Martin Lewis explains coronavirus income support for self-employed people

You can’t get statutory sick pay if you’re self-employed. But if you have to take time off work because you’re sick or self-isolating – or if you’ve lost all your income due to coronavirus – you might be entitled to claim benefits. Plus further help has been announced in the form of the new Self Employed Income Support Scheme (SEISS)…

Under this scheme self-employed workers will be able to apply for taxable grants to combat loss of income due to the coronavirus pandemic. Here’s how it’ll work…

The grants are worth up to 80% of your profits. This is capped at £2,500 a month and is taxable. As it’s a grant it means you don’t have to pay it back.
Grants are decided on your profits over the last three years.
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 2018-9 tax return but missed the deadline this year, you’ll have until 26 April to submit your tax return and then you can still access the scheme. However, 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.
You must earn more than half your total income from self-employment. This must have been the case for either your 2018/19 tax return – or if not, the average of your 2016/17, 2017/18 and 2018/19 tax returns.
Your average trading profit must be less than £50,000/year. 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.
This scheme’s expected to start paying out in June. Payments will be likely backdated to cover March, April and May (in form of a lump sum). The scheme will operate across the UK and is set to last for at least three months, though this could be extended.
Unlike the employee scheme, here you CAN keep working. You also do not need to prove coronavirus impact – all who qualify get it.

Who will be eligible for the scheme?

To apply for this help, 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, if not, the average of your 2016/17, 2017/18 and 2018/19 tax returns.
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.

For both these requirements, the Government says it will first check your 2018/9 tax return – if you met the requirements that year, you’ll be eligible.

However if you earned more than £50,000 (or earned less than half of your income from self-employment) in 2018/9, the Government will then check your 2016/7 and 2017/8 tax returns, if you filed them. If on average over the three years you earned less than £50,000 and made more than half your income from self-employment, you’ll still be eligible.
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 2018-9 tax return but missed the deadline this year, you’ll have until 23 April to submit your tax return and then you can still access the scheme.
If you’re a self-employed limited company director, there have been a lot of conflicting reports on this. Over to Martin who has the lowdown: “I have now had it absolutely confirmed by both the Treasury and HMRC that self-employed limited company directors CAN be furloughed as employees on their PAYE element, even if they’re the sole employee.

“Technically they can’t then work for the firm, but can continue to perform their statutory obligations as directors, eg, official legal filings.”

The Government has also confirmed that contractors within the Construction Industry Scheme ARE eligible for this scheme, as long as they fulfil the other requirements.

However if you’re part of an umbrella company, you’ll typically be eligible for the job retention scheme for employed people instead – as you’re usually employed by the umbrella company.

How do I apply for the SEISS?

Those who are eligible for the Self-Employment Income Support Scheme will be contacted by HMRC directly – 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. We’ll be following the scheme closely and keep you fully updated as and when you can apply.

I am eligible but can’t wait until June – what can I do?

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, 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 it comes through). See more on other help for the self-employed below.

In addition, it may also be worth using any money you have set aside for your July tax bill 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.

Quick questions

What if I’m not eligible for the Self-Employment Income Support Scheme?

Not all self-employed people can access this help – for example, if you earn more than £50,000 per year or less than half of your income is from self-employment. If you don’t meet the eligibility requirements unfortunately you won’t be able to claim, but there are other things you can try:

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. Read more on the Government’s Business Support website.
You can defer your 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. See Self-assessment tax payments delayed.

If neither of these apply to you, check if you can claim benefits towards housing and other costs.

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Self-assessment tax payments are being delayed

On 20 March, the Government announced it will delay the next set of self-assessment tax payments to January 2021, in a bid to help the self-employed. If you pay the majority of your tax via self-assessment, then usually you make two payments each year to pay off the previous year’s tax bill, one by 31 January (when your tax return is due) and one by 31 July.

The Chancellor announced that there will be no payment due by July this tax year, allowing people more time to pay their tax bill, or to be able to use the cash already saved towards it for more immediate expenses.

I might not be able to pay my tax – can I get help?

IR35 tax reforms have been delayed a year

Controversial reforms which will lead to tax bills going up for many self-employed people have been delayed a year as a result of coronavirus. Changes to IR35 ‘off payroll working’ rules – anti-tax avoidance rules – will now come in in April 2021 instead.

The changes will mean every medium and large private sector business in the UK will become responsible for setting the tax status of any contract worker. Currently the rules only apply to the public sector.

In simple terms this means self-employed people working for a company will pay more tax. And the fear is that businesses will find the changes too complicated and use fewer self-employed people as a result.

However while the delay comes as a respite for some, it’s been made clear they will still definitely go ahead in April 2021.

Gig worker, zero hours, freelance or agency? Check if you’re eligible for furlough

If you work in the ‘gig’ economy, you freelance, you work through an agency or are on a ‘zero-hours’ contract, it’s important to check whether you are actually employed or self-employed.

The best way to tell this is to see how you’re taxed. If you’re taxed through PAYE, then you’re considered as an employee. So, you should have the same rights as an employee – read more about what those are.

If you are taxed through PAYE, then you should be eligible for furlough (the Coronavirus Job Retention Scheme), which means the Government will pay 80% of your salary up to £2,500/mth.

The amount the Government will pay will be 80% of your usual pre-tax monthly salary, as it was on 28 February (if you earn fees, commission or bonuses on top of your usual salary, this won’t be included).

If your pay varies from month to month – for example, because you’re employed on a ‘zero hour’ contract – the 80% will be calculated based the higher of:

Your earnings in the same month of the previous year
OR your average monthly earnings from the 2019-20 tax year

If you’ve worked for your employer for less than a year, it’ll be calculated based on your average monthly earnings while you’ve worked there.

If you are self-employed (therefore taxed through self-assessment and not PAYE), you won’t be eligible to be furloughed, but you may be eligible for the support being offered to the self employed, or be able to claim benefits.

I’m a limited company director – do I qualify for any of these schemes?

No official scheme has been announced for directors of limited companies, even if they’re just one (wo)man bands, and it looks unlikely one is coming, though many are lobbying for it.

However we have it rock solid CONFIRMED that self-employed limited company directors, even if they’re the only employee, can furlough the PAYE element of their income – ie, get 80% of salary up to £2,500/month. This isn’t likely to be huge as it’s likely more of your income is dividends (and there’s no help there), but it’s something.

If you do this, technically you can’t then work for the firm, but you can continue to perform your statutory obligations as directors, eg, official legal filings.

The reason for this is that HMRC find it difficult to separate the dividends you get from your own company from dividends that you get from other sources, such as share income. So, you’re not eligible for the self-employed support scheme, but – as Martin says – you will be able to furlough yourself under the employees scheme on your PAYE element.

If this leaves you with cash flow issues, check the benefits section below to see if you qualify.

Don’t dismiss universal credit (and other benefits)…

Universal credit is a benefit which is available to many employed and self-employed workers, either if you’re on low income of if you’re unemployed (including if you were on a higher income, but that income has now either stopped or been reduced).

Amid the current crisis, the Government has increased the standard allowance AND removed the minimum income floor (which benefits the self-employed).

So, from Monday 6 April, if you’re single and 25 or over, you can get a monthly standard allowance of up to £409.89 (both new and existing claims). Over a year, that’s £4,918. Before the crisis, this yearly allowance was £3,813.

Whether your get more or less than the standard allowance is dependent on several factors:

What’s the max you can get? There is no set amount – it all depends on your personal circumstances, including: income, if you have children (and if so, how many), if you’re a carer of a disabled person, rent levels and more. It’s quick (and free!) to see how much you could get, just visit our 10 min benefits calc.
Can I work/be furloughed and still receive UC? Yes, you can but your universal credit monthly payment will reduce by 63p for every £1 you earn in that same monthly period. For example, if your UC payment is £300/month, you won’t receive a payout if you start earning £476+/month. However, anyone responsible for any children or young people, or living with a disability or health condition that is affecting their ability to work can earn up to a certain amount – max £503/month – before their earning are getting reduced.

What happens if I have savings?
One of these factors is the amount of savings you’ve got. If you or your partner have combined savings of more than £6,000 you’ll get less universal credit, and if your household has got savings of £16,000 or over you won’t be eligible for universal credit at all.
I have other benefits coming in – will they affect my payment?
Some, such as child benefit and personal independence payment, are fully ignored. Some, such as jobseekers’ allowance or employment and support allowance, count £ for £ and come off your entitlement in full.

NEW UNIVERSAL CREDIT STANDARD ALLOWANCE
Your circumstances	Monthly standard allowance
Single and under 25	£342.72
Single and 25 or over	£409.89
In a couple and you’re both under 25	£488.59
In a couple and either of you are 25 or over	£594.04

Housing element of universal credit

However, the BIG change to universal credit is the amount of housing benefit you can claim. The amount it paid out had been frozen since 2016, but from April the housing element of universal credit will be unfrozen, meaning both people who rent and those who own their property could be eligible to more money.

If you claim the housing element of universal credit, it could be worth £100s or even £1,000s a month.

The housing element of universal credit can be used to cover:

Your rent
The interest on your mortgage
Any service charges you may pay

According to the Chancellor, Rishi Sunak, housing costs support will cover the bottom 30% of market rents in any particular area – for example, in one London borough, for a two-bed home the max was £1,390/month, it could now be as high as £1,550/month.

You can apply for universal credit online, and, if your application is successful, you’ll get your first payment after around five weeks.

Applying for universal credit?

Be patient, it will happen. We’ve been badgering the Department for Work and Pensions over universal credit delays, and they let us see the figures. Online applications were up 832% last week – rather than the typical 9,751 a day, it went as high as 105,678. They’re swamped.

If you’re told to ring for an appointment but can’t get through, try and be patient (I know it’s hard). They’re checking who’s missing and WILL call you. And remember those call-handling staff are working flat out in difficult circumstances, so try not to vent at them – it’s not their fault.

To check beforehand if it’s likely you’ll be accepted use our 10 min benefits calc.

Contributory employment and support allowance (ESA)

Both employed and self-employed workers can apply for this if you’re directly affected by coronavirus, caring for a child who is ill with coronavirus or self-isolating according to Government advice.

As part of its response to the coronavirus pandemic, the Government is changing the rules so you’re eligible to claim ESA from the first day of sickness/self-isolation rather than the eighth, as previously. This change has been announced but hasn’t kicked in yet (the Department for Work and Pensions can’t tell us currently when it will, but when it does the new rule will be backdated to Friday 13 March).

Given that payments are made fortnightly in arrears, claimants who meet the criteria should actually receive their first payment after around two weeks.

To be eligible you must have paid enough national insurance contributions in the last two to three years (see full eligibility criteria – national insurance credits also count). What you get (and if you can get it) depends on several factors:

How much can I get?
You can get up to £73/week depending on your age – if you’re under 25 you’ll get £58/week.
Can I still earn while I claim?
Yes – you can earn up to £131.50 a week (£140 from 6 April) but only if you are doing ‘permitted work’ of less than 16 hours per week because of a disability.
What happens if I have savings?
The amount won’t be affected by either you or your partner’s savings or income, though if you get a private pension worth more than £85/week it’ll be reduced.
What if I’m claiming other benefits?
Contribution-based ESA can’t be claimed alongside statutory sick pay, maternity pay, or jobseekers’ allowance. However it can be claimed ALONGSIDE universal credit, but your UC entitlement may be reduced.

You can’t claim extra benefits for taking time off to look after kids because schools are closed

Unfortunately, you won’t be able to claim extra benefits if you’re self-employed and need to take time off work to look after your children because schools are closed. You can only get help with childcare costs if you’re using a registered childcare provider, rather than caring for your kids yourself.

Employment support allowance (ESA) can now be claimed from the first day of sickness, but only in cases where households are ill or self-isolating – so unfortunately you can’t just claim it because your child’s school is closed and you have to take time off to care for them.

However, it’s still worth checking you’re claiming all the other benefits and support you’re entitled to, which could include seeing if you can claim universal credit or checking if you can take a mortgage payment holiday or delay energy bills.

Working tax credit

If you’re still on the old benefit system and still receiving working tax credits, how much you can claim is also set to increase.

That’s because from Monday 6 April, the basic element of working tax credit is increasing by £1,040/yr (£20/week) to £3,040/yr.

The only people still eligible for working tax credit are those who receive the severe disability premium, or have received it in the past month and are still eligible for it.

Payments are means tested, so the more you earn the less you receive. But, there’s no set limit for income because it depends on your circumstances (and those of your partner).

For most people, however, working tax credit has been replaced by universal credit.

It’s also worth using our Benefits Checker to see what you may be entitled to.