Since the government first announced its Coronavirus Job Retention Scheme for employees, self-employed workers have been waiting anxiously for their own support measures.
We've now seen some movement on this front from the Chancellor. Last night Rishi Sunak confirmed that the government would step in to pay self-employed people who have lost their income.
The scheme at first blush is similar to the one set up for employees – 80% of gross profits under and up to a £2,500 threshold.
However, there are some important differences, including eligibility criteria: The Treasury estimates one in twenty self-employed workers won't qualify.
Let's look at some of the detail:
How does the coronavirus self-employment support scheme work?
The scheme will pay self-employed people a taxable grant worth 80% of their average monthly profits up to £2,500 per month. A self-employed person who averages £2,500 per month in income would therefore receive £2,000 under the scheme.
HMRC will calculate this average income using the person's last three years of tax returns – they have extended the filing period for this year's tax returns by a month in order to allow self-employed workers to get their proof of income in for the tax year just gone.
One crucial difference between this and the scheme for 'furloughed' employees is that self-employed people may continue to trade and still benefit from the scheme. This means business owners can still work run their companies whilst taking advantage of the grant.
Who is eligible for coronavirus self-employment support?
The scheme is available to self-employed people with trading profits of up to £50,000. The Treasury believe that this will cover 95% of self-employed workers, based on available data. Those who aren't eligible may be able to access other support for their business in the form of loans or grants, however.
To be eligible for the scheme, a person's self-employment must be their main form of income. If they are also employed by someone else and their self-employed work is effectively a 'side job', then they cannot access the grants.
To minimise the risk of fraud, you must also have submitted your tax return for 2019 in order to get the funding. As mentioned above, the deadline for this has been extended to 23 April 2020.
Do self-employed people need to apply to access this coronavirus support?
HMRC are administering this scheme automatically, so they will be contacting self-employed people directly to offer them support if they're eligible for it.
You therefore don't need to reach out to them at this stage to access the coronavirus grants. It is, however, a good idea to get your latest tax return in as soon as you can if you haven't already done so, taking advantage of the extension.
HMRC will pay the money directly into your bank account once the scheme is up and running and they've confirmed you want it.
When will self-employed people get the grant?
HMRC won't start administering the scheme until the extended tax return window has closed. In effect, this means the scheme is unlikely to be paying money into people's accounts before the end of June.
This will clearly create cash flow problems for many self-employed people. Again, the business grants and loans that the Government has already made available may go some way to plugging the gap, so we recommend reading more about those. Universal Credit could also be an option for some people, as well as any options to reduce outgoings such as the mortgage holidays that all major banks should now be offering.
Ultimately, even with this welcome scheme, these will be a difficult couple of months for the self-employed and their cashflow. Many questions also remain unanswered about how the scheme will operate – we recommend keeping an eye on this Gov.uk page for updates.
If you'd like to get in touch, a coordinated team of experts are leading our support and can be contacted collectively using our dedicated inbox: [email protected].