UK Government announces support for self-employed
On Thursday 26th March 2020, the Chancellor Rishi Sunak outlined plans to support the UK’s self-employed affected by the coronavirus outbreak. The Self-Employment Income Support Scheme gives a taxable grant to those who are self-employed and can be used by the self-employed or by a member of a partnership that has lost income due to coronavirus.
Millions of self-employed individuals will be allowed to claim a taxable grant of up to 80% of your trading profits, up to a maximum of £2,500 per month, for the next three months. It potentially covers 95% of people who receive most of their income from self-employment.
This brings parity with the coronavirus Job Retention Scheme, announced by the Chancellor on 20 March 2020, where the government committed to pay up to £2,500 each month in wages of employees who are furloughed during the outbreak. For further details, please read our fact sheet by clicking here.
The government has estimated the Self-Employment Income Support Scheme will amount to about £10 billion. However, it will benefit many people who work as plumbers, electricians, musicians, hairdressers and many other self-employed people who perhaps work zero-hour contracts and within what is known as the ‘gig economy’. Here are the main points from the announcement below:
- Those who are eligible for the new scheme will be able to apply directly to HMRC for the taxable grant, using a simple online form, with the cash being paid directly into people’s bank account.
- The scheme will be open to those with a trading profit of less than £50,000 in 2018-19 or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2018-19.
- To qualify, more than half of their income in these periods must come from self-employment.
- In an effort to minimise fraud, only those who are already in self-employment and meet the above conditions will be eligible to apply. HMRC will identify eligible taxpayers and contact them directly with guidance on how to apply.
- The income support scheme, which is being designed by HMRC from scratch, will cover the three months up to May.
- Grants will be paid in a single lump sum instalment covering all 3 months and will start to be paid at the beginning of June.
- Individuals have also been instructed not to contact HMRC now. HMRC will use existing information to check potential eligibility and invite applications once the scheme is operational.
- Those who pay themselves a salary and dividends through their own company are not covered by the scheme but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.
There is some concern with the fact the first payments are not expected until June, by which time many sole traders will be severely stretched.
However, self-employed individuals are already benefiting from a series of measures announced by the Chancellor to boost household incomes and will be able to access these while the new scheme is being rolled out. These measures include the following:
- A strengthening of the welfare safety-net with a £7 billion boost to Universal Credit
- Income tax and VAT deferrals
- £1 billion more support for renters and access to three-month mortgage holidays.
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