On 26 March 2020, the government announced welcome support for the self-employed. What does that support involve and who is entitled?
Who is eligible?
Any self-employed individuals, who:
- make the majority of their income from self-employment;
- have with at least one year of tax returns;
- have trading profits of up to £50,000.
This is said to cover 95% of self-employed people.
What will the government pay?
A taxable grant worth 80% of average monthly income over the last three years up to a maximum of £2,500 a month.
How long will it last?
As for the employed, it will be open for three months at the outset, but subject to extensions.
What if an individual does not have three years of accounts?
The government will look at the accounts that have been submitted.
What if an individual has not submitted a tax return?
If this is because the individual missed the January 2020 deadline, the government has provided an extension of four weeks for returns to be submitted.
If this is because the individual was recently self-employed and does not have a tax return to submit, unfortunately they will not be eligible for the scheme due to the risks of fraud.
Individuals that are not eligible will need to apply for Universal Credit (UC) and Employment Support Allowance (ESA). The support already provided in relation to these schemes is set out in the article 'FAQs - COVID-19 support measures announced on 20 March 2020'.
When will the scheme be available?
The government expects individuals to be able to access the scheme no later than the beginning of June 2020. HMRC will contact eligible self-employed individuals directly.
How do I apply?
Once contacted by HMRC, individuals will need to complete an online form. The grant will then be made directly into the individual’s bank account.
Can the self-employed claim this support and continue to work?
Yes, unlike furloughed employees.
Will the self-employed have to pay more tax in the future?
The Chancellor made comments regarding the parity in support now provided to the employed and self-employed as against the disparity in tax and National Insurance contributions paid. The Chancellor hinted that we may see a change in this once we are outside of the current climate and in a situation where the government needs to recover some of the money that it has paid out.
It is disappointing that the scheme has not been introduced sooner and that self-employed individuals will need to wait until June 2020 to receive a pay-out, but these are unprecedented measures for unprecedented times and the government has sought to provide a fair model which is available for the majority of self-employed individuals.
If the self-employed need support in the meantime, they will need to access Universal Credit (UC) and Employment Support Allowance (ESA) or some of the other support measures that have been introduced such as business interruption loans and mortgage breaks.