Last month the UK government introduced a new grant to help support self-employed workers who have lost income during the COVID-19 crisis. The Self-Employment Income Support Scheme (SEISS) allows self-employed workers to claim a taxable grant worth 80% their monthly profits, up to a maximum of £2,500 a month.

While the scheme has currently been made available for three months, first payments will not be distributed until the start of June at the earliest.

However, even with this new government support, latest research from IPSE (the Association of Independent Professionals and the Self-Employed) has highlighted that almost half (45%) of self-employed workers fear they will not have enough money to cover basic living costs during the COVID-19 outbreak.

A majority of self-employed workers have seen a significant drop in business as a result of coronavirus, with 53% saying demand for their work has decreased substantially.

The IPSE research explored whether freelancers felt the government support scheme would sustain their business during the crisis. 43% of sole trader freelancers – many of whom are eligible for the government scheme – believed the scheme would not be enough to sustain their business. Among freelancers working through limited companies – who are not eligible for the scheme – this figure rose to 69%.

Consequently, a significant proportion of self-employed workers will be forced to rely on their savings to meet basic living costs. Overall, two thirds (66%) are concerned they will use up all of their savings over the next three months.

To help mitigate the financial damage to self-employed workers, the CIPD is joining IPSE in calling on the government to include dividend income in the Job Retention Scheme to help Limited Company Directors.

Ben Willmott, Head of Public Policy at the CIPD, said:

‘This research demonstrates starkly the huge impact of the coronavirus crisis on the self-employed and the financial distress and hardship it is causing. It also clearly shows more still needs to be done to help those who fall through the gaps in the support available through either the Job Retention Scheme or the income support scheme for the self-employed.’

Willmott continues, ‘These include many of our 15,000 self-employed HR consultant members who are limited company owners, along with hundreds of thousands of other small company directors who receive most of their income in dividend payments rather than salary. Consequently, CIPD strongly backs the recommendation to allow dividend income earned by company directors to be considered in calculating earnings under the Job Retention Scheme.

‘This would help support the livelihoods of hard-pressed small company owners and the ability of their businesses to bounce back once the crisis has passed. We also would urge the Government to consider seriously the other recommendations put forward by IPSE to help freelancers keep going through this crisis.’

The other recommendations to government put forward by IPSE are:

• Temporarily relax the Universal Credit application criteria for self-employed people waiting for the SEISS grant in June.
• Extend the SEISS scheme to the newly self-employed by letting them file and early tax return before the end of April.
• Introduce a taper above the £50,000 salary threshold for the SEISS.

Andy Chamberlain, Director of Policy at IPSE said:

‘This research shows that it is not just a few self-employed people falling through the cracks in the government support: right across the sector, freelancers are facing dire financial damage because of the Coronavirus crisis.

‘The Self-Employment Income Support Scheme (SEISS) offered generous support to many sole traders, but there are a lot of freelancers who will struggle in the interim before it can be implemented. Government should look at ways to open up access to temporary support before June.

‘The lack of support for limited company directors in SEISS is not just a crack: it is a gaping hole in the package. The government must act quickly to fill it. We believe the best way would be to include dividend income – through which many limited company directors pay themselves – in the Job Retention Scheme.

‘This would allow the self-employed who work through limited companies to furlough themselves and hold on to 80 per cent of their income. If not, we suggest a bespoke solution involving either a grant or a temporary tax break for this significant and under-supported group.

‘The government has made great strides in supporting the self-employed through the Coronavirus crisis, but this research shows too many freelancers are still getting left behind. We urge the government to act on these findings and help more of this diverse and vital group through the coming months.’

For advice, resources and guidance on coronavirus, visit the CIPD coronavirus hub.