For all your legal challenges...

We're here to help

News and Events

Financial Support for Individuals and Self-Employed Individuals

View profile for David Darlington
  • Posted
  • Author

Many of our clients are self employed and won’t be covered by some of the business schemes referred to in our guide What measures are available to help businesses through the Coronavirus outbreak?  However, the Government announced the Coronavirus (COVID-19) Self-employment Income Support Scheme on 26th March 2020 as well as having previously announcing some other measure to help.

Coronavirus (COVID-19) Self-employment Income Support Scheme 

The scheme is very similar to that for employed furloughed worker offering a taxable grant of up to 80% of trading profits up to a maximum of £2,500 for three months from 1st March 2020 – 31st May 2020. The scheme can be extended by Government should that be necessary.

Am I eligible for the scheme?

To be eligible for the scheme you need to be self-employed (including being a member of a partnership) and have traded in the tax year 2019-20. You must also be trading when you apply for the scheme or have been prevented from trading by COVID-19.

You must have filed a tax return for the year 2018-19 to be able to claim and if you have missed the filing deadline in January you until 23rd April 2020 to submit it and be eligible for the scheme. Unfortunately, that means if you did not trade in the 2018-19 tax years you will not be eligible for the scheme, nor if your trading profits were below the tax return filing threshold.

The scheme is only open to those individuals who intend to keep trading in the tax year 2020-21 and have lost trading profits due to COVID-19.

There is a financial eligibility criteria to the scheme and is available to anyone who earned less than £50,000 in trading profits as an average over the tax years 2016-17, 2017-18, and 2018-19 AND earned less than £50,000 in trading profits in the tax year 2018-19 is eligible providing this income forms more than half of your taxable income in the same periods. This means that if you have had a rise in profits last year that takes you over the £50,000 threshold last year even though the average is not over £50,000 you will not be eligible. Also, if you have other earnings through employment which are higher than your self-employed income you will not be eligible for the scheme. 

How much will be paid under the scheme?

The amount paid will be calculated based on an average of your trading profits declared on your SA302 self assessment tax returns in the tax years 2016-17, 2017-18 and 2018-19. If you have not traded in all of these periods it will be averaged over the period you have submitted returns for. 

Once the amount of your average trading profits over the above period have been calculated you will be eligible for a grant of the lower of either 80% of that average or £2,500 which will be a taxable grant and will be declarable on your future tax returns.

When will I be paid under the scheme?

The Government anticipates that a single payment will be made into your bank account at the beginning of June. They have explained that it will take time to set up the scheme and have allowed some time for late filers as well. The single payment made will cover all three months of eligibility so could be up to £7,500 depending on your average earnings over the assessment period. 

How do I apply?

HMRC will contact you if you are eligible for the scheme. As this is a scheme based on your filed tax returns HMRC can identify those eligible without you contacting them. We anticipate that following them contacting you there will be a requirement for you to complete forms and declarations confirming you want the grant and that you remain eligible for the scheme. Once you have confirmed we anticipate they will process the payments for you.

I am a Director of my Company what can I apply for?

If you are a director of your own company and pay yourself through the PAYE system and don’t intend to do any work you may be able to apply for Furlough Leave as above in relation to the employed income. It unlikely this self-employed scheme covers dividend income as the announcements refer to trading profit and not dividends (which is classed as investment income).  

Deferral of Self-Assessment Income Tax Payments for July 2020

Given the delay in the above self-employment support scheme paying out there is an automatic deferral of income tax payments until January 2021 and there is no need to apply. Be aware that this is only a deferral of the tax and it will still be payable at the end.

Time to Pay Service

The same principle as applies to tax payments for businesses applies to self-employed individuals and you can call the same number for assistance.

Mortgage holidays

Homeowners and landlords affected by coronavirus can apply for a three-month mortgage payment holiday. It is the discretion of the lender whether this is allowed. Most residential lenders seem to be allowing this, but not all buy to let lenders.

You will still owe the bank at least the same capital amount as you do now and interest will continue to accrue on this. Some lenders may add the amount borrowed to the capital amount. This means it may take you longer and cost you a little more to clear your mortgage so you may be better not to use this facility if you don’t need to. 

Rental holidays

Tenants in either social or private accommodation who are struggling to pay their rent due to coronavirus are able to speak to their landlord about a payment plan for up to 3 months. There is no guarantee that the landlord will agree, but given they may also be able to apply for a mortgage holiday they may be agreeable. 

At the end of any rental holiday period, landlords and tenants will be expected to work together to establish and affordable repayment plan, taking into account tenants’ individual circumstances.

Other benefits

Currently the self-employed are not entitled to sick pay. Instead they would have to claim employment and support allowance (ESA) and or Universal Credit. The weekly payment of ESA is typically £73.10 or £57.90 for people under the age of 25.

However, The Chancellor has said that he is raising the payments of universal Credit so that the self-employed receive the same amount as someone on statutory sick pay (£94.25 a week).

Some self-employed businesses may be able to apply for the business loans or be eligible or the grants referred to in our guide on What measures are available to help businesses through the Coronavirus outbreak? and you should review that to check availability. 

You should take financial advice on any of the loans before entering to them as you will be taking on debt.

This is a rapidly developing area and therefore if you require any further details then please do not hesitate to contact us. 

Should you need any guidance or legal assistance in navigating your business through the coronavirus outbreak please do not hesitate to contact Fieldings Porter’s Commercial Team who will be happy to help.