Self-employed Income Support Scheme what it means for you

 Rishi Sunak, coronavirus self-employed concept


UPDATED: Chancellor Rishi Sunak has announced a Self-Employed Income Support Scheme to help Britain’s 5m self-employed get through the coronavirus pandemic.

The Self-Employed Income Support Scheme will offer a taxable grant of up to 80 per cent of a self-employed person’s income based on their taxable profits over the past three years, capped at £2,500 per month.

The scheme will only become available at the beginning of June and will have an initial three-month lifespan, to be reviewed.

And the Self-Employed Income Support Scheme will only cover those who paid tax on trading profits of up to £50,000 of income in 2018-19.

HMRC will pay the single lump sum direct into people’s bank accounts.

Individuals should not contact HMRC now. HMRC will use existing information to check potential eligibility and invite applications once the scheme is operational.

Sunak claimed the Self-Employed Income Support Scheme, which will cover up to 95 per cent of people who receive the majority of their income from self-employment, was unparalleled in almost any other country.

Sunak said: “We know that people are worried about their jobs and income … many self-employed people are worried about the lack of support for them.

“This last 100 days have shaken our country and the economy like never before … what we have done will stand as one of the most important economic interventions anywhere in the world.”

The coronavirus self-employed rescue package is based on Norway’s scheme, which pays self-employed people 80 per cent of their average earnings over the previous three-year period.

The Resolution Foundation, a think-tank, has estimated it would cost £3.6bn to support 1m self-employed people for three months, taking into account their lower average earnings than employees.

The self-employed make up 15 per cent of the UK workforce and represent a sector worth an estimated £305bn.

Britain’s self-employed are a disparate group.  Analysis by the Institute for Fiscal Studies showed that about a third had taxable income of less than £10,000, while a small number of high-earning partners in professional firms rank among the UK’s top 1 per cent by income.

>See also: How to get the government’s £10,000 cash grant for small businesses

Strengthened safety net

Prior to today’s announcement, the government pointed out that it had already “strengthened “the safety-net for the self-employed who will benefit from a relaxation of the earnings rules for self-employed claimants under universal credit and deferring income tax self-assessment payments due in July 2020”.

Until today, the self-employed had been offered only £94.25 a week in universal credit benefits and the deferment of their tax payments.

Many poorer self-employed people will be helped by the government’s decision to scrap the “minimum income floor” — which often makes those on low incomes ineligible for help under universal credit.

However, any self-employed person with savings of £16,000 or more is not entitled to any support via Universal Credit so will have to wait until they have burned through their savings in order to qualify.

Even if they do qualify they could find themselves waiting for five weeks for their first payment because of the time taken to process new applications for Universal Credit.

There also remains a gap in the coverage of statutory sick pay for 2m self-employed people with low earnings.

>See also: What coronavirus small business help is available for free?

Income crisis

Previously, the Association of Independent Professionals and the Self-Employed (IPSE) warned that Covid-19 would present an “income crisis” for millions of workers.

In a letter to business secretary Ashok Sharma, Rachel Reeves, the Labour chairwoman of the Commons’ business select committee, called on the government to address a “worrying gap” in its attempts to protect livelihoods.

“It is arbitrary that the self-employed should see the large part of their income disappear, while other workers enjoy government protection,” Reeves wrote.

And the Royal Society for the Encouragement of Arts, Manufactures and Commerce (RSA), warned that without help the equivalent of 12m people in Britain would feel obliged to work even if they had coronavirus. They include 47 per cent of the self-employed and 51 per cent in “atypical” work, such as zero-hours contracts, according to a poll it commissioned from Populus.

Further reading

Government launches business Coronavirus Job Retention Scheme

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