COVID-19: Support for the self-employed
The new coronavirus, officially name COVID-19, was first declared a pandemic by the World Health Organisation on 11TH March 2020, when the number of affected countries and individuals drastically increased.
Given how much the virus has spread across the UK, the stimulus package announced during the 2020 Budget is no longer sufficient to deal with the crisis, and so further measures have been put in place to protect businesses across the UK.
Whilst Chancellor Rishi Sunak has focused on employees and businesses up to press, last night he announced a new package designed to support the self-employed.
We look at what this means and who is eligible.
The first and main point to note is that directors/shareholders are not eligible for the new self-employment package as they are not classified as self-employed. Self-employed individuals are classed as those who are sole traders, partners in unincorporated partnerships and partners in LLPs.
If directors/shareholders are on a PAYE scheme, then they may be eligible to claim under the Job Retention Scheme. Further guidance on the scheme was announced on 26 March 2020 and can be found here.
Support package explained
The long-awaited support package for the self-employed was outlined by The Chancellor during last night’s press conference, and whilst further information is due to be rolled out with regards to the process, here’s what we know so far.
Those who have a profit of up to £50,000 according to either their 2018/19 tax return or as an average over the last 3 years, will be able to claim 80% of their monthly salary up to a maximum of £2,500. If they missed the deadline for the 2018/19 submission, individuals have a further four weeks to submit this.
Sadly, it appears those who have become self-employed since 6 April 2019 will not be covered by the scheme and would therefore need to rely on the benefits system for support.
For those who are eligible, lump cash sums will be paid out in June 2020. Whilst this is a generous offering, it’s worth noting that this will be a TAXABLE grant, although how this will be deducted has yet to be revealed.
How to apply
Self-employed individuals do not need to make an official application as those eligible will be contacted directly by HMRC with further instructions.
The government response for employees, businesses and the self-employed has been staggering, well considered and most importantly unprecedented. However, during such difficult times, it will take a while to roll out the support available which may have a negative effect.
Our main concerns are that June 2020 is over 3 months away, which is a long time for self-employed individuals who are used to earning a significant living to go without income. One potential option could be the Interruption Loan Scheme which could help those struggling to draw down loans quickly.
In addition, the profit threshold of £50,000 raises concern. Self-employed individuals don’t necessarily fund personal living costs based on profits as they want to support future growth or simply because the business does not have the funds. We all know that profit does not mean cash.
But, for those businesses with profits in excess of £50,000 and drawings are below profits, then perhaps one option would be to revisit their remuneration strategy and forgo profit retention in the short term.
If you would like to discuss any concerns or seek further guidance, please email email@example.com to speak with one of our team.
On Friday 3rd April at 3pm we will be running a webinar to provide online support, guidance and advice to those affected by the COVID-19 pandemic.
To register your interest, please text 07583094867 and we will send further information.