Q: What assistance is available for self-employed people?

On 26 March the government announced help for the self-employed which is similar (but not identical) to the coronavirus job retention scheme.

Self-employed people can claim taxable income support worth 80% of their average monthly income, capped at £2,500 per month if they are adversely affected by the coronavirus pandemic. 

Their income will be calculated by taking the average of their income over the last three years. Income is based on PAYE salary not dividends which do not count towards the average income. This coronavirus self-employment income support scheme will be open for at least three months. 

The eligibility criteria are that the self-employed person must have:

  • Traded in tax years 2019-2020 and the tax year 2018-2019.

  • Plan to continue trading in the tax year 2020-2021.

  • Submitted the 2018-2019 year's Self-Assessment tax return on or before 23 April 2020*.

  • The self-employed person must have trading profits in 2018-2019 of under £50,000.

  • Self-employed people who earn more than £50,000 p.a. do not qualify.

  • The self-employed person must make more than half of their income from self-employment.

  • Employees who work for an employer but have some separate self-employed work on the side which is less than half their income will not be eligible.

*Self-employed people whose tax return has not been submitted and was still due after the 31 January 2020 deadline, were able to submit a late tax return for 2019 until 23 April 2020. To help calculate the amounts the tax return for the tax year 2016-2017 will also be needed.

Q: Can a self-employed person work for us over the March-June period and still claim under the coronavirus self-employment income support scheme?

Yes, the self-employed can claim the new income support payments and continue working for their business. This is in complete contrast to furlough leave under the coronavirus job retention scheme for employees - under that scheme the employees must not continue to work for the employer.

The self-employed person or partner must have lost trading profits due to COVID-19 which presumably will be assumed if profits fall over this period. It does not appear to matter if the self-employed person only loses a small amount of profit due to the coronavirus situation, they would still be entitled to receive the 80% support grant as no credit is given for any earnings that are unaffected as long as there is some adverse effect. 

Eligibility for self-employment income support depends upon the individual’s income being under £50,000 on average for the last three years; no equivalent restriction applies to employees on furlough under the coronavirus job retention scheme.

Q: When will payments under the coronavirus self-employment income support scheme be made?

Initially, guidance suggested self-employed people do not have to initiate the application but this has now changed. HMRC will now check the 2018/2019 tax return and contact those who are eligible. Those who earned more than £50,000 (or had less than half their income from self-employment) in 2018/2019 will have their 2016/2017 and 2017/2018 tax returns checked. If on average over the three years people earned less than £50,000 and made more than half their income from self-employment then they'll still be eligible.

HMRC are currently in the process of contacting people by letter, text or email. Those who are eligible can still able to make an application from 13 May. Self-employed income support payments are due to start arriving by 25 May or six working days after the claim is made. Self-employed people may need to borrow money to help with cash flow over the next few weeks until their income support application is processed. There are also business interruption loans available and the July self-assessment tax payments can be delayed for six months. Tax advisers can provide assistance or support but cannot make the claim on behalf of the self-employed person who must make the claim themselves.

Q: What happens to people who work for us but only became self-employed in the 2019-2020 tax year?

People who first became self-employed in the tax year 2019-2020 (and do not therefore quite have a full year of accounts) will not be able to claim under the scheme.

Those who are ineligible for the Self-Employed Income Support scheme may be able to claim Universal Credit although those with more than £16,000 in savings may be restricted in what they are able to claim.

Q: Do self-employed people have to have been self-employed for three whole years to claim under the coronavirus self-employment income support scheme?

No, self-employed people do not have to have traded for three years to claim under the coronavirus self-employment income support scheme, but they do have to:

  • have traded in the tax years 2018-2019 and 2019-2020

  • be trading when the application is made (or would be trading except for the pandemic)

  • intend to continue trading in 2020-2021.

The self-employed person or partner must have lost trading profits due to COVID-19. The 80% is based on average monthly income over the past three years. This means that figures for average trading profits in 2016-2017, 2017-2018, and 2018-2019 will be used and these must be under £50,000 on average.

If the person started trading after 2016, HMRC will use the years for which a self-assessment tax return has been submitted to calculate the average profits. The profits must be more than half of the individual’s average taxable income over those three years.

Q: Is it correct that self-employed people with average profits of £50,001 will not be eligible?

Yes, if profits are over £50,000 on average the self-employed person will not be eligible, whereas if the profit is under £50,000, they will be.

Q: Are self-employed people, who have to self-isolate, or whose work stops, eligible for sick pay?

Self-employed people, who have to self-isolate, or whose work stops, have limited sick pay protections as they are not eligible for statutory sick pay although other benefits are available.

Self-employed Income Support

The self-employed income support scheme which provides freelancers and self-employed people with guaranteed earnings during the pandemic. The payments depend upon the self-employed person’s previous tax returns and will be administered by HMRC. This scheme provides state help for self-employed workers in a similar way to the scheme for reimbursement of furloughed employees’ salaries. See the question on the assistance available to self-employed people above for more information.

Other rights 

The other precise legal rights of self-employed workers depend upon the terms of the agreement and how the arrangement operates in practice. Some workers deemed to be self-employed may in fact be protected as employees.

If workers deemed to be self-employed do in reality have employee status then employers should consider the new support measures introduced by the government, including the Coronavirus Job Retention scheme and furlough leave. 

Further state help

The government announced in the March 2020 budget that the self-employed will be able to claim employment support allowance from the first day of their isolation or illness rather than day eight. However, it is only paid to those who are too sick to work and who meet certain conditions and those who are likely to benefit are fairly limited. The benefit is worth £73.10 a week, or £57.90 for the under-25s.

The government is also temporarily changing universal credit so that the minimum income ‘floor’ of how much the self-employed person would normally expect to earn in a month, is ignored when calculating entitlement to universal credit. This means some individuals will be able to claim over the telephone or online for time they spend off work due to sickness. In effect, instead of sick pay the self-employed will be given support through the benefits system by raising universal credit so that the self-employed receive  a similar amount to the £94.25 statutory sick pay.

The government has also announced a new £500m fund to support economically vulnerable people which will be allocated by local authorities. More information can be found on the Government website.

DISCLAIMER: The materials provided here are for general information purposes and do not constitute legal or other professional advice. While the information is considered to be true and correct at the date of publication, changes in circumstances may impact the accuracy and validity of the information. The CIPD is not responsible for any errors or omissions, or for any action or decision taken as a result of using the guidance. You should consult the government website for the very latest information or contact a professional adviser for legal or other advice where appropriate.

If you have other queries about COVID-19 not covered above, please contact the CIPD member employment law helpline on 03330 431 217 or visit the Community pages

We know that our members and customers are facing challenging times and we are here to help you. Due to a high number of calls we apologise that your wait time may be longer than usual. We appreciate your patience and will connect you to an expert adviser as soon as we can.

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