The government have now provided information as to how they plan to support those who are self-employed through the coronavirus. Much criticism has been levied as the government unveiled their plans for employees via the Job Retention Scheme with an apparent lack of regard to the millions of self-employed. At that time, it seemed the only meaningful step the government had taken was to reduce the income-ceiling for applications for universal credit, meaning that more people would be eligible to apply for benefits.
However, the Chancellor has now announced new measures targeted to assist the self-employed during this tumultuous period. The key points to note are as follows:
- The self-employed will be able to apply for a grant to replace up to 80% of their average monthly profits, up to a maximum of £2,500 per month, (the idea being that this package broadly supports that which is being offered to employees).
- It will be assessed based on their last three years’ tax returns. For those with fewer years available, it is suggested that HMRC will have to work with what they have got. For those who missed the deadline to file their 2018-2019 tax return in January, an extension of 4 weeks has been granted to enable them to qualify for the scheme).
- In order to qualify, at least half of their income needs to be by way of self-employment.
- They must earn less than £50,000 per annum.
- The grants can be backdated to 1 March 2020.
- In contrast to the Job Retention Scheme for furloughed employees, self-employed persons can continue to work during this period.
- They will have to declare any grant received on their tax return by January 2022 and pay tax on the sums received under this scheme.
There are still many unanswered questions and worries for those who are self-employed. Most notably, those who are only recently self-employed may not be eligible to apply for a grant and may be entirely dependent upon universal credit and the benefits system. Similarly, it would seem that the grants may not be available to company owners who pay themselves a dividend, which could leave some self-employed business owners in significant financial difficulty.
The biggest problem for those who are eligible to apply to this scheme is that whilst the money will be backdated to 1 March 2020, it will not be paid out until June. This could leave many millions of self-employed people struggling to make ends meet, and there is a real concern that they will continue to work, thereby risking the further spread of coronavirus.