Some of the workers most affected by the Coronavirus are the self-employed. Many have seen their workloads disappear overnight and face an uncertain future regarding their income.
It is logistically difficult to apply the Coronavirus Job Retention Scheme to the self-employed given the nature of their work, the relative lack of regular reporting around their income and the structure around a method to pay them.
As a result, the Chancellor has announced the Self-Employed Income Support Scheme, and we explore this below.
Self-Employed Income Support Scheme
The Chancellor has announced that, like the Coronavirus Job Retention Scheme, HMRC will pay self-employed people a taxable grant worth 80% of average monthly profits over last three-years, up to a maximum £2,500 per month.
The Scheme will be open to anyone with averaged annual profits of up to £50,000 and the Chancellor stated this covers 95% of all self-employed.
Only those in self-employment with a filed tax return for 2019 will be eligible for the Scheme. The Chancellor confirmed that HMRC have set a deadline of four-weeks to file the tax return, if you previously failed to do so by the deadline of 31 January 2020, in order to qualify for the Scheme.
In addition, for those who are self-employed and have other income, they can only claim if the majority of their income is from self-employment.
The Scheme will be in place by June 2020 and HMRC will contact the self-employed directly with details of the payment to be made. In the meantime, the self-employed can continue to earn and this will not affect their ability to receive the grant under the Scheme. In June, they will receive three-months’ worth of payments.
The Chancellor stated on announcing the Scheme that the tax regime for the self-employed will be brought into line with the employed in future budgets, strongly hinting that National Insurance Contributions for the self-employed will be increased.
This does not apply to contractors, personal service companies or business owners who take their remuneration through dividends. For owner-managed companies, this will be a significant gap.
Would you like to know more?
If you would like to discuss how this Scheme could apply to you or have other queries about how you can make the right decisions for the future of your business and your income, please get in touch with your usual Campbell Dallas contact.
The information in this update should not be regarded as financial advice. This is based on our understanding on 26 March 2020. Laws and tax rules may change in the future.