Speaking to the House of Commons earlier this week, the Chancellor Rishi Sunak revealed that more than two million self-employed people whose businesses are affected by coronavirus have now applied for funding through government grants. The Chancellor went onto reveal that claims made to date have now exceeded £6bn.
In the last week, we have seen the furlough scheme for employees extended until the end of October, but as yet, it is unclear whether the Chancellor will do the same with the self-employed scheme. However, it is anticipated that the Chancellor will come under increased pressure to do so, particularly as the self-employed are likely to see the greatest disruption to their ability to work.
The eligibility criteria for the Self Employed Income Support Scheme has been widely publicised by the Government and HM Revenue & Customs, who are responsible for overseeing the scheme, has also contacted 3.5 million businesses to invite them to apply. Grants are to be calculated at 80% of monthly profit, averaged out over a period of three years and capped at £7,500. A single payment, backdated to the start of March and covering a three month period to the end of May will be made by the Government, who have confirmed that applicants should expect to receive funds within six working days. Other conditions are that individuals must have filed a tax return for 2018/19 and earn more than 50% of their total income from self-employment
The payment is not a loan and there is no requirement to repay the funds to the Government, which is a misconception amongst some self-employed. However, businesses should remember that the payment is a taxable grant, so it will need to be declared on Self Assessment tax returns and the self-employed may need to pay income tax and make National Insurance contributions on it. The grant should also be reported as self-employed income on any Universal Credit claim and when reporting any changes to tax credits.
Whilst the future of the Self Employed Income Support Scheme is uncertain, it is vitally important that the self-employed plan appropriately to continue to meet their essential costs and any future tax liabilities (albeit, some of which may be deferred). The coronavirus pandemic has highlighted the need for businesses at all levels to have access to emergency cash to support their ongoing function. Until further information is released by the Chancellor regarding the potential extension of this scheme, the self-employed should look to retain some of the grant where possible, to assist with future expenses.
Whilst interest rates remain at an extremely low level, it is always worth considering whether your money could work harder for you and where savings are accumulated, they should be reviewed on a regular basis.
The Self Employed Income Support Scheme differs from the furlough scheme as businesses can continue to operate where they can comply with Government regulations e.g. social distancing. The recent amendments to the lockdown should have a positive effect on some self-employed and their ability to work.