Coronavirus: Business update – Help for the self-employed

26th March 2020

The Chancellor has today announced long awaited details of relief that will be made available to self-employed workers known as the self-employed income support scheme.

The government had faced criticism for failing to provide support for self-employed and freelance workers in its earlier huge package of economic measures.

How much is the relief

A taxable grant will be awarded per each month, which will be based on the lower of:

• 80% of average taxable profits per month for the last three tax years
• £2,500

This is a grant not a loan so will not be repayable.

Who is eligible?

This is open to self-employed workers who have profits of up to £50,000 per tax year and for whom the majority of taxable earnings must arise from self-employed work.

Only individuals who have submitted their 2018/19 Tax Return will be eligible. If this has not been submitted yet, an individual has four weeks from today to get this filed so that they may be eligible for the grant.

How do I apply

Enrolment is automatic, HMRC will directly contact you if you meet the qualifying criteria.

HMRC will contact you asking you to complete an online application form, then they will arrange for the monies to be paid direct into your bank account.

When will this be available from

This scheme is currently being set up by HMRC and should be available from June 2020 onwards.

It has been recognised that this delay may cause a cash flow issue and it has been announced that the self-employed will have access to universal credit in full if they qualify.

Note also, the income tax payments self-employed individuals are due to make in July 2020 has been deferred to January 2021.

It is advised that businesses in need of cash flow make use of other reliefs such as the business interruption loan (more details can be found on our website).

Unanswered questions

This announcement still leaves many unanswered questions that need resolving such as:

• What happens to an individual who started in self-employment post April 2019. HMRC will have no record of their earnings on which to make an assessment?
• When assessing partners in a partnership, will their assessable income (and entitlement to the relief) be based on the taxable profits of the business or their own individual share. For example, a two partner business with £80,000 of profits is not entitled to the relief. However, if it is assessed on an individual basis (£40,000 each) they should get the full relief, as their individual profit share is under the limit?
• Clarity is needed as to what the Chancellor means, when he states the majority of income must be from self-employed earnings. Will this be based on a fixed percentage of overall taxable income, if so what is the required percentage?
• What happens to businesses who had a dip in taxable profits due to a one off event occurring (e.g. a large item of capital equipment was purchased that qualified for capital allowances). Will they be penalised for this? Often we see individuals penalised for this when making a mortgage application, we hope HMRC will take a more considered approach.
• No announcement was made regarding directors and in particular those who are directors of personal service companies (who are not legally recognised as self-employed). Will they receive any support? These individuals normally receive income as a mixture of minimal salary and remainder as dividends.
• Will universal credit now become available for directors as a means of support . This may though, not be necessary if it transpires they are entitled to a grant on 80% of their salary payments as per the employment retention scheme. However, we are awaiting further clarification, on this which should be available shortly.

Detailed guidance on this matter should be rolled out shortly, which will hopefully address some of the concerns raised above. When this has been made available we will let you know.

Please remember we are here to help as much as possible through these challenging times. We will continue to keep you updated as further announcements are made over the coming days.

Links to our other articles.

Coronavirus: Business update – The Coronavirus Job Retention Scheme

Coronavirus: Business update – Summary of all available support

Coronavirus: Business update – Latest announcements

Read our latest ‘Hot Topic’ COVID-19: measures for UK businesses

Coronavirus: Business update – Business Rates & IR35

Coronavirus: Latest measures to support UK businesses

Coronavirus – Update for Businesses

Useful links

UK Government guidance

NHS – condition overview