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Almost 5 million people are self-employed in the UK.  As a result, this accounts for 15% of the UK workforce.  There are many benefits of being self-employed including the flexibility to work when you want, be your own boss and to be able to work on projects that may interest you. But as with many things, with the benefits, there also come risks. Here we look at support for self-employed.

The COVID-19 crisis has highlighted the challenges faced by people who are self-employed, in particular freelancers, who have little job security.  Consequently, these people aren’t entitled to the benefits that employed people take for granted, such as sick pay or holiday pay.  Due to the Coronavirus pandemic, their income may be reduced as companies start to cut costs and not look for additional support.

What are the key areas of support for self-employed?

Universal Credit

The Government have removed the minimum income threshold that is usually required to apply for Universal Credit.  This was removed on April 6th and will apply whilst the outbreak last, for those people who are in self-isolation or who are directly impacted by COVID-19.  It is intended to provide compensation for any loss of income.  Importantly, these people impacted will not need to go to a job centre.

Rishi Sunak, the Chancellor of the Exchequer, has raised the Universal Credit allowance to £95.25 per week, which is the equivalent of the statutory sick pay.  People with savings of £16,000 or more, are not eligible to apply.  You can find more information on Gov.uk.

Self-Employment Income Support Scheme (SEISS)

The Scheme is aimed at self-employed people whose income has been negatively impacted by COVID-19.  SEISS is intended to issue a grant to partnerships or self-employed people, up to the value of 80% of their profits.  There is a maximum allowed of £2,500 per month.

The value of the grant will be calculated by looking at the average profits from the last three years tax returns (2016-2017, 2017-2018 and 2018-2019).  HMRC will automatically calculate this for any eligible person.  SEISS is available to people where self-employment is the majority of their income, and whose profits are below £50,000.  The government and the HMRC provide guidance on how total trading profits and total income via the Gov.uk website.

The scheme is intended to be open for an initial 3-month trial period.  HMRC will invite those people who they feel are eligible by checking the information they have on file.  It’s important to note the online service is not up and running yet.  If you are eligible, HMRC will contact you by mid-May 2020.  The intention is to make payments into bank accounts by early June 2020.

To be eligible, you must meet all of these criteria:

  • Trading profits below £50,000, of which this must be more than half of your income.  HMRC will look at your trading profits and total income of 2018/2019.  They will also look at the average over the last three tax years.
  • Be self-employed or a member of a partnership.
  • Profits have been negatively impacted as a result of COVID-19.
  • Filed a tax return for 2018-2019 as self-employed, or a member of a partnership.
  • Traded in 2019-2020, trading at the point of application and intending to trade in the tax year 2020-2021

Company Directors who pay themselves Dividends are not covered by this scheme.  People who are owners of Limited Companies can access the Coronavirus Job Retention Scheme.

Unlike the Furlough Scheme, claimants of SEISS can continue to work or undertake other employment.  Eligible people can access both SEISS and Universal Credit schemes.

Employment and Support Allowance

This is available to people directly impacted by COVID-19 or in self-isolation.  This is on the proviso they have paid enough National Insurance contributions over the last 2-3 years.  It will be payable from the first day of sickness.  Single claimants under 25 can claim up to £57.90 per month, those over 25 can claim up to £73.10.  For more information on the ESA scheme, click here.

HMRC Time to Pay

HMRC have launched a scheme aimed at the self-employed who are concerned about paying their taxes.  Some businesses may be entitled to financial contributions.  HMRC will look at these on a case-by-case basis.  You can contact HMRC’s helpline Monday-Friday between 8am and 4pm.  You can contact them on 0800 024 1222.

Self-Employed can defer self-assessment tax return payments until January 2021.  HMRC will also defer penalties relating to late payments and interest as a result of COVID-19.

Large Business Interruption Loan Scheme

The Coronavirus Business Interruption Loan Scheme (CLBILS) is targeted at large businesses.  For businesses with turnover between £45 million and £250 million, they can apply for up to £25 million in finance.  For businesses with turnover of more than £250 million, they can apply for up to £50 million as a loan.

The scheme will launch on 20th April 2020 and is only available through accredited lenders.  These are listed on the British Business Bank’s website.

Coronavirus Business Interruption Scheme

This scheme is also administered by the British Business Bank.  It is targeted at businesses with a yearly turnover of up to £45 million.  They must trade through a business bank account and have over 50% of their turnover through trading activity.

IR35 Tax Reforms

There is a delay on these new reforms aimed at tax avoidance by contractors and freelancers.  This will now come into effect in April 2021.

Schemes Not Eligible for the Self-Employed

There are a number of schemes available for the self-employed.  Importantly two of the most popular employment support schemes in the UK aren’t available.  These include the Coronavirus Job Retention Scheme (The Furlough Scheme) and the Statutory Pay Scheme.

These are incredibly tough times for everyone across the world.  We are available at Kinsella Tax to offer advice on your Tax and VAT affairs.  Call us on 0800 471 4546.