Millions of self-employed individuals will receive direct cash grants though a UK-wide scheme to help them during the coronavirus outbreak, the Chancellor has announced.
In the latest step to protect individuals and businesses, Rishi Sunak has set out plans that will see the self-employed receive up to £2,500 per month in grants for at least 3 months.
Those eligible for the new Self-Employed Income Support Scheme can receive a cash grant worth 80% of their average monthly trading profit over the last three years.
Cleaners, plumbers, electricians, musicians, hairdressers and many other self-employed people who are eligible for the new scheme will be able to apply directly to HMRC for the taxable grant, using an online form, with the cash being paid directly into people’s bank account.
Chancellor Rishi Sunak said: “Self-employed people are a crucial part of the UK’s workforce who’ve understandably been looking for reassurance and support during this national emergency.
“The package for the self-employed I’ve outlined today is one of the most generous in the world that has been announced so far. It targets support to those who need help most, offering the self-employed the same level of support as those in work.
“Together with support packages for businesses and for workers, I am confident we now have the measures in place to ensure we can get through this emergency together.”
The scheme will be open to those with a trading profit of less than £50,000 in 2018-19 or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2018-19.
To qualify, more than half of their income in these periods must come from self-employment.
To minimise fraud, only those who are already in self-employment and meet the above conditions will be eligible to apply. HMRC will identify eligible taxpayers and contact them directly with guidance on how to apply.
The income support scheme will cover the three months to May. Grants will be paid in a single lump sum instalment covering all 3 months, and will start to be paid at the beginning of June.
Individuals should not contact HMRC now. HMRC will use existing information to check potential eligibility and invite applications once the scheme is operational.
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.
The scheme has been designed after engagement with stakeholders including the TUC, the Federation of Small Businesses and IPSE – The Association of Independent Professionals and the Self-Employed.
Other measures set to benefit the self-employed that have already been announced include a strengthening of the welfare safety-net with a £7 billion boost to Universal Credit, income tax and VAT deferrals, £1 billion more support for renters and access to three-month mortgage holidays.
National Chairman of the Federation of Small Businesses (FSB) Mike Cherry said: “This bold support package from the government will give much-needed help to vast numbers of self-employed workers, guaranteeing 80 per cent of income to those affected, with earnings of up to £50,000.
“This is a time of national emergency, and it is very welcome that the Government has listened to FSB and responded with a multi-billion-pound package to support the most financially vulnerable entrepreneurs, and to do so through the self-assessment system.
“This follows help in the Budget and since, that was aimed squarely at small businesses such as a cut in the jobs tax, cover for small employers that cannot pay their employees, business rates holidays, cash grants, mortgage holidays, rent protections, and interest-free, fee-free loans. We hope the raft of support will keep as many small businesses as possible afloat.
“The self-employed, however, remained a glaring gap. They needed more help, and especially those with least resources to prepare for this storm. We have heard despairing stories from hard-working hairdressers, bakers, childcare providers, freelancers, drivers and many others, seeing the businesses they’ve spent years building dry up in a matter of days. It is many of those strivers who today’s package will support.
“The self-employed community underpins the UK economy. They are the individual risk-takers who don’t expect the same benefits as employees. In this moment of a collective national effort to overcome a global pandemic, today’s package is a significant, multi-billion-pound improvement on what was proposed last Friday.
“Many tax-paying self-employed who will be helped by today’s measures will be relieved. Although the deal is not perfect, the Government has moved a very long way today.
“This is an incredibly challenging situation for everyone. While the healthcare response is paramount, overcoming the economic disruption also requires a speedy response in the interests of jobs and future growth. Today’s announcement will give hope to many hard-working, self-employed entrepreneurs, and it is important that the scheme is ready on-time and delivered as soon as possible. As this will be run through self-assessment, it is vital that any late filers submit their 2018-2019 return, right now, or they risk missing out.”
Dame Carolyn Fairbairn, CBI Director-General, said: “Many self-employed people across the UK will be hugely relieved tonight. These new measures will provide essential support to those facing significant uncertainty and loss of income.
“Given the complexity of the task, it’s understandable this will take time to deliver. Fast clarity on how and when money will reach their bank accounts will help individuals to plan.
“The self-employed make an immense contribution to our society and across many industries. They will play a critical role in the UK’s recovery once we overcome the worst of the virus.”
Eddie Williams, Midlands Chair of insolvency and restructuring trade body R3 and a partner at Grant Thornton in the region, said: “Even without the current coronavirus outbreak, self-employed people and sole traders often have unpredictable income levels, making it harder for many to save for a rainy day. The Government’s announcement is a welcome, if limited, step towards evening out the support available for workers across the economy.
“The limitations do stand out. The self-employed will have a sizeable gap to bridge between now and June when the help will actually be available. That could be too long to wait for those with no safety net. There are quite a few gaps in the support: for people who have only recently started working for themselves or who pay themselves through dividends, there may be no help at all.
“Anyone who is in financial difficulty or starting to see signs it may be around the corner should seek advice from a professional as soon as possible. The earlier you seek advice about your personal finances, the more considered a decision you can make, and the greater range of options you have for improving your situation.”