The package of temporary support measures for public services, people and businesses announced by The Chancellor, Rishi Sunak, on Friday 20 March were broadly welcomed and commended due to the size and scope of the measures. However, there was a clear lack of additional support and protection afforded to Self Employed, estimated at around five million people in the UK.
Since then many have been pressing the government for further help for the Self Employed, particularly for those outside of the retail, hospitality and leisure sectors. Before the announcements of Thursday 26 March, the best the Self Employed could achieve in benefits to help cover their loss of earnings was £95 a week. This is in sharp contrast to the employed that were promised 80% of normal wages up to £2,500 per month.
Thankfully Rishi Sunak has now announced significant additional measures to address the imbalance.
The new Self Employed Income Support Scheme will be available to the Self Employed as a taxable grant of 80% of their earnings, based on their average earnings over the last three financial years, up to £2,500 per month. This scheme will be open for at least three months and includes members of partnerships. Unlike the employed scheme, the Self-Employed can continue to work under this scheme too.
The measure is described as targeted support for anyone with averaged trading profits up to £50,000 and will benefit 95% of people who make the majority of their income through self-employment. For those with less than three year’s returns it will be based on the years available.
Only those already in Self Employment will be eligible. Those who are late with their 2019 Self-Assessment Tax returns will have up to 23 April 2020 to get their return filed so as to be eligible for the scheme. The government will be contacting those who they believe are eligible and will be asking them to complete a form for the scheme and amounts will be paid directly into bank accounts. It is estimated that the grants will be paid no later than the beginning of June, to include amounts back dated to March so people will receive three months’ in a lump sum.
Those who pay themselves a salary and dividends through their own company are not covered by the scheme and will only be covered for their company salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes. This is another unfortunate gap in the support as many will be taking the vast amount of their remuneration (often under £50,000) via dividends which are essentially disregarded. One reason given was that it would be difficult to separate these dividends from other dividend income but I suspect that’s not the main reason.
Those contracting via Umbrella companies will need to refer to their supplier to see how they are being dealt with.
This will not support all Self-Employed, including the newly Self-Employed, and there will be some earning more than the £50,000 cap which will still be impacted. However, the Government has also provided the following support for the Self-Employed;
It was clear from the Chancellor’s comments that the self-employed were told to expect to pay the same National Insurance Contributions as employees. This is news to look out for at future budgets. Given the scale of this support as a result of the COVID-19 pandemic, we might expect to see significant tax increases in the future for all of us.
The Government have said that individuals should not contact HMRC now. HMRC will use existing information to check potential eligibility and invite applications once the scheme is operational.
HMRC are seeing an increase in scam emails, calls and texts. If someone gets in touch claiming to be from HMRC, saying that financial help can be claimed or that a tax refund is owed, and asks you to click on a link or to give information such as your name, credit card or bank details, please do not respond.
HMRC will never contact you out of the blue to ask for these details.