The new Coronavirus (Covid-19) Self-employment Income Support Scheme will pay 80% of an individual’s average monthly profit over the last three years, as a taxable grant up to a maximum of £2,500 a month. It will be open to all across the UK for a three-month period, with an extension if necessary.
This scheme applies to self-employed individuals and members of a partnership, who have lost income due to coronavirus.
HMRC will use the average trading profits from tax returns in 2016-17, 2017-18 and 2018-19 to determine the size of the grant
Those who cannot produce three years of accounts will be able to submit either one or two years, but Sunak pointed out that income levels for the self-employed can be volatile, and hence the three-year requirement.
The financial support figure and terms are the same as those set out earlier in the crisis, when PAYE employees were offered a scheme covering 80% of their monthly earnings up to a £2,500 cap.
Sunak said the delay in rolling out help for the self-employed was because of the difficulty of devising a scheme which offered ‘deliverable, fair and targeted support’, given that the self-employed are ‘a diverse population with some people earning significant profits’. For the same reason, it will only be on offer for those with trading profits of up to £50,000.
Applicants for the scheme must make the majority of their income from self-employment. To minimise fraud, they must also have already submitted a tax return for 2019.
'If you claim tax credits, you’ll need to include the grant in your claim as income,' HMRC guidance states.
However, Sunak also announced that from today, 26 March, anyone who was late filing their January tax return and missed the 31 January deadline will have four weeks in which to submit a return with a final deadline of Thursday 23 April 2020.
He said government analysis suggests that the scheme will benefit 95% of those who are self-employed, while the remainder have substantially higher incomes than average.
Availability of funds
HMRC plans to be able to offer access to the scheme no later than the beginning of June, when the department will contact those eligible directly and ask them to fill in an online form. Payments will be made directly into their bank account, and will be back dated to 1 March, meaning a self-employed taxpayer will receive three months’ money in one go.
HMRC has issued initial guidance on the scheme and further details will be shared in due course by the tax authority.
Asked how those who have no resources will manage until June, Sunak said the welfare payments system had also been changed, so self-employed people will be able to make a universal credit application and should receive an emergency payment within days, and they will also be eligible to apply for business continuity loans where they have a business bank account.
The Chancellor said that the operational complexity of devising the scheme had also thrown into relief what he termed the ‘inconsistency’ of current tax policy, given that the planned intervention for the self-employed marked ‘one of the most significant economic interventions in the history of the British state’.
‘It is harder to justify the inconsistency of contributions. We are all in this together and everyone, both PAYE and self-employed, is now benefiting from the same state support. When we start to come out of this and right the ship, there will be questions about ensuring equivalence in the future,’ Sunak said.
David Hough, partner, Blick Rothenberg said: ‘The Chancellor said that for the self-employed to benefit from the State they should expect to contribute equally in future.
‘This means that national insurance contributions (NICs) will be aligned so that employees and the self-employed pay the same. Expect this to be included in the Autumn Budget.’
The scheme also does not recognise the fact that many self-employed persons operate their business through a company, for example contractors using personal service companies (PSCs); this is not necessarily for any tax reason but for limited liability protection, Hough said.
If you are a director of your own company and paid through PAYE it may be possible to get support using the Coronavirus Job Retention Scheme, although final guidance on the JRS measure for employees is not yet available [as of 26 Mar 2020].
Joanne Harris, technical commercial manager at SJD Accountancy said: ‘PSCs who pay themselves salary and dividends will not be eligible for the self-employed scheme but will be covered by the Job Retention Scheme if they are operating PAYE schemes.’
Use this scheme if you're self-employed or a member of a partnership and have lost income due to coronavirus.
Published 26 March 2020
This scheme will allow you to claim a taxable grant worth 80% of your trading profits up to a maximum of £2,500 per month for the next 3 months. This may be extended if needed.
You can apply if you’re a self-employed individual or a member of a partnership and you:
Your self-employed trading profits must also be less than £50,000 and more than half of your income come from self-employment. This is determined by at least one of the following conditions being true:
If you started trading between 2016-19, HMRC will only use those years for which you filed a Self-Assessment tax return.
If you have not submitted your Income Tax Self-Assessment tax return for the tax year 2018-19, you must do this by 23 April 2020.
HMRC will use data on 2018-19 returns already submitted to identify those eligible and will risk assess any late returns filed before the 23 April 2020 deadline in the usual way.
You’ll get a taxable grant which will be 80% of the average profits from the tax years (where applicable):
To work out the average HMRC will add together the total trading profit for the 3 tax years (where applicable) then divide by 3 (where applicable), and use this to calculate a monthly amount.
It will be up to a maximum of £2,500 per month for 3 months.
We’ll pay the grant directly into your bank account, in one instalment.
You cannot apply for this scheme yet.
HMRC will contact you if you are eligible for the scheme and invite you to apply online.
Individuals do not need to contact HMRC now and doing so will only delay the urgent work being undertaken to introduce the scheme.
You will access this scheme only through . If someone texts, calls or emails claiming to be from HMRC, saying that you can claim financial help or are owed a tax refund, and asks you to click on a link or to give information such as your name, credit card or bank details, it is a scam.
Once HMRC has received your claim and you are eligible for the grant, we will contact you to tell you how much you will get and the payment details.
If you claim tax credits you’ll need to include the grant in your claim as income.
The government is also providing the following additional help for the self-employed:
Published 26 March 2020
Reviewed as at 27th March 2020