Coronavirus self-employment entitlements
The chancellor has announced a grant scheme for self-employed individuals, which could see claimants receive up to £2,500 a month for the next 3 months. The grant will be calculated on their average monthly profits over the last 3 years, unless the individual has been trading for a shorter period; in such cases, the grant amount can be calculated on the monthly average profits over a shorter time period. Note that the calculations will be made from the submitted self-assessment tax returns, and payments are expected to be made in June.
Are there any restrictions?
In order to ensure that the grant is largely being directed to the targeted group, a few restrictions will become effective. Firstly, anyone whose 3-year average profit is greater than £50,000 will not be eligible to receive the grant money. This measure has been introduced to ensure that help is only being given to those individuals who require it. The scheme also excludes anyone who became self employed recently, as they will not have submitted a 2019 self-assessment tax return. The final restriction states that to be eligible for this grant more than 50% of an individuals income must come from self-employment. This is expected to benefit 95% of people who need the grant, whilst the remainder can access Universal Credit.
The grant is to count towards taxable income and must be included on the 2020/21 self assessment tax return. It is also important to note that company directors who pay themselves by way of dividends won’t be eligible, so this doesn’t apply to people working through personal service companies.
Unlike furloughed workers taking advantage of the Job Retention Scheme, self-employed individuals in receipt of this grant will still be able to work. The chancellor ended his announcement by foreshadowing a change in taxation that will see the self-employed pay equal amounts to the employed – an idea that is bound to be met with discontent. What everyone will agree on, however, is Sunak’s claim that the current Conservative government are offering one of the most generous support packages in the world.