Government unveils income support for millions of the self-employed

Last week the Chancellor Rishi Sunak announced the Government is to pay 80% of employees' wages if their employers are struggling, up to a monthly maximum of £2,500. But until now the UK's five million self-employed workers have been left waiting to hear how they will be supported, beyond boosts to benefits. 

Today the Chancellor confirmed that self-employed people across the UK will be able to get an amount equivalent to 80% of their income, based on their average monthly profits – again, up to a maximum of £2,500 a month.

Grants will start to be paid at the beginning of June, as a taxable lump sum covering March, April and May. And while the scheme's initially to cover these three months, the Chancellor has said it may be extended.

Sunak added that the support is expected to be available to about 95% of those who earn the majority of their income from self-employment. But a significant number won't be able to apply for any help at all from the scheme. This includes those with average annual trading profits (loosely your taxable profits) of £50,000 or more, and those who have become self-employed since April 2019 and so haven't filed a tax return yet. 

See our Coronavirus help for the self-employed guide for more info. And here's MSE founder Martin Lewis' quick video explainer of the changes.

Who will be eligible for the scheme?

To apply to the new Self-Employment Income Support Scheme, the following must apply:

• You must earn more than half of your total income from self-employment. This must have been the case for either your 2018/19 tax return or the average of your last three years' tax returns: 2016/17, 2017/18 and 2018/19 tax returns (or both).

• Your average annual trading profit must be less than £50,000. This is essentially a 'cliff-edge' requirement – so those whose average annual trading profit is £50,000 or more won't be able to get any support from this scheme.

  Government guidance says your average annual trading profit will be calculated from either your 2018/19 tax return or the average of your 2016/17, 2017/18 and 2018/19 tax returns. It's not clear from the Government guidance which of these is used if the figures differ though – we're checking and will update this story when we know for sure.  

• You must have filed a tax return for 2018/19. This means you must have been self-employed prior to 6 April 2019. If you were due to file a 2018/19 tax return but missed the deadline this year, you'll have until Thursday 23 April to submit your tax return, after which you can access the scheme. 

If you're a company director and pay yourself a salary or dividends you won't be covered by this scheme, but you could get support through the Coronavirus Job Retention Scheme for employees if you operate pay-as-you-earn schemes. 

How much could the grants be worth?

The grants will be worth 80% of your profits, capped at £2,500 a month, based on your tax returns for 2016/17, 2017/18 and 2018/19 if you were self-employed over that period.

If you became self-employed after April 2018, your 2018/19 tax return will be used instead. But it's worth noting that if you only have a few months' self-employment on your 2018/19 return, this will be counted as your total profit for the year – the Government won't pro-rata it based on your monthly profits. 

How do I apply to the scheme?

Those eligible will be contacted directly by HM Revenue & Customs – the Government hasn't said when this'll be, only that it will happen "once the scheme is operational". At that point you'll be asked to fill in an online form, and the grant will then be paid directly into your bank account.There's no need to contact HMRC now as there's nothing you can do to apply at this stage. If you believe you're eligible and don't hear anything when HMRC does start contacting people, contact it at that stage – we'll be following the scheme closely and keeping you fully updated. For the very latest see our Coronavirus Financial Help & Rights guide.

I'm not eligible for a grant – what other help is available?

Not all self-employed people can access this help – for example, if you earn £50,000 a year or more. If you're not eligible unfortunately you won't be able to claim, but you have other options:

• You can apply for a 'business interruption loan'. The temporary Coronavirus Business Interruption Loan Scheme is open to self-employed people and offers access to loans, overdrafts, invoice finance and asset finance of up to £5 million for up to six years. 

  The Government could also give you a 'business interruption payment' to cover the first 12 months of interest and fees on the loan. 

  The scheme is now open for applications, and is offered by all major banks. 

• You can defer income tax payments. If you have income tax payments due in July 2020 under the self-assessment system, you can defer them until January 2021.

• You may be able to access universal credit in full. The Government has removed the 'minimum income floor' to the universal credit benefit, and will be boosting the standard allowance from Monday 6 April – meaning a single person aged over 25 could get a standard monthly allowance of £409.89. 

  You can use Entitledto's benefits calculator to check what you may be eligible to claim for. 

See your rights if you're self-employed for more info.

I'm eligible but can't wait until June – what can I do?

Even if you are eligible for help from this scheme, it's unlikely you'll see any cash in your bank account until June at the earliest, which for many will be a struggle.

In the meantime, as above you can try applying for a business interruption loan if eligible, or universal credit (for universal credit, the grant will be treated as earnings – but check if you can apply for support before the grant is paid).

In addition, it may also be worth using money you have set aside for tax to cover immediate expenses until your grant comes through in June. This especially applies given the July self-assessment tax payment can be deferred until January 2021.

More quick questions – eg, do I have to stop working?

There are lots more queries to answer – here are a few more quickfire questions (and answers):

Q. If I apply for the grant, do I have to stop working? A. No, that's not a requirement – you can continue working and earning if you're able to once you've applied, and this won't have any impact on you getting a grant. 

Q. I've only become self-employed this year and haven't had the chance to file a tax return yet – can I apply? A. No, unfortunately not. If you weren't able to file a tax return for self-employed earnings in 2018/19, you won't be able to apply.

Q. What if my business was just getting started and I made a loss? A. The grant you'll get is based on your average monthly profits – so if you made a loss, sadly you won't be able to get anything. However, check other support available, such as a business interruption loan or universal credit.

Q. Will the scheme be extended beyond the next three months? A. It's possible – while initially there will be a payment in June to cover March, April and May earnings, the Chancellor said it may be extended. If it is, we don't yet know whether payments would be made monthly – we'll be following this closely and posting full updates in our Coronavirus Financial Help & Rights guide. 

Q. What if I get a grant then have a really good year – will I need to pay it back? A. The Treasury hasn't said there will be a 'clawback' of the grants if you end up with high overall earnings in 2020/21 – but we're double-checking and will update this story when we know more. 

If you've got a question we haven't answered above, let us know at news@moneysavingexpert.com (unfortunately we're not able to answer every email directly, but all are read).

What does the Government say? 

Chancellor Rishi Sunak said: "Self-employed people are a crucial part of the UK's workforce who have understandably been looking for reassurance and support during this national emergency.

"The package for the self-employed I've outlined today is one of the most generous in the world that has been announced so far. It targets support to those who need help most, offering the self-employed the same level of support as those in work.

"Together with support packages for businesses and for workers, I am confident we now have the measures in place to ensure we can get through this emergency together."