The Chancellor, Rishi Sunak, yesterday announced the details of the rescue package for self-employed individuals.
Although it goes some way to supporting self-employed individuals, the package has today been criticised as significantly lacking in comparison to the furlough scheme.
The Self-employment Income Support Scheme will see HMRC making payments to those they deem to be eligible from their records. They are estimating that these payments won’t be made until the end of June 2020, leaving households who don’t have savings or a second form of income without until that time. We will see how the situation unfolds but at the moment the main points of the scheme are:-
- The scheme will pay self-employed people a taxable grant worth 80% of their average monthly income (profit-based), capped at £2,500pm.
- Income will be calculated by taking an average of their income over the last three years (2016/17, 2017/18 and 2018/19).
- Self-employed people can claim these grants, and if they are able under the current restrictions can continue to work (this is where the scheme is different to furlough leave, where employees cannot work.)
- The scheme is only open to anyone with trading profits of up to £50k (the government report that this covers 95% of self-employed people). Self-employed people who earn more will not qualify for this scheme.
- The scheme is only open to those who make the majority of their income from self-employment or partnership. If you are employed but have a ‘side job’ which is self-employed, you will not be eligible. To qualify, more than you’re your annual income had to be from self-employment.
- The scheme is only going to be applicable to people who have submitted a tax return for 2019 (this is to minimise fraud). However, the government has applied a grace period for those who did not submit their tax return by the due date of 31 January 2020, and have not yet submitted one. These people can still submit a tax return for 2019 for a further four weeks from the 26/03/2020 and still qualify for the scheme.
- HMRC will send an online form to those eligible, so you don’t need to do anything at this point. Once you have completed the form HMRC will then pay the grant straight into your bank account. HMRC will automatically calculate amounts due and contact you by June 2020. Any payments will then be backdated 3 months.
- The scheme is open to people across the UK for at least 3 months. This can be extended if needed. However, with the estimated start date of the end of June, it is not going to help with immediate cash flow issues. Universal credit may be available to households on low income you can find out more on this link.
- This new legislation does not cover those who are directors of their own companies, who may pay themselves salary and dividends. This is to be covered for their salary by the Coronavirus Job Retention Scheme if they operate under PAYE.
Other measures available to businesses already still apply to those who are self-employed. These include the business interruption loan scheme and the deferral until Janaury 2021 of self-assessment payments due in July. If you have any tax-related questions there is a HMRC tax helpline number. Call 08000 241222, lines are open from 8am to 4pm daily.
You can find out more about the scheme on this link https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme.
