Financial help for barber businesses during 2021 lockdown

As the UK barber and hairdressing industry has been forced to close at the start of 2021 thanks to another COVID-19 lockdown, we've put together advice on financial help from salon consultant Ryan Fox.

Below he shares his expert opinion on the financial help and support that is currently available to hair businesses throughout the UK during this third national lockdown.

 

What financial help is available to barbershop businesses during the current COVID-19 UK lockdown?

According to the UK Government’s website a number of existing schemes are being extended to help businesses during the latest COVID-19 lockdown.

 

1. New 2021 lockdown grants for the hairdressing industry due to COVID-19 lockdown

Due to the COVID-19 UK lockdown, the UK Chancellor of the Exchequer Rishi Sunak announced on 5 January new lockdown grants for the retail, leisure and hospitality sectors, which includes the professional hairdressing industry. 

The one-off top-up grants will be granted to closed businesses on top of existing grants with a maximum of £9,000 on offer. The cash is provided on a per-property basis to support businesses through the latest restrictions. Any business which is legally required to close and cannot operate effectively remotely is eligible for the grant.

The business support is a devolved policy and therefore the responsibility of each devolved administration, which will receive additional funding. The Scottish Government will receive £375 million, the Welsh Government will receive £227 million and the Northern Ireland Executive will receive £127 million

The grants on offer are as follows:

• £4,000 for businesses with a rateable value of £15,000 or under


• £6,000 for businesses with a rateable value between £15,000 and £51,000


• £9,000 for businesses with a rateable value of over £51,000

Ryan Fox says: “There are new one off ‘top up’ grants of up to £9,000 on top of existing grants, which doesn’t sound too bad, but most salons will only get the lower amounts of £4,000 or £6,000 because of their rateable value being below £15,000 or £51,000 respectively.

 

2. Local Restricted Trading Grants from November 2020 England Lockdown

Businesses required to close in England due to local or national restrictions back in November 2020 were eligible for the following:

• For properties with a rateable value of £15k or under, grants to be £1,334 per month, or £667 per two weeks;


• For properties with a rateable value of between £15k-£51k grants to be £2,000 per month, or £1,000 per two weeks;


• For properties with a rateable value of £51k or over grants to be £3,000 per month, or £1,500 per two weeks.

Individual local authority websites had information on to find out how to apply for business grants.

Ryan Fox says: “Many salons are still waiting for existing grants from the November lockdown which they should have applied for from their local authorities of between £1,000 & £3,000 and grants of up to £2,100 once they were opened again depending on their rateable value. However, once they kick in these should hopefully continue in addition to the new one-off grants.”

 

3. Discretionary Grants from local authorities

There are some discretionary grants available but they are difficult to apply for and they are patchy as each local authority is making their own decisions.

Check your local authority’s website to see what could be available for you. 

Ryan Fox says: “For many salon owners the three types of grant listed above are not enough to pay the bills, even when closed, particularly with many landlords offering little or no help and many report that local authorities are being slow in providing these to businesses.”

 

4. Furlough Scheme extended until end of April 2021

On 17 December 2020, the UK chancellor confirmed the UK Government’s Job Retention or Furlough Scheme would be extended until the end of April 2021. This will cover 80% of wages with businesses only having to pay National Insurance and pension contributions.

Chancellor of the Exchequer Rishi Sunak said: “We know the premium businesses place on certainty, so it is right that we enable businesses to plan ahead regardless of the path the virus takes, which is why we’re providing certainty and clarity by extending this support, as well as implementing our Plan for Jobs.”

Ryan Fox says: “This is extremely helpful for salon owners with employees, but they still have to cover National Insurance Contributions and Pension Contributions for the hours not worked.”

 

5. Job Support Scheme will only come into force when the extended furlough scheme ends, which is now not until April 2021

Please note: The Job Support Scheme was scheduled to come in on Sunday 1 November but it has now been postponed until the Furlough Scheme ends.

When it does come into force, it will help businesses who are legally required to close by covering the cost of two thirds of employees’ salaries where they can’t work for a week or more. Employers must cover National Insurance and pension contributions where applicable. If businesses are still open but adversely affected by coronavirus, the UK Government is making it easier to keep employees on:

• Employees must work a minimum of 20% of their hours. The employer will pay the wages for these hours.


• For every hour not worked, the employee will be paid two-thirds of their usual salary. The employer will contribute 5% to a cap of £125 a month, with the rest paid by the government to a cap of £1,541.75 a month.

 

6. Self-Employed Income Support Scheme (SEISS) for England, Scotland, Wales and Northern Ireland

The government offered two Self-Employed Income Support Scheme (SEISS) grants due to the COVID-19 UK lockdown which are available to the hairdressing industry. Each grant is available for three-month periods covering November 2020 to January 2021 and February 2021 to April 2021.

The grants will be paid in two lump sum instalments each covering a three-month period. The first grant covers the three-month period from 1 November 2020 until 31 January 2021.

The government will provide a taxable grant covering 80% of tax payer’s average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £7,500 in total.

The grants are taxable income and also subject to National Insurance contributions.

The second grant will cover a three-month period from 1 February 2021 until 30 April 2021. The Government will review the level of the second grant and set this in due course.

Ryan says: “This is very helpful for salon owners who are self-employed and their self-employed workers.”

 

7. Extension of Business Support Loans Until March 2021

Applications for the Business Interruption Loan Scheme, which provides loans of up to £5m, with no interest due for 12 months has been extended until March 2021 . The government guarantees 80% of the finance to the lender and pays interest and any fees for the first 12 months.

 

8. Extension of Bounce Back Loan Until 31 March 2021

Applications for the Bounce Back Loan, which helps small and medium-sized businesses to borrow between £2,000 and up to 25% of their turnover is extended until 31 March 2021. The maximum loan available is £50,000. The government guarantees 100% of the loan and there won’t be any fees or interest to pay for the first 12 months. After 12 months the interest rate will be 2.5% a year.

Ryan says: “Applications for business support loans have been extended until March 2021 and you are able to top up existing Bounce Back and Business Interruption Loans which sounded great when announced. However, having tried to apply on behalf of my clients if you have already taken 25% of your turnover, you can’t get any more. As this is now based on current turnover rather than Pre-COVID-19 turnover, it’s very unlikely that you will get any more finance this way.”

 

9. Business Rate Holiday Until March 2021

Businesses in the retail, hospitality and leisure sectors in England, which includes the hairdressing industry  do not have to pay business rates for the 2020 to 2021 tax year. Businesses do not need to take any action as the  local council will apply the discount automatically.

Ryan says: “There have been calls from business groups and industry associations to extend the current 100% Business Rate Holiday for a further year to March 2022. Let’s hope this is also announced as otherwise many salons will have yet another bill to pay again from April 2021.”

 

10. Extended job retention scheme until 30 April 2021

The Job Retention Scheme is extended until 30 April 2021 with businesses being paid upfront to cover wages costs. There will be a short period when the UK Government will need to change the legal terms of the scheme and update the system and businesses will be paid in arrears for that period.

The job retention scheme is being extended until the end of April. The level of the grant will mirror levels available under the previous scheme, so the government will pay 80% of wages up to a cap of £2,500 and employers will pay employer National Insurance Contributions (NICs) and pension contributions only for the hours the employee does not work.

As under the current scheme, flexible furloughing will be allowed in addition to full-time furloughing. The Job Support Scheme will be introduced following the end of the current job retention scheme.

Please note: Claims for furlough days in December 2020 must be made by 14 January 2021.

11. Job retention bonus claim from 15 February 2021

The Job Retention Bonus is a £1,000 one-off taxable payment to the employer for each eligible employee that you furloughed and kept continuously employed until 31 January 2021.

You’ll be able to claim the bonus between 15 February 2021 and 31 March 2021. You do not have to pay this money to your employee.

 

12: Alternative Funding Options

Ryan says: “Many salons will now be forced into “alternative funding” options just to keep going which are usually at very high interest rates.”

 

13: VAT Deferred Payments

If you deferred VAT between 20 March and 30 June 2020 and still have payments to make, you can:

• pay the deferred VAT in full on or before 31 March 2021


• opt in to the VAT deferral new payment scheme when it launches in 2021


• contact HMRC if you need more help to pay.

To use the VAT Deferred Payments scheme you must:

• still have deferred VAT to pay


• be up to date with your VAT returns


• opt in before the end of March 2021


• pay the first instalment before the end of March 2021


• be able to pay the deferred VAT by Direct Debit

If you opt in to the scheme, you can still have a time to pay arrangement for other HMRC debts and outstanding tax.

Ryan says: “Businesses who deferred their VAT during the initial lockdown quarter can spread the payments over 11 months interest-free from March 2021.”

 

14: What’s on offer for company directors and Self Employed? 

Ryan says: “The latest measures do not address the issues for many salon owners who do not receive any financial help personally from the UK Government. Many won’t have either the means or the will left to survive. It’s all very well supporting jobs with furlough but if you don’t support the business owners, those jobs won’t exist.”

 

15: Lack of hairdressing industry-specific support

Ryan says: “The 5% VAT rate reduction to 31 March 2021 only applies to food, accommodation and attractions and still no specific industry help for hair & beauty salons.

 

Ryan’s conclusion on the financial help available for the hairdressing industry during the current COVID-19 UK lockdown?

“Whilst there is some welcome new support, much of it is recycled announcements of existing help and I’m afraid the support won’t go far enough for many salons. I’m now expecting many salons who don’t have an alternative vision, not to survive this next phase unless the UK Government announces further help, particularly larger grants, loan extensions or mandatory help from landlords on rent free periods or reductions.”

Ryan Fox is a Hair and Beauty Salon Consultant at umbrellaconsulting.co.uk, he helps salon business owners develop an alternative vision to survive.

This article originally appeared on our sister site hji.co.uk