The Self-Employment Income Support Scheme explained

If you’re self-employed and have lost some, or all of your income due to coronavirus, and you’re eligible for the government’s Self-Employment Income Support Scheme, you must apply for a third grant on or before January 29, 2021.

The scheme originally only provided a grant to cover lost income during the months of March, April and  May but has been extended several times to help those who have seen their incomes fall. Applications for the first two grants have now closed. 

In November last year, the Chancellor Rishi Sunak increased the amount available from the third grant. Claimants will be able to apply for a grant of up to £7,500, rather than the £3,750 that was initially proposed, or the £5,160 it was subsequently raised to. 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 November to 31 January 2021.  

Millions of people who work for themselves have been left struggling financially as a result of coronavirus, but although the scheme provides a lifeline for many, there are sadly many 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. You don’t need to have received the first or second grant to be eligible for the third or fourth grants.

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 third 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 could claim for the first three months is £2,500 each month, so up to £7,500 in total. This was paid in a single instalment covering March, April, and May. Payments for the months of June, July, and August were capped at £2,190 per month, or £6,570 in total. The third grant will provide 80% of average trading profits, up to a maximum of £7,500. Details of the fourth grant, which will cover the period between the beginning of February until the end of April 2021, have yet to be announced.

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 April 2021, having previously been due to run until March 31 2021. Since August, employers have had to start contributing to the cost of the scheme, paying employees 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, 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 has been extended from 30 November 2020 to 31 January 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

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 weeks 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 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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9 thoughts on “The Self-Employment Income Support Scheme explained

  1. Avatar
    Alastair Cuthbertson on Reply

    I am self employed driving a van for school orchestra tours in Europe . All of my bookings were cancelled. I also drive an HGV as a casual for a firm specialising in conference and exhibition transport. All of this work stopped mid March. I pay my tax and NI as self employed not LTD. The application was easy to complete and the money paid promptly. Thank you HMRC.

    1. Avatar
      Helen on Reply

      Thank you for sharing your experience of applying for self-employed support, Alastair. With so much negative press, I think some people can be put off applying, so it’s great to hear some positive feedback. I do hope you’ll be back on the road soon.

    1. Avatar
      Helen on Reply

      Hi Emil

      Sorry for the delay in coming back to you – I needed to check with our Finance Journalist before doing so.

      The short answer is ‘yes’, but you must meet the eligibility criteria outlined in the article. Unfortunately there will be freelancers who will miss out, for example if you’ve only recently become self-employed, or you are a director of your own limited company business. If in doubt, you can check whether you’re eligible to claim using this link.

  2. Avatar
    Marina on Reply

    I know someone who works for himself, and is living with his girlfriend and her daughter. Unfortunately his relationship has broken down and he needs to get out. Unfortunately he no money and to support himself otherwise he would get So he will go in two weeks with no home so he will be homeless. So he waiting until he has to go. I can’t put him up as I have no room. Is anyone out there has been or knows anyone out there been in a similar position

  3. Avatar
    John Bowles on Reply

    I’m a freelance first aid trainer all of my scheduled work was cancelled due to the pandemic. I applied for the SEISS grant and was eligible, it was a life saver, excuse the pun, a very straightforward process.

    Thank you HMRC.

  4. Avatar
    Phyllis Astaruta on Reply

    I have 4 rental flats and nine of them has been empty since 7th March and have not been able to clean it and get it back on market due to Covid.
    Do I qualify for help?

    1. Avatar
      Helen on Reply

      Hi Phyllis. Thank you for your question. As financial services are a regulated industry, we are unable to advise on individual circumstances, I’m afraid. Our understanding is that property landlords cannot claim for the Self-employment Income Support Scheme for lost rental income, as rental income is classed as investment income rather than trading income.

      You might like to use the eligibility checker we link to from the article to find out if you qualify, if you receive any other sort of income. This article is also a useful resource which mentions landlords and explains more about who’s eligible.

  5. Avatar
    Rabi Pradhan on Reply

    Thank you so much for all the information you have gathered and presented. Very informative and very very helpful. Thanks again.

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