COVID-19/Coronavirus: Update on Government support for the self-employed
27 March 2020
As the COVID-19/Coronavirus situation has grown ever more serious - both from a health perspective and an economic one - the Government has set out a number of packages of support for different parts of the economy. While we have seen an unprecedented series of support measures for businesses and employees, a glaring omission has been the help available for the self-employed. In his statement yesterday (26 March), the Chancellor set out to rectify this situation by somewhat evening-out the support available to workers across the board.
- A new Self-Employed Income Support Scheme, will see eligible self-employed people receiving a cash grant worth 80% of their average monthly trading profit over the last three years, up to a limit of £2,500 per month. This covers 95% of people who receive the majority of their income from self-employment.
- The scheme also applies to members of partnerships.
- Those 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.
- To minimise fraud, only those who are already in self-employment and meet the eligibility conditions will be able 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 to May. Grants will be paid in a single lump sum instalment covering all three months, and will start to be paid at the beginning of June.
- Individuals should not 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.
Even without the current coronavirus outbreak, self-employed people and sole traders often have unpredictable income levels, making it harder for many to save for a rainy day. The Government's announcement is a welcome, if limited, step towards evening out the support available for workers across the economy.
The limitations do stand out. The self-employed will have a sizeable gap to bridge between now and June when the help will actually be available. That could be too long to wait for those with no safety net. The Chancellor was keen to note, however, that while the scheme is being rolled-out, self-employed individuals will be able to benefit from some of the Government's other measures, including through the welfare system which will see a £7 billion boost to Universal Credit, income tax and VAT deferrals, as well as £1 billion more support for renters and access to three-month mortgage holidays.
There are quite a few gaps in the support: for people who have only recently started working for themselves or who pay themselves through dividends, there may be no help at all. That said, for those who pay themselves a salary as well as a dividend, their salary will at least be covered by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.
Anyone who is in financial difficulty or starting to see signs it may be around the corner should seek advice from a professional as soon as possible. The earlier you seek advice about your personal finances, the more considered a decision you can make, and the greater range of options you have for improving your situation.
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