The Self-Employment Income Support Scheme explained

If you’re self-employed and have lost some, or all of your income due to coronavirus, you have until 13 July to apply for a grant of up to £7,500 from the government’s Self-Employment Income Support scheme. 

The scheme originally only provided a grant to cover lost income during the months of March, April and May, but has now been extended for a further three months. This means that those who qualify will be able to claim a second grant for the months of June, July and August. Applications for the second grant will open in August.

Millions of people who work for themselves have been left struggling financially in recent weeks, but although the Scheme will provide a lifeline for many, there are plenty of people who won’t qualify.

Here, we explain how the scheme works, who’s eligible, and what other financial support might be available if you don’t qualify.

Who’s eligible for the scheme?

If you earn at least half your income through self-employment, traded in the 2018/19 tax year, and your business has been negatively affected by coronavirus, you might qualify for the Scheme.

Your trading profits must be less than £50,000 a year, and you must have submitted your tax return for the 2018/19 tax year on or before 23 April 2020. The deadline for this return is usually 31 January 2020, but it was extended to help those who missed it.

HMRC will use information from this tax return, and also the returns you have submitted in the previous two tax years, to help work out whether you’re eligible. If you became self-employed after April 2019, unfortunately you won’t qualify for help from the scheme.

You can find out if you qualify for the scheme using the government’s Eligibility Checker.  You’ll need your ‘Unique Taxpayer Reference’ to use the checker. This is 10 numbers and can be found on your tax return or on any letters you’ve received from HMRC about self-assessment. You’ll also need your National Insurance number and for your details in your Government Gateway account to be up to date.

The Government Gateway is the account you use to access online government services, such as filing your tax return or claiming tax credits. You should have been given the details for your Government Gateway account, consisting of a User ID and password, when you first registered as self-employed.

HMRC started contacting people who may qualify for the Self-employment Income Support scheme on 4 May, inviting them to check their eligibility by text message, email and letter. Everyone contacted was given a date and time to submit their applications. If you still didn’t receive a notification from HMRC, it doesn’t necessarily mean you’re not eligible and you can still use the checker to find out.

What if some of my income is from self-employment and some from employment?

Provided you’ve made more than half your income from self-employment over the past three tax years and you earned less than £50,000 on average each year, you should still qualify for the scheme.

How much can I get?

If you qualify for support from the scheme, you’ll be able to claim a taxable grant worth 80% of your average trading profits. Grants are decided on your profits over the last three tax years up to and including the 2018/19 tax year, or your profits over the last two or one tax years if you haven’t yet been self-employed for three tax years. 

The maximum you can claim for the first three months is £2,500 each month, so up to £7,500 in total. This will be paid in a single instalment and will cover March, April, and May. Payments for the months of June, July, and August will be capped at £2,190 per month, or £6,570 in total.

As the cash is a grant rather than a loan, it does not have to be repaid. However, it is taxable, so you will have to include it as income on your tax return and pay tax on it.

When will I receive the money?

If you successfully apply for the first tranche of the Scheme, the money should be paid into your account within six days of submitting your claim.

Am I allowed to keep working if I get the grant?

Yes, you are able to continue working even if you’ve claimed a grant under the Self-Employment Income Support scheme.

This is one of the main differences between this scheme for self-employed workers and the furlough job retention scheme for those who are employed. If you’re an employee and have been furloughed by your company (which means that rather than being made redundant, you’re told not to work for a certain period of time) you aren’t currently able to carry on working. Like the self-employment scheme however, for any employees put on furlough, the Government will pay 80% of wages up to £2,500 a month. 

The furlough scheme has also been extended and will now run until the end of October, having previously been due to run until June 30, Employers can ask employees to return to work part-time from 1 July if they want to, and they will have to pay them for the hours you work. HMRC is due to announce further details on how people can return to work part-time whilst remaining furloughed on 12 June. If you stay fully furloughed, the Government will continue to pay 80% of your salary until the end of July. From August, employers will need to start contributing to the cost of the scheme, starting with National Insurance and pension contributions.

Will I be eligible for the Self-Employment scheme if I’m a director of my limited company business?

Unfortunately not, and there’s no specific scheme in place to help limited company directors. However it is possible to furlough yourself, but you can only do this for the income you receive under Pay As You Earn (HMRC’s system to collect income tax and National Insurance from employment) and not income you receive from dividends. Whilst you will still be able to complete your statutory directors duties to the minimal extent required, you won’t be able to work for your company if you do this.

As a director, if you’re not eligible for either the Self-Employment or furlough scheme, then depending on your individual circumstances, you may be able to get a government-backed ‘Bounce Back’ loan for up to £50,000 to help you through this period. You can apply for a loan if your business is based in the UK, was established before 1 March 2020 and has been adversely affected by coronavirus.

You can borrow between £2,000 and 25% of your turnover, up to a cap of £50,000. This will have to be paid back, but no fees or interest is charged in the first year and you don’t have to make any repayments in the first year either. After the first year ends, interest is charged at 2.5% annually and loans must be repaid within six years of taking the loan. If you want to pay back what you owe early, you can do this at any point without paying a fee. You can find out more about bounce back loans and how to apply here.

If you need to borrow more than £50,000, you might alternatively be able to apply for a Business Interruption loan scheme, which helps small and medium-sized businesses access loans and other types of finance up to £5m. To qualify, you’ll need to show that your business has been adversely impacted by the coronavirus, or that it would be viable if it weren’t for the pandemic. The government guarantees 80% of loans and also pays interest and fees for the first 12 months. Find out more about the Business Interruption Loan scheme and how to apply here.

Is there any other financial support available?

If your income has reduced or stopped due to coronavirus, and you’re not covered by the self-employed scheme or the furlough Job Retention scheme, then you may still be eligible for unemployment benefits to help you make ends meet. These include Universal Credit, a means-tested benefit which is paid monthly and is designed to help you cover your living costs if you’re on a low income, unemployed, or off work due to sickness or disability. You can apply for Universal Credit even if you also apply for the Self-Employment Income Support scheme, provided you still meet Universal Credit eligibility criteria. Find out whether you qualify and how much you’re likely to get in our article Everything you need to know about Universal Credit.

You might also be able take a payment holiday from your mortgage or other debt repayments if you’re finding it difficult to cover your outgoings. Learn more in our article Financial support for those affected by coronavirus.

Remember too that any tax you owe to the Government that is due to be paid in July this year can be deferred until January next year, which might help alleviate a bit of financial pressure over the next few months.

Beware scams

Recent weeks have seen a spate of scams involving text messages and emails purporting to be from HMRC and Gov.uk encouraging people to apply for financial support. Often these ask the recipient to click on a link and then submit their banking details.

HMRC or Gov.uk will never ask for personal or financial details when it sends text messages or emails, so if a text asks for this sort of information, you’ll know it’s a scam.

The message you get from HMRC asking you to check your eligibility for the Self-Employment Income Support Scheme will direct you to Gov.UK and will not include any links to click on.

If you are sent a text message from HMRC including links or asking you for financial information, please forward it to HMRC at 60599. If you receive a scam email from HMRC, email it to [email protected] You should also report any scam emails, texts or telephone calls to Action Fraud online or by calling 0300 123 2040.

Sadly, we are hearing many heartbreaking stories of scammers using the current crisis to their advantage. If you want to learn more about common coronavirus scams you can read our full guide on Coronavirus scams to watch out for.

Are you planning to apply for the Self-Employment Income Support Scheme, or have you recently made a benefits claim? If so, we’d be interested in hearing from you. You can get in touch via [email protected] or leave a comment below.

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