a new national lockdown coming into force across England on Thursday, thousands of businesses will be forced to close and many people’s incomes will fall.

The government has announced additional help for workers, and lenders will also be giving borrowers some additional leeway.

So what support is available if you find yourself facing financial difficulty?

1. What if my employer cannot afford to keep paying me?

   The government has extended the Job Retention Scheme (furlough) for November.

   The terms will revert to how they were in August, meaning that the government will pay 80 per cent of wages for hours not worked, up to a maximum of £2,500 per month. That’s an increase from October, when the state put in 60 per cent with employers contributing 20 per cent.

   Now, employers will only be required to pay workers’ national insurance and pension contributions.  

   Neither the employer nor the employee has to have previously used the furlough scheme in order to be eligible this time. That is important for people who have recently changed jobs who may not have been eligible under the old rules. The minimum period you can be furloughed for is seven days, down from three weeksTo qualify you have to be on an employer's payroll and registered for PAYE income tax before 30 November.

   Furlough will be available across the UK.

2. What if I’m self-employed?

   A new round of the Self-Employed Income Support Scheme (SEISS) is available to cover lost income during November, December and January.

   The maximum grant is £5,160, and applications open at the end of November. It is calculated based on your monthly trading profits from the 2018/19 tax year.

   For November you can claim 80 per cent of one-twelfth of last year’s earnings. This reduces to 40 per cent for December and January. Another grant will be available to cover February to April, with the level of support yet to be determined.

   Only workers who were eligible for previous SEISS grants will be eligible for the new ones, meaning that up to 2.9 million people will not be able to claim. The Resolution Foundation estimates that 500,000 people who have not been able to claim SEISS had no work between March and September.

3. Can I take a mortgage payment holiday?

   The Financial Conduct Authority announced on Saturday that homeowners can ask to temporarily stop making payments for up to six months. People who have already started a payment holiday can extend it up to a maximum of six months.

   After six months, if you are still having difficulty making payments, you will be moved onto “tailored support”. This could mean reduced payments, an extension of your mortgage or switching to interest-only.

   The FCA told borrowers not to contact their lender yet. Banks and building societies will be geting in touch soon to give more detail about the payment holiday options.

   Payment holidays won't show up on your credit report. However, lenders can still choose to check bank account records and find out whether or not you have taken one. It’s possible this may be taken into account when making decisions on whether or not to offer you credit.

4. What about loans, credit cards and other finance?

   The FCA has said that borrowers who have not yet had a payment holiday should be able to take one for up to six months. The proposals cover personal loans, credit card, motor finance, rent-to-own, buy-now pay-later and pawnbroking.

   People with high-cost, short-term credit (payday loans) can defer payments for one month if they have not done so already.

   “It is important that consumer credit customers who can afford to do so continue to make repayments,” the regulator said.

   It did not comment on whether overdraft borrowers would receive a £500 interest-free buffer as they did during and shortly after the previous lockdown.

5. Are loans still available to businesses?

    

   Yes, government-backed loan schemes have been extended with applications open until 31 January. That includes the Bounce Back Loan Scheme (BBLS), Coronavirus Business Interruption Loan Scheme (CBILS) and Coronavirus Large Business Interruption Loan Scheme (CLBILS).

   Under the BBLS, small and medium-sized firms acan borrow up to 25 per cent of their turnover. Those who have not yet used the scheme can apply and those who have not borrowed the full 25 per cent can request to top up their loan. Borrowing via the BBLS is 100 per cent government backed.

   More than 1.3 million small businesses have borrowed money under the scheme, although concerns have been raised that many high street lenders have closed to new applicants.

   It is hoped that after an emergency meeting between banks and Treasury officials on Monday, lenders will re-open to applicants.  

   CBILS loans require a firms to go through a more rigorous application process and allow them to borrow larger sums. CLBILS loans wil be available until 31 January for businesses turning over more than £45m.