Coronavirus support package for UK self-employed: how does it work?

The chancellor, Rishi Sunak, has unveiled an emergency support package to protect Britain’s 5 million self-employed workers. But how will it work in practice?

How much am I going to get?

The government will pay self-employed people a taxable grant based on their previous monthly earnings over the last three years, worth up to 80% of earnings and capped at £2,500 a month. To be eligible, you must have annual “profits” (self-employed earnings) of less than £50,000 a year, according to HMRC.

The last three years’ tax returns will be the key evidence of your earnings on which an assessment will be made. HMRC will take an average of your last three years’ profits as a self-employed person. If you have been self-employed for just one or two years, then HMRC will rely on those tax returns only.

I went self-employed only a few months ago, so don’t have an HMRC tax return to show. Am I covered?

Unfortunately not. If you have not filed a tax return as a self-employed person, you are not covered by this scheme. You must instead apply for universal credit if you lose your income. The chancellor said he had no choice but to use HMRC tax returns as the way to operate the scheme, and that 95% of the self-employed would be covered by it.

When will I get the money?

It will not be an immediate payment – Sunak said the grant may not be awarded until June. But it will then be backdated to March, which suggests the maximum grant could be as high as £7,500. He added it was possible the scheme could be up and running before June, but did not want to promise anything earlier.

How long will it last for?

The scheme is designed to last three months, but will be reviewed and could be extended.

I am a plumber on £65,000 a year with a family and a large mortgage to support, do I get nothing?

It is unlikely you are going to receive anything. The Treasury said anyone with trading profits above £50,000 would not be eligible. Your trading profit is broadly the same as your “taxable profit” that you entered in your tax return. Explaining the cut-off, the chancellor said the average income of those excluded from the scheme was about £200,000 a year.

HMRC said to qualify for the scheme, at least one of these things must be true:

  • Having trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income;

  • Having average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period

How do I get through to June without any money?

Sunak said the government had made universal credit more generous and that a family could pick up as much as £1,800 a month in support. He added that the Department for Work and Pensions could make advance payments of the benefit, “certainly within days” of an application. Councils also had money to help families with council tax bills, he said.

Where do I apply?

You don’t apply right now. HM Revenue & Customs will administer the scheme and contact you with a form you will have to fill in and send back.

Do I get taxed on the money?

The chancellor said the grant was taxable. So when it comes to your next tax return, the likelihood is that if you have returned to earning a decent sum, then some of the grant will be clawed back through the tax system.

How do I prove I’m self-employed?

You will only receive the grant if you have previously put in a tax return to HMRC.

I’m late with my tax return. Will I still get the money?

You can, but move fast now. The chancellor said he will accept “late” tax returns for the next four weeks only.

I work four days a week at a local hair salon, and one day a week doing private clients as a form of self-employment. Do I get anything from this scheme?

No. The chancellor said that it is only available to those people who make the majority of their earnings from self-employment.

I’m registered as a personal service company – but it’s just me. Do I apply for help as an employee, or as self-employed?

The Treasury said: “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.”

Isn’t this scheme open to abuse?

The chancellor said he did not want a scheme where the perfect would be the enemy of the good. He said the existence of a prior tax return was a good way of making sure the person was genuinely self-employed.

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