Understanding the support available for the self employed during Covid-19

Govt statement on measures to help the Self Employed

HMRC will provide payments equalling 80% of profits to the self-employed. HMRC will email those who are eligible – some people have had notification that that will be at the start of June.

The amount is taxable.

Those eligible are those who make 50% or more of their income from self-employment – we know this doesn’t cover all who are self-employed creatives including:

1.Those who make less than 50% of their income from self-employment and who might only receive 80% of their PAYE wage through being furloughed (there’s a post about furloughing further down this thread).
2. Those who are new graduates or recently self-employed and have no 2018/19 tax return lodged with HMRC – although the govt has indicated “When it comes to people who have only just begun working as self-employed, Rishi Sunak says they will look at whatever accounts they have to work out their entitlement”
3. Those on zero-hour contracts (although zero-hour contract employers may technically be to be furloughed employees).
4. Those on sequential short term PAYE contracts

The payment is also problematic because many self-employed people have ongoing business expenses which will be necessarily paid out of a sum which is only 80% of their profits.

This will be a taxable grant administered by HMRC. It will be based on 80% of average monthly profits over the last three tax years up to a maximum of £2,500 per month. It is aimed at those working for themselves whose business has been adversely affected by COVID-19

The scheme will have a duration of three months and should be operational by the beginning of June.

Payments will be covered retrospectively from the beginning of March. The duration of the scheme may be extended.

It is open to those with trading profits of up to £50,000.

You will need to have filed a tax return for 2018/19 although there will be a grace period of four weeks from 26/03/20 to file a late return if you have not already done so. You will need at least one year’s declared profits to be part of the scheme; otherwise you will need to apply for support from the welfare system.

In order to qualify the majority of your income will need to come from self-employment. You will be able to claim universal credit and access this scheme although the details of how this will work are still pending

The government will identify who can apply and they will be asked to complete an application. The application process will include a check that the individual is still trading.

Because this allowance is unlikely to be paid for 2 months you should claim Universal Credit now (or maintain your claim if you have already made it in recent weeks) if you savings are below £16,000 (if you have a partner this will be your savings combined).

If savings are above £16k, you have no other choice but to wait for support from the SEISS scheme; although you may wish to consider applying to the Business Interruption Loan Scheme if you meet the criteria (see section 11 below).

Further information and details of the scheme will be shared shortly by HMRC.

HMRC will use the average trading profits from tax returns in 2016-17, 2017-18 and 2018-19 to determine the size of the grant.

This scheme also applies to members of partnerships.

Before grant payments are made, the self-employed will still be able to access other available government support for those affected by coronavirus including more generous universal credit and business continuity loans where they have a business bank account.

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