If you’re self-employed, the government has announced a range of measures to support you. This guide tells you more about the available schemes and how they will affect you if you’re a sole trader, work in the gig economy or run your own business. There’s also information about the types of welfare benefits you might be entitled to claim if your income has dropped or you can’t work because you’re sick or self-isolating.
Coronavirus self-employment income support scheme
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The government has launched the self-employment income support scheme. To be eligible, you must earn more than half your income from self employment, have submitted a tax return for 2018/19 and have:
- an average trading profit of less than £50,000 for the tax year 2016/17, 2017/18 and 2018/19.
or if you haven’t been trading for all these years
- a trading profit of less than £50,000 for 2018/19
If you qualify the government will pay you a grant for 80 percent of your monthly profits, up to £2,500 a month for three months.
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Payments will be backdated to the start of March and cover a three-month period to the end of May. The government has said the scheme might be extended.
HMRC will use your average trading profits from 2016/17, 2017/18 and 2018/19 to work out the size of your grant.
It is a taxable grant, so you will have to declare it on your Self Assessment tax return and might have to pay income tax and National Insurance on it.
If you made a self-employed income during the 2018/19 tax year, but have not submitted a Self Assessment tax return yet, you have until 23 April 2020 to submit one.
This scheme is open to sole traders and members of partnerships.
If you pay yourself a salary and dividends through a company, you will not be eligible, but might be helped by the coronavirus job retention scheme if you’re earning through PAYE.
If you’ve become self-employed since April 2019, you will not be eligible.
If you are not eligible for this grant, you will still be able access other government support, including benefits and business support grants.
If you’re eligible for the income support grant and are waiting for it to be paid, you may be able to claim Universal Credit if your household income is low and your and your partner or spouse have savings of less than £16,000.
However, the grant will need to be declared as income when it is paid. This is likely to significantly reduce or completely remove any Universal Credit payment you will get in June or July, depending on when you receive the grant and your assessment period.
This means you will need to plan ahead for how you will pay essential costs.
How can I claim the grant?
Applications for the grant are open, but to avoid putting too much pressure on the system, you will be given a date between 13 and 18 May to make your claim.
To make your claim you will need:
- Self Assessment Unique Taxpayer Reference (UTR)
- National Insurance number
- Government Gateway user ID and password
- UK bank details if requesting a bank transfer (Bacs) payment
You should get the payment within six working days.
Look out for scams
The self-employment income support scheme is likely to be targeted by scammers claiming to be from HMRC. If you’re self employed you should have already received an email from HMRC explaining the scheme and telling you there is no reason to contact them about this.
If you are contacted by email, phone or text by someone claiming to be from HMRC at this time offering you the income support grant, tax refund or any other financial help, this is a scam.
If you can’t work because you’re sick or having to self-isolate
If you’re self-employed you can’t claim Statutory Sick Pay.
If you’ve paid enough National Insurance Contributions, you might be able to claim new style Employment and Support Allowance (ESA) if you’re ill.
The government has said you’ll now get paid from the first day of the claim, rather than after eight days.
If this is the first time you’ve applied for ESA, you’ll have to fill in form ESA 1 and send a fit note from NHS 111 with your claim form to show that you’re not fit for work. You should get the first payment into your bank or building society account within two weeks.
You might also be able to claim elements of Universal Credit if you need help with other costs for children or housing if you and your partner or spouse have savings of less than £16,000. Their income will also be taken into account as part of the claim.
If you don’t qualify for Employment and Support Allowance
You might be able to claim the limited capability for work and work-related activity element of Universal Credit if you and your partner or spouse have savings of less than £16,000. Their income will also be taken into account as part of the claim.
If your income has dropped significantly
If you are feeling well but your work has dried up and you’re waiting for the self-employment income support grant you (and your partner or spouse if you live as a couple) have savings of less than £16,000 you might be able to claim Universal Credit until the self-employment income support scheme starts.
You may be able to claim elements for other costs, such as housing, caring responsibilities or bringing up children.
If you have savings of between £6,000 and £16,000 the amount of Universal Credit you get will be reduced.
Universal Credit and the minimum income floor
The minimum income floor has been temporarily abolished.
The minimum income floor is a formula used to work out how much Universal Credit you should get when you’re self-employed. It is based on national minimum wage and an assumed number of worked hours, regardless of whether you actually work them or not.
Abolishing the minimum income floor should increase the amount of Universal Credit you are entitled to claim if you’re not able to work and allow you to keep your self-employed status.
Applying for Universal Credit
If you’re making a new claim for Universal Credit, you will no longer have to call the DWP. You will be called if any of your information needs to be checked and message you through your online journal.
If you’ve used your Government Gateway account in the last year, for example to file a Self Assessment tax return, this can be used to prove your identity.
If you’re claiming Universal Credit you will have to wait at least five weeks for the first payment, so don’t delay making a claim.
You can make a claim for an advance payment while you are waiting for your Universal Credit payment. You can talk to your work coach about how to do this once you’ve made your claim. The advance payment is a loan that will need to be paid back out of future Universal Credit payments, so make sure you only ask for what you need.
If you stop claiming Universal Credit before the advance payment is repaid, you will have to agree a repayment plan with the Department for Work and Pensions (DWP).
If you or your partner or spouse are already getting any of the benefits being replaced by Universal Credit, including Tax Credits, Housing Benefit or Income Support, these benefits will stop and your benefit income for these costs will be reassessed as part of the Universal Credit claim.
If you decide to end your self-employment
If you decide to end your self-employment and apply for benefits, what you can claim depends on the type of National Insurance contributions you were paying and the amount you have in household savings.
If you were only paying Class 2 National Insurance contributions
You might be able to survive now the government has announced the self-employment income support scheme but, if you decide to end your self-employment and look for paid work you usually won’t be able to claim new-style Jobseeker’s Allowance (JSA) if you were only paying Class 2 National Insurance contributions.
Universal Credit is based on household income and savings and you won’t be able to claim if you have savings over £16,000 as it is a means tested benefit. You will have to wait until your (and your partner’s or spouse’s) savings drop below £16,000 before you can make a claim.
If you have savings between £6,000 and £16,000 you will get a reduced amount of Universal Credit.
If you have paid Class 1 National Insurance contributions
If you were working as an employee during the past two to three years and paid enough Class 1 National Insurance or received National Insurance credits, you may be able to apply for new style Jobseeker’s Allowance. You will also be able to make a claim for Universal Credit to help with the costs of housing, caring responsibilities or bringing up children if you have household savings of less than £16,000.
If you are not entitled to claim new-style Jobseekers Allowance (JSA) and have savings of less than £16,000 you will be able to make a claim for Universal Credit straightaway.
If you work in the gig economy
Unless it has been agreed as part of your contract, you will not be entitled to Statutory Sick Pay, sick leave or paid holiday leave.
Some employers have said they will offer sick pay if you have to self isolate because of coronavirus. Others have said they might offer some kind of compensation if you have been diagnosed with coronavirus.
If you’re working in the gig economy, check with the company to find out what your rights are.
You will be able to claim sickness benefits available for self-employed people if you’re eligible.
If you run your own business
The government has said they will fund the costs of Statutory Sick Pay (SSP) for employers with workforces of 250 people or fewer for up to 14 days.
You can also apply to HMRC for a grant to cover up to 80 percent of your employees’ salaries, up to £2,500 a month.
The government has announced grants and business rates support for small and medium sized business.
Banks will also be offering loans to small and medium sized businesses under the governments Coronavirus Business Interruption Loan scheme.
Small businesses can access loans of between £2,000 and £50,000 through the Bounce Back Loan Scheme. These are interest free for 12 months and no repayments will be due during this time.
If you’re registered for VAT, the government has announced VAT payments due between 20 March 2020 and the end of June 2020 have been deferred.
Find out more about the help available to businesses on the Gov.uk website
The government has announced the next Self Assessment tax return payment – due on 31 July – has been suspended until January 2021 and you won’t be charged any penalties or interest for late payment during this period.
HMRC has expanded its Time to Pay Scheme if you are struggling financially because of anything to do with coronavirus and you owe outstanding tax.
If you already have missed a payment or are worried you will miss your next payment, call the HMRC Time to Pay helpline on 0800 015 9559.
If you’re business is struggling from the impact of coronavirus, then you can call Business Debtline on 0800 197 6026.