COVID-19 Help for individuals who are self employed

Thursday, March 26th, 2020

We are waiting for the chancellor to announce some measures for the millions of sole traders in the UK. Whilst we know they have a lot to consider, it must feel like you’ve been forgotten.  Let’s hope an announcement comes soon.

Self-employment Income Support Scheme (SEISS)

The chancellor has announced a measure of support to provide a grant to self-employed individuals or partnerships. HMRC are going to use the average profits from your submitted tax returns from 2016-17, 207-18 and 2018-19 to calculate the grant that you can receive. The grant is capped at £2,500 per month.

The scheme will be open to to those that have profit of less than £50,000 and will last initially for three months and it is anticipated that the first claims can be made by the beginning of June.

Am I eligible?

The eligibility criteria is:

  • you must be self-employed or a member of a partnership
  • have lost trading profits due to COVID-19 e.g. a restaurant that has had to close its doors
  • have filed a self-assessment as return as a self-employed person or as part of a partnership in at least 2018-19. If you have’t filed it yet, you’re late and the government are giving you 4 weeks to get yourself sorted
  • you must have traded in the 2019-20 tax year and intended to trade in the 2020-21 tax year
  • have trading profits of less than £50,000 and more than half of your income coming from self-employment
  • this will be with reference to at least one of the following conditions:
    • your trading profits and total income in 2018-19
    • your average trading profits and total income for the three years 2016-17, 2017-18 and 2018-19
How do I access it?

HMRC will be checking eligibility your potential eligibility and will invite you to apply once the scheme is operational. You will then get the payment direct in to your bank. We suggest that you use a bank account that you don’t intend to use for expenditure as if you go in to overdraft in these trying times the payment will be swallowed up.

Whilst HMRC are urgently working to set up this scheme it is unlikely that it will be up and running until the beginning of June 2020. That, no doubt, feels a long way away.

HMRC are publishing guidance on the scheme, here. They have assured us that they will continue to update the guidance.

In the interim, if you need financial assistance please check out your eligibility for Universal Credit and other business continuity loans.

Employment Support Allowance (ESA) and Universal Credit

If coronavirus means you’re not able to work and you have paid enough National Insurance, you may be able to claim new style Employment and Support Allowance (ESA) if you’re ill. The government have said that you will get ESA from day 1 for your claim, rather than after 8 days.  If this is the first time you have claimed, you’ll need to fill in form ESA 1 and send a fit note from NHS 111 with your claim form to prove that you are sick and unable to work.  The first payment should be paid directly to you within 3 weeks.

You might also be able to claim elements of Universal Credit if you need help with other costs – but only if you and your partner or spouse have less than £16,000 in savings.

If your income has dropped

Many self-employed people are well enough to work, but their income has dried up because of the current lockdown situation, as customers stall planned workflow.  In this case you may be able to claim for Universal Credit, but again only if you and your partner or spouse have less than £16,000 in savings.

The government announced that the standard allowance will be increased by up to £86.67 a month from the new financial year, 6 April 2020.  The amount you get is dependent on your circumstances including all your household income and will be available to all claimants, new and old.  If you’re self-employed and qualify to claim Universal Credit, the minimum income floor will be temporarily removed from 6 April 2020.  This should increase the amount of Universal Credit you are entitled to claim if you’re not able to work.

Don’t forget however that all claims take a while – so please don’t delay in putting your claim in.  Payment of benefits can take longer than you think, and if you’re claiming for the first time your first payment can take five weeks. You can claim an advance payment while you’re waiting – but this is treated as a loan and will be clawed back out of your future payments.

What if you don’t want to be self-employed anymore

Let’s be fair, it’s a thought that many have had; times like these make you wonder if it’s worth continuing being self-employed and you’d be better off claiming Jobseeker’s Allowance (JSA).  If you have savings over £16,000 you won’t be able to claim JSA if you’ve only been paying Class 2 National Insurance contributions, so check your last tax return computation to see what class you paid.

You also won’t be able to claim Universal Credit either, because it is a means-tested benefit.  You will have to use up your savings until they drop below £16,000 and only then will you be able to make a claim.

If you have been self-employed for a short time, and previous to becoming self-employed you were employed paying Class 1 National Insurance, you may be able to claim JSA as well as Universal Credit to help with costs for housing and bringing up your children – but again only if you have savings of less than £16,000.  If your savings are less than £16,000 you will be able to make a claim for Universal Credit even if you’re not able to claim JSA.

I have my second payment on account to pay in July

The government have announced that they are delaying the second payment on account for self-assessed individuals that is due to be paid by 31 July 2020.  The payment has now been deferred until 31 January 2020.

This is going to be automatic, so you won’t have to apply to HMRC for it to be deferred.

I don’t think I’m going to be able to pay my mortgage or rent

The government announced that the 3-month mortgage holiday for households who are in financial difficulty will also include those that are self-employed.  You will need to contact your mortgage provider to ask them for their assistance.

If you rent your home, you are protected too.  Local housing allowance rates will pay at least 30% of market rents.  The government has also suspended evictions and introduced a 3-month mortgage payment for landlords.  If you rent your home through the local authority, contact them for guidance.  If you rent your home from a private landlord, don’t ignore the rent that needs paying, contact them and explain your circumstances.  Many will be claiming the mortgage holiday, which should also give you some breathing space.

Can I claim a hardship grant?

Some local authorities have set up a Hardship Grant.  Please refer to your local authority’s website for more information as it different per area.

For further guidance on the impact of coronavirus in the workplace, check our Employers’ duty of care page.

And for more around self-isolation and absence issues, click to our Self-isolation and absence page.

If you are concerned about laying off staff, check the advice on our What if I need to lay off my employees? page.

Learn more about the specifics on how to furlough employees, visit our How to Furlough Your Employees page

Want to know more about financial support during the coronavirus disruption? Then click to read the Financial Help for Businesses page.

The content contained within this document has been obtained from information gathered from GOV.UK and may have changed since publication and has been provided as a guide only.  You should always seek professional advice pertaining to your own individual circumstances.


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