Last updated 5th May
The outbreak of the Coronavirus is having a profound impact on businesses, and will likely continue to do so in the months ahead. The Government has announced a package of measures to support a broad range of firms in mitigating the detrimental economic consequences of the virus.
The self-employed play an important role in the UK economy, and many IoD members are self-employed, contractors or consultants. More widely, the latest figures from the Office of National Statistics suggest that around five million people in the UK workforce fall into these categories. This is an explainer on recently-announced Government measures for the self-employed.
This is a fast-moving situation and as such we will aim to keep this page up-to-date. The IoD will continue to push the Government for more support for the self-employed.
What are the key measures to note for the self-employed?
Self-Employment Income Support Scheme
The SEISS is designed to assist self-employed people whose income has been adversely impacted by Coronavirus. The scheme will issue a grant to self-employed people or partnerships, worth 80% of their profits up to a cap of £2,500 per month.
HMRC will calculate the value of the grant by looking at average profits from tax returns in 2016-2017, 2017-2018 and 2018-2019. SEISS will be available to people for whom self-employment makes up the majority of their income and whose profits are under £50,000. The government has published guidance on how HMRC calculates total income and total trading profits for the SEISS here.
The Government has said the scheme will be open for an initial three month pilot. HMRC will use information it has on file to check individuals' eligibilty and then invite applications. The online service used for the scheme and making claims is not yet up and running but individuals will be able to apply for the grant from 13 May. HMRC will begin contacting eligible self-employed individuals w/c 4 May by email, text and letter to inform them that they are eligible and explain what they need to do to apply.
Applications will open in tranches using the Unique Tax Reference (UTR) number given to all self-employed taxpayers. To provide further support to the claims process, the Government has launched an online eligibility checker tool available here.
In order to be eligible for the scheme, you must meet all of the following criteria:
- Be self-employed or a member of a partnership
- Have lost trading or partnership trading profits as a result of the Coronavirus
- File a tax return for the year 2018-2019 as self-employed, or as a member of a trading partnership – those who have not yet filed for 2018-2019 will be granted an additional four weeks (from 27 March 2020, we understand) to do so
- Have traded in 2019-2020; be trading currently at the point of application (or would be were it not for the Coronavirus) and plan on continuing to trade in the tax year 2020-2021
- Have trading profits of under £50,000 and more than half of your income come from self-employment, which can be in reference to one of the following:
- Your trading profits and total income in 2018/2019
- Your average trading profits and total income across up to three years between 2016-2017, 2017-2018 and 2018-2019.
Please note that company directors who pay themselves a dividend are not covered by the SEISS. Owner-managers of limited companies can access the Coronavirus Job Retention Scheme for their salary.
Claimants of the SEISS are able to continue working or take on other employment including volunteering.
Individuals can access both Universal Credit and the SEISS.
If you wish to find out more about the scheme, please refer to this guidance on gov.uk. Moreover, you may wish to read this guidance published on the government's business support hub and the accompanying FAQs.
The minimum income threshold for Universal Credit will be temporarily removed from 6 April for the duration of the outbreak for those directly affected by COVID-19 or in self-isolation. Universal Credit will be available to those directly affected by COVID-19 or in self-isolation, with no need to attend a job centre. This measure is designed to provide compensation for any income losses.
The Chancellor is raising the payments for Universal Credit so that a self-employed person can receive the same amount as someone on statutory sick pay (£95.25 per week).
Those with savings of at least £16,000 are not eligible for any support via Universal Credit. These people must wait until they have burned through their savings buffer in order to qualify.
For more information on Universal Credit, see here and here.
Employment and Support Allowance
A new-style ESA will be available to those directly affected by COVID-19 or in self-isolation, provided they have paid enough National Insurance contributions in the last two to three years. This benefit will be payable from the first day of sickness rather than the eighth day. At present, single claimants under the age of 25 can claim up to £57.90 per month, while those aged 25 and over can receive up to £73.10.
If it is your first time applying for ESA, you need to send a completed ESA 1 form, along with an NHS 111 fit note as proof that you are not fit for work. You will receive the first payment within three weeks.
For more information about Employment and Support Allowance, see here and here.
HMRC 'Time to Pay'
HMRC has launched a helpline for businesses and the self-employed concerned about paying tax due to COVID-19. Businesses may be eligible to receive financial support, on a case-by-case basis, through the 'Time to Pay' support scheme. HMRC's dedicated helpline number is 0800 024 1222 and opening hours are from 8am to 4pm Monday to Friday.
HMRC will also waive penalties related to late payments and interest in cases where a business has administrative problems in contacting HMRC or paying taxes as a result of COVID-19.
The self-employed will be able to defer the payment of their self-assessment tax return until January 2021.
For more information on ‘Time to Pay’, see here.
Coronavirus Business Interruption Loan Scheme
A temporary Coronavirus Business Interruption Loan Scheme administered by the British Business Bank, which supports businesses in accessing bank loans (worth up to £1.2 million) and overdrafts - approach one of the 40+ accredited lenders with a borrowing proposal.
Self-employed people with an annual turnover of up to £45 million can apply under the scheme, provided they operate through a business bank account and generate over 50% of their turnover from trading activity.
For more information on the Coronavirus Business Interruption Loan Scheme, see here.
Coronavirus Large Business Interruption Loan Scheme
The Government has announced an expansion of the CBILS loan scheme. The Coronavirus Large Business Interruption Loan Scheme sees all firms with a turnover of more than £45 million being able to apply for up to £25 million in finance, and up to £50 millions for firms with a turnover of more than £250 million. The scheme, which launches on 20 April 2020, will be available through accredited lenders, which will be listed on the British Business Bank's website here.
For more information on the Coronavirus Large Business Interruption Loan Scheme, see here.
Coronavirus Bounce Back Loan Scheme
The Government has announced a 100% government-backed loan scheme for small businesses, which sees firms being able to apply to borrow between £2,000 and £50,000 and to access the cash within days. These loans are interest-free for the first 12 months and no repayments will be due in the first 12 months.
The application process is designed to be easy and through a short, standardised form.
More information on the Bounce Back Loan Scheme, see here and here.
Package for innovative firms, including the Future Fund
The government has announced a £1.25 billion support package aimed at innovative firms that are adversely affected by the Coronavirus. It includes the Future Fund, which is a new £500 million loan scheme for high-growth firms. The package also includes £750 million in targeted support for SMEs focusing on research and development.
The Future Fund will dispense convertible loans to innovative firms which are experiencing financial difficulties as a result of the pandemic. It will provide government loans to UK-based businesses ranging from £125,000 to £5 million, subject to at least equal match funding from private investors.
The convertible loans may be an appropriate option for firms that rely on equity investment and are not eligible to access the CBILS. The scheme will launch in May 2020 and will be administered in partnership with the British Business Bank.
For more information about the scheme, read the government press release here. For details on the scheme, read the government guidance here and the accompanying headline terms here.
A delay to proposed IR35 tax reforms - measures aimed at clamping down on tax avoidance by targeting contractors who provide the same services as employees (but which has affected freelancers more widely) - will now be delayed by one year, to April 2021.
For more information on the delays to IR35, see here.
What key measures do not apply to the self-employed?
Statutory sick pay is not applicable for the self-employed, as this is money paid by employers. The above-mentioned adjustments around Universal Credit and Employment and Support Allowance are designed to ease the burden on the self-employed.
The self-employed are not eligible for the Coronavirus Job Retention Scheme, which sees the government reimbursing 80% of furloughed workers’ wage costs up to a monthly ceiling of £2,500. However, the Self-Employment Income Support Scheme is designed to be an equivalent support measure for this particular category of worker.
How the IoD can help
Let us know what steps you think Government should take to support the self-employed. We are in direct contact with the heart of Government, and want to make your voice heard.
Additionally, we would welcome any feedback you have on the above measures and are happy to pass this on to our contacts in Government.
Email the policy unit
IoD explainer on government support for SMEs
Government Coronavirus Business Support page
Covid-19: Government support for employers
Government guidance on social distancing
Government guidance on travel