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 March 2021 Budget.

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 four grants have now closed, but there will be one further grant available. The fifth grant is open for applications from late July and all claims must be made on or before 30 September 2021. Although the grant covers a five-month period, the actual amount you can get is based on three months of average profits.

Claimants will be able to apply for a grant of up to a maximum of £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 1 May to 30 September.

Millions of people who work for themselves have been left struggling financially as a result of coronavirus, and the scheme was previously amended so that up to 600,000 more people who’ve recently become self-employed were eligible for the fourth grant and can now claim the fifth grant too. 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.

Example showing how HMRC works out your grant:

  1. Start with your average trading profit over the past four tax years (£36,000).
  2. Divide by 12 = £3,000.
  3. Multiply by 3 = £9,000.
  4. Work out 80% of £9,000 = £7,200. You’ll receive £7,200.

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 fifth Self-employment Income Support scheme over the next few weeks, 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, so even though applications open towards the end of July, this isn’t necessarily the date you’ll need to apply on. 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 have been able to get a government-backed ‘Bounce Back’ loan for up to £50,000 to help you through this period, or a Business Interruption Loan, although applications for both these schemes have now closed.

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.

Beware scams

Recent months have seen a spate of scams involving text messages and emails purporting to be from HMRC and 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 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 viruses 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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