Coronavirus: What help are self-employed getting from government?

Kevin Peachey - Personal finance reporter
·4 min read
Woman with mask working in carpentry workshop
Woman with mask working in carpentry workshop

The chancellor is expected to announce more help for the self-employed in his Budget on 3 March.

The government is being lobbied to provide financial support to those who missed out on special funding schemes during the pandemic.

What will the new help be?

Chancellor Rishi Sunak will outline details of a fresh payment to the self-employed. This will cover the three-month period from the start of February until the end of April.

A series of payments - the Coronavirus Self Employed Income Support Scheme (SEISS) - aimed to protect the self-employed during the pandemic, but nearly a fifth missed out on financial assistance.

What help has he given the self-employed so far?

The chancellor's first package of measures were unveiled in March last year.

If they suffered a loss in income, people who were self-employed or in partnerships were paid a taxable grant worth 80% of their profits, up to a cap of £2,500 per month.

It was available to those who had been trading in the financial year 2018-2019, and were planning to continue doing so, but whose business had been hit by coronavirus.

Help was initially given as one lump-sum payment to cover three months.

Over the summer a "second and final" payment was announced covering 70% of profits, up to a cap of £2,190 per month for another three months - £6,570 in total. It proved not to be the final payment, but the second of four.

The third payment covered 80% of profits for November, December and January, up to a total limit of £7,500 - paid in a single instalment. Applications for this grant have now closed.

The government's original plan was for this third grant to only cover 40% of average monthly trading profits, with a limit of £3,750 in total, but it was extended after stricter restrictions for businesses were introduced.

Businesses have also been able to apply to banks for government-backed support loans.

Who missed out on these payments?

Although many people are covered, there has been a significant campaign, and concerns raised by MPs, over a large number of people who miss out on the support. Research body the Institute for Fiscal Studies (IFS) said there was "clear unfairness" in some of the exclusions.

Self-employed people who pay themselves a salary and dividends through their own company are not covered by the scheme (although they will have some of their salary covered by job retention schemes if they operate through PAYE).

As a result, an estimated 18% of those for whom self-employment makes up most of their income are ineligible, according to the Institute for Fiscal Studies.

Who is eligible?

More than half of a claimant's income needs to come from self-employment.

The schemes have been open to those with 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.

The relatively newly self-employed do not receive any help under this scheme, as more recent tax details are not being considered.

The government's help comes on top of extended delays for tax payments through the self-assessment system. Payment plans can be set up giving people more time to pay their full tax bill up to January 2022.

Those with the lowest income are in line to receive more generous benefits payments compared with before the crisis.

How do I claim the help?

This is how it has worked:

  • HMRC uses existing information to identify those eligible and invite applications

  • The application requires people to confirm that they meet the eligibility requirements

  • It will be paid straight into a bank account, which eligible taxpayers will need to confirm on their application form

How many people are self-employed?

There are more than five million self-employed people in the UK, earning an average of £781 a month. The number has risen fast since the 2008 financial crash.

Roughly a fifth of the self-employed are in the construction sector, according to the Office for National Statistics (ONS), with hundreds of thousands of others working in the motor trade, professional services, and education

The chancellor has suggested that in future, tax breaks for the self-employed - such as lower national insurance - may end. These were in place because the self-employed do not get sick pay or holiday pay. They were also meant to encourage entrepreneurship.

This signals a massive change in UK tax policy, potentially equalising the tax treatment of employees and the self-employed.

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