In response to the coronavirus economic crisis the government has announced a financial support package for the self-employed. If you employ freelancers or contractors or are a company owner this is what you need to know.
The chancellor Rishi Sunak has unveiled a new Self-Employed Income Support Scheme. The support package is for those who earn the majority of their income from self-employment and who had average profits of no more than £50,000 over the last three years will be eligible for a taxable grant equal to 80% of their average profits.
It covers three years from April 2016 to April 2019, up to a cap of £2,500 per month, if they report that their income has been negatively impacted as a result of coronavirus.
According to the government this should cover 95% of people who receive the majority of their income from self-employment.
Unlike the employee scheme, the self-employed can continue to work as they receive support.
How to apply
Individuals should not contact HMRC now. HMRC will use existing information to check potential eligibility and invite applications once the scheme is operational.
Once identified, those eligible for the grant new scheme will be able to apply directly to HMRC, using a simple online form, with the cash being paid directly into people’s bank account.
Who is not eligible
According to the Institute for Financial Studies there are three main groups who will not be eligible for the support:
- People who set up a business in the last year and did not therefore file a 2018-19 tax return
- Company owner-managers who pay themselves mostly through dividends, who run their own incorporated businesses are not eligible for the new scheme. “They are, we believe, eligible for the Coronavirus Job Retention Scheme in relation to their salary if they stop working,” the IFS said.
- Those who just miss the criteria of more than half of their income from self-employment and (b) have a trading profit of less than £50,000 in 2018-19 or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2018-19.