Coronavirus: Self-employed income support

On 26 March, following significant pressure, Chancellor Rishi Sunak announced new measures to help the self-employed and freelancers.

Self-employed individuals will be able to apply for a grant of up to 80% of average monthly trading profits for a 3-month period. This will be calculated by looking at average trading profits over the last 3 tax years (2016/17 to 2018/19) or shorter period where applicable. Like the Coronavirus Job Retention Scheme (CJRS), this is subject to a maximum claim of £2,500 per month. The maximum total grant is therefore £7,500.

The plan will be backdated to March and cover up to 95% of the self-employed, according to the Chancellor. Payments are set to be made to up to 3.8 million people.

How to qualify

In order to qualify the individual must have satisfied all of the following:

  • Income tax return for 2018/19 must have been submitted by 23 April 2020 – there is therefore a short window to submit late returns (4 weeks).
  • Must be self-employed or a member of a partnership
  • Must have traded in the 2019/20 tax year
  • Must be intending to trade in the 2020/21 tax year
  • Must be trading at the time the grant application is made, or would be trading if it weren’t for COVID-19
  • Trading profits from self-employment must be at least 50% of total income
  • Trading profits from self-employment must be less than £50,000 in the 2018/19 tax year OR less than £50,000 on average over the 3 tax years 2016/17 – 2018/19
  • Must have lost trading profits due to COVID-19

If the conditions above are met, a grant can be applied for beginning 1 June.

Not yet available

It is worth noting that you cannot apply at this time; HMRC will invite eligible individuals to apply when the scheme is ready. The government are asking individuals not to contact HMRC about this scheme at this time.

Payment of the grant will be made in one lump sum, expected to be around June 2020. The grant will be taxable income in the 2020/21 tax year and must be declared on the tax return for that period.

This scheme does not apply to company owners or directors who pay themselves dividends and a salary. However, it is suggested that company directors may be able to benefit from the Coronavirus Job Retention Scheme:

“Those who pay themselves a salary and dividends through their own company are not covered by the scheme but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.”

Government announcement

However this has not been confirmed and it remains to be seen how this would work in practice.

Additional points

The grants will be taxable and will need to be declared on tax returns by January 2022.

The Chancellor also highlighted the disparity in tax treatments between the employed and self-employed so we can expect some changes to the tax regime when this is all over.

Please note there is limited information available at the moment in respect of some of the detail. This is therefore subject to change until detailed guidance becomes available.