COVID-19: Government support for the self-employed
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Prime Minister Boris Johnson signalled in advance that the government wanted the self-employed to have ‘parity of support’ with the so-called furloughed employees, who will receive 80% of their lost earnings up to a maximum of £2,500 per person per month. Extending support to the self-employed was described as ‘highly complicated’ by the Chancellor – not least because the risk of fraud and the challenge of ensuring that support is targeted at those who most need it.
The Scheme provides a cash grant of 80% of an individual’s average monthly profits over the last three years of up to £2,500 per month. It will apply where individuals:
- Have taxable trading profits of up to £50,000 per annum
- Earn the majority of their income from self-employment
- Are registered self-employed and have submitted a 2018/19 tax return to prove it
The government anticipates that 95% of self-employed people will benefit from this. Those above the income threshold will not benefit from these measures, as the Treasury calculates that they have average earnings of £200,000 per annum.
Access to the Scheme started from the beginning of June, with payments back dated from March. HMRC will contact individuals to complete a required form and the grant will be paid directly into their bank account.
Unusually (perhaps uniquely), however, compared to the schemes that have been introduced as part of the Coronavirus support package, there is a longer-term sting in the tail for the self-employed. By agreeing to treat the self-employed equally with employees, the Chancellor also implied that the National Insurance regimes for both would be aligned going forward. This will increase future National Insurance paid on trading profits, but this is an issue for the future.