The government will provide a taxable grant to those who are self-employed in line with the payments provided for furloughed employees. It is expected to be available to 95% of those who are currently self-employed.
The grant will be available for an initial three months, from 1 March, and will be based on the lower of:
- 80% of the average monthly profit based on a period of up to three financial years and;
- Capped at £2,500 per month
Sole traders and partners will be eligible to receive a grant if they meet all the following qualifying criteria:
- Trading profits of no more than £50,000 for either 2018/19 alone or averaged over 2016/17, 2017/18 and 2018/19;
- Majority of income from self-employment;
- Tax return for the 2018/19 tax year filed with HMRC by 23 April with reported self-employment income;
- Currently trading; and
- Intending to continue to trade.
The grant is expected to be made available from June 2020 and paid as a lump sum. The delay will allow those who are yet to submit their 2018/19 tax returns four weeks to file and for HMRC to identify those eligible for the grant and get ready to administer the scheme. HMRC will then make direct contact with those who could qualify, inviting them to make a claim. Any payment will be made directly into the individual’s bank account.
The grant does not specifically help the self-employed who have commenced trade on or after 6 April 2019 and their only recourse to support will be universal credit, of which there have been 477,000 applications in the last nine days. While the level of the grant is the same as for employees, it fails to take into account the ongoing expenses the self-employed may be committed to, such as rent and insurance, which would not apply to employees.
The Chancellor also made it clear that a review will be carried out to rebalance the tax and national insurance contributions made by the self-employed compared to those employed. Could this be a revival of a policy to increase national insurance contributions by the self-employed which was previously announced and then withdrawn?
If you are self-employed and have not yet filed your 2018/19 Tax Return, you have until 23 April to file to be eligible to claim the grant.
This article was last updated on 26 March 2020.