COVID-19 Income Protection for the self-employed
As expected, the Chancellor of the Exchequer yesterday unveiled a support package for self-employed workers who have been impacted by the Coronavirus pandemic.
As widely reported in the media, the design of this package has not been as straightforward as the Coronavirus Job Retention Scheme for employees, due to the fact that self-employment remuneration is recorded on an annual tax return, rather than the real-time reporting PAYE basis. The Chancellor was quick to reassure, in his speech, that the self-employed “have not been forgotten” and that “95% of people who are majority self-employed will benefit from this scheme”, though it does initially appear that the delays do not give self-employed parity with those in employment.
The measures announced are expected to be available for at least three months and will be extended if necessary. In summary, the measures are as follows:
- a grant of up to £2,500 per month per self-employed person (expected to cover those who were trading as self-employed in the last financial year, continuing to be self-employed now and planning to continue to be self-employed);
- the grant value will be up to 80% of the self-employed person’s average profits for up to the last three years (where multiple years of accounts are available);
- the grants will be in place for three months and potentially extended if required;
- the grants will only be available to the self-employed with trading profits of up to £50,000 per year;
- the grant will only be available to those who receive the majority of their income through self-employment; and
- first payments under the grant are expected to be made no later than the beginning of June 2020
- HMRC will directly contact those who are eligible;
- To minimise fraud, only those already in self-employment with a tax return for 2019/20 will be able to apply.
The Chancellor also noted that self-employed people with outstanding tax returns for the year ended 5 April 2019 would still be eligible for the above grant, provided returns are filed in the next 4 weeks (these were originally due to be filed by 31 January 2020). In addition to the above, the self-employed may also be able to avail themselves of the other, previously announced, measures:
- universal credit;
- deferral of the income tax self-assessment payment on account due on 31 July 2020 to 31 January 2021;
- business interruption loans; and
- deferral of next quarterly VAT payment due until the end of the financial year.
As with the other relief packages that have been recently announced, further detail will follow later. However, the above should give peace of mind to many off-payroll workers for now in this latest release of “unprecedented” measures.
We also heard yesterday the first suggestion as to how The Chancellor plans to fund the Coronavirus reliefs, with an indication that National Insurance Contributions for the self-employed could be increased to match those taxed under PAYE in the future. Mr Sunak said that “if we all want to benefit equally from state support, we must all pay equally in future”.
With regards to the wider relief measures announced by the government, we also have a “COVID-19 Business Support Guide”, which is available on request from your HFMC Wealth adviser. This guide will be updated as new measures are announced and eligibility for relief is clarified.
Please contact your usual HFMC Wealth contact should you require further information or any assistance with the above or reach us at email@example.com.