Practical Guidance Note #5

COVID-19: Sunak announces aid package for the self-employed

Today, the Chancellor of the Exchequer rolled out his relief package for self-employed workers who will be able to apply for a grant of up to 80% of their earnings, up to a maximum of £2,500 a month. This is for three months initially which is equivalent to the measures announced last week for employees.

26th March 2020

The money will be paid in a single lump sum but will not begin to arrive until the start of June 2020 at the earliest.

Mr Sunak said the plan would be backdated to March and would cover those earning up to £50,000. He described it as, ‘one of the most generous schemes anywhere in the world’ and this evening’s announcement ended weeks of uncertainty for those who work for themselves.

However, many of those struggling with the impact of coronavirus on their business will have to wait months to get any money and may potentially have to sign up for Universal Credit in the meantime.

The taxable grant will be based on the average monthly profits of the self-employed over three years, so people will need to have filed a tax return to be eligible.

The Self-Employed Income Support Scheme will be available to those who make the majority of their income from self-employment so only the ‘genuinely self-employed’ will benefit. In order to minimise fraudulent claims he confirmed that, ‘only those who are already in self-employment who have a tax return for 2019 (tax year ended 5 April 2019) will be able to apply’ which appears to exclude anyone who has become self-employed after the 5th April 2019. This covers 95% of people who are currently self-employed.

To also qualify, an individual:

  • must have traded in the tax year 2019-20
  • be trading when they apply, or would be except for COVID-19
  • intends to continue to trade onto the tax year 2020-21
  • must have lost trading/partnership trading profits due to COVID-19

Sunak has also confirmed that anyone who missed the 31 January 2020 filing deadline has four weeks from now to get it done and still qualify.

Looking to the recovery, the Chancellor hinted that he may ask the self-employed to pay more in National Insurance once the crisis is over. ‘I must be honest and point out that in devising this scheme in response to many calls for support, it is now much harder to justify the inconsistent contributions between people of different employment statuses. If we all want to benefit equally from state support, we must all pay in equally in future.’

In summary the key points of the Self-Employed Income Support Scheme are:

  • Self-employed people will be able to apply for a grant worth 80% of their average monthly profits over the last three years, up to £2,500 a month.[1]
  • Self-employed people must have profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income, or have average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period.
  • Anyone who missed the 2018-19 filing deadline has until 23 April 2020 to get the 2018-19 tax return submitted to HMRC and they would still qualify.
  • The scheme will benefit up to 3.8 million of the 5 million people registered as self-employed.
  • Unlike the employee scheme, the self-employed can continue to work as they receive support.
  • The money, backdated to March 2020, will arrive directly into people’s banks accounts from HMRC, but this is unlikely to be until June 2020 at the earliest.[2]
  • The grants will be taxable and will need to be declared on 2020-21 tax returns.
  • The scheme also applies to members of partnerships.
  • HMRC will contact taxpayers who they believe to be eligible for the scheme and will invite them to apply online. HMRC have advised that taxpayers do not need to contact HMRC now and doing so will only delay the urgent work being undertaken to introduce the scheme.
  • Those not covered by the scheme, such as self-employed people who commenced trade after the 5 April 2019, will have to look to the benefits system for support.

Here is the link to the Treasury’s press release with full details of Rishi Sunak’s package of help for the self-employed:

We will provide additional commentary over the next few days but if you have any initial questions please contact your Old Mill adviser.


[1] HMRC will use the average trading profits from tax returns in 2016-17, 2017-18 and 2018-19 to determine the size of the grant.

[2] This will be declared on the 2020/21 tax returns so won’t affect tax liabilities in the near future.