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 might be eligible for the government’s Self-Employment Income Support Scheme, which was extended in the Budget earlier this month.

The scheme originally only provided one grant to cover lost income during the months of March, April and May last year but has been extended several times to help those who have seen their incomes fall. Applications for the first three grants have now closed, but there will be a further two grants available. The fourth grant will open for applications at the end of April and the deadline to apply is 31 May 2021.

Claimants will be able to apply for a grant of up to £7,500. To qualify for this grant you must be able to demonstrate that your business has seen reduced demand due to coronavirus during the period from the beginning of February until the end of April 2021.  

Millions of people who work for themselves have been left struggling financially as a result of coronavirus, and the scheme has been amended so that up to 600,000 more people who’ve recently become self-employed will now be eligible. However, although the scheme provides a lifeline for many, there are still sadly many people who don’t qualify. According to the Office for National Statistic’s latest Annual Population Survey released in 2020, there are 2.26m self-employed people aged 55 or over, but as at the end of January 2021, only 536,000 of these were claiming the Self-Employment Income Support Grant.

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, filed a tax return for the 2019/20 tax year, and your business has been negatively affected by coronavirus, you might qualify for the scheme. You don’t need to have received the first, second or third grants to be eligible for the fourth or fifth grants. You must have traded in both the 2019/20 and 2020/21 tax years and plan to carry on trading.

Your trading profits must be less than £50,000 a year, and you must have submitted your tax return for the 2019/20 tax year before midnight on 2 March. The deadline for this return is usually 31 January 2021, 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 four tax years, to help work out whether you’re eligible, or the past three tax years if you haven’t submitted returns for four years.

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 will start contacting people who might qualify for the fourth Self-employment Income Support scheme in mid-April, inviting them to check their eligibility by text message, email and letter. Everyone contacted will be given a date and time to submit their applications. If you don’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 four 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 fourth taxable grant worth 80% of your average trading profits. Grants are decided on your profits over the last four tax years up to and including the 2019/20 tax year, or your profits over the last three tax years if you haven’t yet been self-employed for four tax years. If there was a tax year during the past four years where you didn’t submit a return, HMRC will work out your average monthly trading profit from the 2019/20 tax year alone.

The maximum you can claim from the fourth grant is £2,500 each month, so up to £7,500 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 second 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.

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 can also carry on working and claim for the hours not worked.

The furlough scheme has also been extended and will now run until the end of September 2021, having previously been due to run until 20 April 2021. Employers have been asked to start contributing more to the cost of the scheme from July.

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, your business 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 annual 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 10 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 take a payment holiday, or temporarily switch to making repayments on an interest-only basis if you’re finding it difficult to repay what you owe. If you need a bounce back loan, the deadline to apply for one is 31 March 2021. 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. The deadline to apply for a Business Interruption Loan is 31 March 2021.

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.

Beware scams

Recent months 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. It’s a good idea not to click on links in emails or text messages that you aren’t expecting, as they can be used by scammers to download virus or malware onto your computer or phone. If in doubt, access the site you need through a search engine and log in to the site that way, rather than through the link in a message.

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 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 join the money conversation on the Rest Less community or leave a comment below. 

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