At the end of last week the Chancellor of the Exchequer, Rishi Sunak, announced his plans for helping self-employed people, as opposed to those employed by their own limited company.
What help is there?
If they have suffered a loss in income, a taxable grant will be paid to the self-employed or partnerships, worth 80% of their profits up to a cap of £2,500 per month.
Initially, this will be available for three months in one lump-sum payment, and will start to be paid from the beginning of June.
It will be called the Coronavirus Self-employment Income Support Scheme, and is open to those who were trading in the last financial year, still trading now, and planning to continue doing so this year.
Who is eligible?
More than half of a claimant’s income needs to come from self-employment.
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.
Those who are recently self-employed, having set up since April 2019, will not receive any help under this scheme. This is because they will not have filed a tax return and therefore HM Revenue and Customs (HMRC) will not know of their self-employed status.
The government’s new help comes on top of a six-month delay for tax payments through the self-assessment system.
Those with the lowest incomes are in line to receive more generous benefits payments, announced previously. The chancellor said those applying for universal credit should be paid within a few days.
How will the scheme work?
HMRC will use existing information to identify those eligible and will invite applications.The application will then require them to confirm that they meet the eligibility requirements.
It will be paid straight into a bank account, which eligible taxpayers will need to confirm on their application form.
People do not need to contact HMRC now, if they are eligible HMRC will contact them directly.
Those who pay themselves a salary and dividends through their own company are not covered by the scheme but will have 80% of their salary covered by the Coronavirus Job Retention Scheme if operating through PAYE.
As part of the latest announcement, the chancellor also suggested tax breaks for the self-employed, such as lower national insurance may end in the future. These were in place because, for example, the self-employed do not get sick pay or holiday pay, and to encourage entrepreneurship.
As we have said previously the details are quite sketchy at the moment and we expect more information will come out shortly.
To be fair to the Government this is quite a large undertaking and will take some time to roll out, particularly given the current restrictions on their people as well as the wider public.