Government unveils COVID-19 self-employment support

Recently, I published an overview of the available help for limited company contractors during COVID-19. Soon after, on Thursday 26th March, the Government announced the Self-employment Income Support Scheme (SEISS), which is designed to protect millions of self-employed workers. Whilst this scheme provides comparable benefits to those that employees will receive from the Coronavirus Job Retention Scheme, limited company contractors have slipped through the cracks once more. As disappointing as this is, the SEISS will at least prove important for those operating as sole traders and members of a partnership.

In this piece, I’ll explain the details of the scheme in simple terms…

What was announced?

Under the SEISS, self-employed workers can apply for a cash grant worth up to 80% of their average monthly profits over the last three years. There’s a maximum cap of £2,500 a month and this will be paid out as a lump sum to cover March to June. However, this will not be paid until June at the earliest, which could leave many self-employed workers in the lurch. 

HMRC has said it will use existing information to check your eligibility and invite applications once the scheme is operational – so you don’t need to contact them right now. Assuming that you do qualify, HMRC will pay the grant directly into your bank account. 

Who is eligible?

The scheme is open to self-employed individuals who meet the following criteria:

• At least half of your income needs to have come from self-employment as registered on the 2018-19 tax return filed in January (if you missed the filing deadline, you have four weeks to get it done)
• The scheme is open to those with trading profits under £50,000 a year
• You can also continue to work and still receive support (unlike furloughed workers)
• Company owners who pay themselves a dividend aren’t covered, much to the frustration of limited company contractors
• The scheme doesn’t cover people who only became self-employed recently – the Chancellor said they would have to look to the benefits system for support

The grants will be taxable and must be declared on tax returns by January 2022. You can check the full eligibility criteria by visiting the Government website here.

What if I’m not covered?

If your trading profit exceeds £50,000 a year or you pay yourself dividends then you won’t be covered under this scheme. One of the best options would still be to make yourself a ‘furloughed worker’. However, this will only cover 80% of your PAYE salary (which is likely to be set at around £700 a month for limited company directors). If you think there should be more support for limited company directors, it’s worth signing this petition – at the time of writing it has amassed over 300,000 signatures. 

Other support available

In addition to the SEISS, self-employed workers can also;

• Defer VAT Payments: defer payments from March to June until the end of the tax year. 
• Defer Income Tax Payments: payments for July 31st 2020 are not due until 31st January 2021.
• Business Interruption Loan Scheme: interest-free loans for 12 months with an 80% guarantee from the Government. This can be claimed through your bank.

Charlie Bailey is Co-Founder of Forma, that provides a range of business services for freelancers and contractors. For more information and to use Forma’s COVID-19 eligibility calculator, please visit the Forma website.