Support package announced for self-employed, but it won’t help everyone

Support package announced for self-employed, but it won’t help everyone

27 March 2020

Most of Britain’s five million self-employed workers breathed a sigh of relief yesterday when the government announced that they would receive taxable grants to make up for lost income during the coronavirus pandemic.

Chancellor Rishi Sunak announced that freelancers and contractors would be able to claim up to 80% of their profits from the state if they could prove that they had been adversely affected. But the grants will be capped at £2,500 per month and not everyone will be able to claim them - including contractors that work through a limited company.

In this blog post, we include more details about the support package and who is eligible to receive it. There’s also some good news for limited company contractors that can’t claim the self-employed support.

Support for the self-employed

The Self-Employment Income Support Scheme mirrors a scheme designed to benefit traditional employees. For employees, the Chancellor announced that the government would pay 80% of employees’ wages if their employers were struggling, up to a maximum of £2,500.

Self-employed people will enjoy the same level of support, but the £2,500 limit is based on their profit, not wages.

Grants will be back-dated to the start of March and will cover the three months to May. The grants will only start to be paid at the beginning of June as a taxable lump sum. The Chancellor also said that the scheme may be extended to cover more months if necessary.

He added that the measures were expected to apply to about 95% of those who earn the majority of their income from self-employment. But a significant number will not qualify for any support under the scheme. That includes anyone with average annual trading profits of £50,000 or more and anyone that became self-employed after April 2019.

Do I qualify for self-employed support?

To qualify for the Self-Employment Income Support Scheme, all of the following must apply.

You must earn more than half of your total income from self employment. This should be true either of your 2018/19 tax return, or the average of your last three years’ tax returns.

Your average annual trading profit must be less than £50,000. This will be calculated from either your 2018/19 tax return or the average of your last three tax returns.

You must have filed a tax return for 2018/19. If you haven’t submitted yet, you’ll have until Thursday 23 April to do so.  

What if I work through a limited company?

For these purposes, individuals that work through a limited company are not self-employed. If you’re a company director and pay yourself a salary or dividends then you won’t be covered by this scheme.

However, you may be able to get support through the Coronavirus Job Retention Scheme for employees.

This scheme is open to any UK businesses that operate a PAYE scheme. Since you are an employee of your limited company for tax purposes, you should be able to claim 80% of your income up to a maximum of £2,500 on this scheme.

However, if you only draw down a small percentage of your take home pay as PAYE income and receive the rest as dividend payments, the amount you can claim on this scheme may be limited.

For more information or support please email your umbrella accountant or accountancysupport@umbrella.co.uk.