With more than 5 million people working as self-employed in the UK, the income support scheme announced is welcoming news for this 15% segment of the workforce.

On March 26th, Rishi Sunak announced a world-leading scheme to support the UK’s self-employed affected by the coronavirus outbreak.

With many having seen their income drop drastically since the outbreak the scheme should help most self-employed but unfortunately not all.

Here are the details of the announcement.

Self-employment Income Support Scheme

The scheme will allow a self-employed individual or members of partnerships to receive a taxable grant worth 80% of their monthly profits up to a maximum of £2,500 per month for the next 3 months. This may be extended if necessary.

A self-employed worker or sole trader is someone who works for themselves, not an employee. They are the sole owner of their business and are personally liable for any losses. This is not to be confused with a director or owner of a limited company which is considered an employee of the company.

Who is eligible for the self-employed support scheme?

To qualify you must be a self-employed individual or member of a partnership and:

  • You must have filed your Income Tax Self Assessment for the 2018-2019 tax year.
  • Traded in the tax year 2019-2020
  • Are trading when you apply, or would be except for COVID-19
  • You intend to continue trading for the tax year 2020-2021
  • You have lost trading/partnership trading profits due to COVID-19

If you haven’t already filed your Self-Assessment for 2019, you will have until 23 April 2020 to do so.

However, if you only started to trade as self-employed as of April 2019 you wouldn’t be eligible.

Also, your self-employed trading profits must be less than £50,000 and more than half your income must come from self-employment. HMRC defines this as:

Having trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income

Having average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period

If you are not eligible for this grant, you will still be able to access other government support, including benefits and business support grants

If you don’t qualify for this grant you may still get help from other government programs, benefits or business support grants. Check with us if you’re unsure about your situation.

How much will I get from the self-employment income support scheme?

The amount you will get is calculated by averaging the total trading profits over the last 3 tax years.

If you started trading between 2016 and 2019, HMRC will only use those years for which you filed a Self-Assessment tax return.

It will be up to a maximum of £2,500 per month for 3 months. Paid directly to your bank account in one instalment.

Payments will be backdated from the start of March up to the end of May to cover the 3 months.

How do I apply for the coronavirus self-employed support scheme?

You don’t have to take any actions for now. HMRC will contact those who are eligible and invite them to apply through an online form.

The Chancellor announced that the scheme is expected to start paying at the beginning of June but hoping it can be quicker.

Those who pay themselves a salary and dividends through their own company are not covered by the scheme but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.

Additional support for self-employed individuals

Employment and Support Allowance (ESA)

If you’ve been affected by the coronavirus or are unable to work due to illness or injury you may be able to claim new style Employment and Support Allowance (ESA). That is if you have contributed enough National Insurance over the last 2-3 years.

The government has now updated the scheme to better reflect the current situation and offer to pay from day one of your claim instead of after eight days. You can see the government website here to determine if you’re eligible or you can contact us.

Universal Credit

The universal credit is a type of benefit payment to help with your living costs.  The amount you can get depends on many variables. In short, there is a standard allowance and that amount can be topped up, for example, if you need help with covering housing or children costs.

It can take up more than five weeks before you receive the first payment, so don’t delay making a claim if you need to. However, you can make a claim for an advance payment on your Universal Credit in the form of a loan that will need to be paid back out of future payments.

Defer Income Tax

The government recently confirmed everyone will be able to defer their second income tax payment on account. So if you have to make a second payment coming on 31 July 2020 you can defer that payment until 31 January 2021.

In conclusion

We understand these are challenging times and the amount of information can be overwhelming. As trusted accountants in London, we are committed to helping self-employed, entrepreneurs and small business make sense of their finances during this crisis so you can make the best decision for your business. If you need help you can contact us on 020 7100 6150 or by requesting a quote directly here.