If you’re self-employed, the government has announced a range of measures to help and support you. This guide tells you more about the available schemes and how they will affect you if you’re a sole trader, work in the gig economy or run your own business. There’s also information about the types of welfare benefits you might be entitled to claim if your income has dropped or you can’t work because you’re sick or self-isolating.
Extension to self-employment income support scheme and other help
A new grant will be available for self-employed people to cover the period from November 2020 to January 2021.
If you’re eligible, the government will pay just below 80% of your average monthly profits for three months, up to a maximum total of £7,500.
A second grant will run from February to April 2021 although the amount you get might differ.
To make your claim you will need:
- Self Assessment Unique Taxpayer Reference (UTR)
- National Insurance number
- Government Gateway user ID and password
- UK bank details if requesting a bank transfer (Bacs) payment
Applications for this next grant will open on 30 November 2020.
The deadline for applying for this grant is 29 January 2021.
Eligibility for self-employment income support scheme
If you were eligible for the first two income support scheme grants and your self-employment has continued to be impacted because of the coronavirus outbreak, you will be entitled to these next two grants.
The eligibility criteria remain the same. You must earn more than half your income from self employment, have submitted a tax return for 2018/19 and have:
- an average trading profit of less than £50,000 for the tax year 2016/17, 2017/18 and 2018/19.
or if you haven’t been trading for all these years
- a trading profit of less than £50,000 for 2018/19
HMRC will use your average trading profits from 2016/17, 2017/18 and 2018/19 to work out the size of your grant.
If you’re self-employed, but took time off during 2018/19 to care for new children, or a newly adopted child, can still claim through the scheme. You will be assessed on either your 2017/18 tax return or your 2016/17 and 2017/18 tax return.
This scheme is open to sole traders and members of partnerships.
If you pay yourself a salary and dividends through a company, you will not be eligible, but might be helped by the coronavirus job retention scheme if you’re earning through PAYE.
If you’ve become self-employed since April 2019, you will not be eligible.
If you are not eligible for this grant, you will still be able access other government support, including benefits and business support grants.
If you’re eligible for the income support grant and are waiting for it to be paid, you may be able to claim Universal Credit if your household income is low and your and your partner or spouse have savings of less than £16,000.
Like the previous grants, this will need to be declared as income when it is paid. This is likely to significantly reduce or completely remove any Universal Credit payment you will get in June or July, depending on when you receive the grant and your assessment period.
This means you will need to plan ahead for how you will pay essential costs.
Claiming the grant does not affect your chances of being accepted for a payment holiday if you’re struggling to pay your bills.Find out more about payment holidays if you have a mortgage.If you need a vehicle for work, find out more about payment holidays on car finance agreements.If your insurance needs have changed because of coronavirus, you might be able to get a refund or reduction in your premiums.Learn more about payment holidays on credit cards, personal loans, payday loans, rent to own agreements and other forms of borrowing in coronavirus and your money.
Look out for scams
The self-employment income support scheme is likely to be targeted by scammers claiming to be from HMRC. If you’re self employed you should have already received an email from HMRC explaining the scheme and telling you there is no reason to contact them about this.
If you are contacted by email, phone or text by someone claiming to be from HMRC at this time offering you the income support grant, tax refund or any other financial help, this is a scam.
Test and Trace Support Payment
If you’re told to self-isolate by NHS Test and Trace system, can’t work from home and are claiming:
- Universal Credit
- Working Tax Credit
- Income-related Employment and Support Allowance
- Income-based Jobseeker’s Allowance
- Income Support
- Pension Credit
- Housing Benefit
You will be entitled to a payment of £500.
In Scotland, this is called the Self-Isolation Support Grant. There is no similar payment available in Northern Ireland.
In Wales, you can apply for this payment from 14 December 2020. It will be backdated to 23 October 2020 and has been extended to cover parents and carers on low incomes.
This payment will be made by your local authority.
You will have to show proof of your employment to qualify and checks will be carried out to check you’re unable to work from home.Find out more about the scheme if you live in England on the gov.uk website.If you live in Scotland, you can find out more about the scheme on the mygov.scot website.If you live in Wales, you can find out more about the scheme on the gov.wales website.
What happens if you can’t work because you’re sick or having to self-isolate
Self-employed sick pay and coronavirus
If you’re self-employed you can’t claim Statutory Sick Pay.
If you’ve paid enough National Insurance Contributions, you might be able to claim new style Employment and Support Allowance (ESA) if you’re ill.
ESA and coronavirus
The government has said you’ll now get paid from the first day of the claim, rather than after eight days.
If this is the first time you’ve applied for ESA, you’ll have to fill in form ESA 1 and send a fit note from NHS 111 with your claim form to show that you’re not fit for work. You should get the first payment into your bank or building society account within two weeks.Find out more about how to claim ESA on the Gov.uk website or from NIDirect.gov.uk.
You might also be able to claim elements of Universal Credit if you need help with other costs for children or housing if you and your partner or spouse have savings of less than £16,000. Their income will also be taken into account as part of the claim.
What happens if you don’t qualify for Employment and Support Allowance (ESA)?
You might be able to claim the limited capability for work and work-related activity element of Universal Credit if you and your partner or spouse have savings of less than £16,000. Their income will also be taken into account as part of the claim.Find out more about new-style ESA and Universal Credit if you’re ill.Learn more about claiming Universal Credit if you’re self-employed.
What can you do if your income has dropped significantly?
If you have any questions about claiming Universal Credit you can talk in complete confidence to a Citizens Advice Help to Claim adviser who can support you through the process.
If you’re in Scotland, visit the Citizens Advice Scotland website.
Universal Credit for self-employed and coronavirus
If you are feeling well but your work has dried up and you’re waiting for the self-employment income support grant you (and your partner or spouse if you live as a couple) have savings of less than £16,000 you might be able to claim Universal Credit until the self-employment income support scheme starts.
You may be able to claim elements for other costs, such as housing, caring responsibilities or bringing up children.
If you have savings of between £6,000 and £16,000 the amount of Universal Credit you get will be reduced.
Universal Credit and the minimum income floor
The minimum income floor has been temporarily abolished.
The minimum income floor is a formula used to work out how much Universal Credit you should get when you’re self-employed. It is based on national minimum wage and an assumed number of worked hours, regardless of whether you actually work them or not.
Abolishing the minimum income floor should increase the amount of Universal Credit you are entitled to claim if you’re not able to work and allow you to keep your self-employed status.
Applying for Universal Credit
If you’re making a new claim for Universal Credit, you will no longer have to call the DWP. You will be called if any of your information needs to be checked and message you through your online journal.
If you’ve used your Government Gateway account in the last year, for example to file a Self Assessment tax return, this can be used to prove your identity.
If you’re claiming Universal Credit you will have to wait at least five weeks for the first payment, so don’t delay making a claim.
You can make a claim for an advance payment while you are waiting for your Universal Credit payment. You can talk to your work coach about how to do this once you’ve made your claim. The advance payment is a loan that will need to be paid back out of future Universal Credit payments, so make sure you only ask for what you need.
If you stop claiming Universal Credit before the advance payment is repaid, you will have to agree a repayment plan with the Department for Work and Pensions (DWP).
If you or your partner or spouse are already getting any of the benefits being replaced by Universal Credit, including Tax Credits, Housing Benefit or Income Support, these benefits will stop and your benefit income for these costs will be reassessed as part of the Universal Credit claim.Learn more about claiming Universal Credit if you’re self-employed.Check if you’re eligible and apply for Universal Credit on the Gov.uk website.
If you decide to end your self-employment
If you decide to end your self-employment and apply for benefits, what you can claim depends on the type of National Insurance contributions you were paying and the amount you have in household savings.
If you were only paying Class 2 National Insurance contributions
You might be able to survive now the government has announced the self-employment income support scheme but, if you decide to end your self-employment and look for paid work you usually won’t be able to claim new-style Jobseeker’s Allowance (JSA) if you were only paying Class 2 National Insurance contributions.
Universal Credit is based on household income and savings and you won’t be able to claim if you have savings over £16,000 as it is a means tested benefit. You will have to wait until your (and your partner’s or spouse’s) savings drop below £16,000 before you can make a claim.
If you have savings between £6,000 and £16,000 you will get a reduced amount of Universal Credit.
If you have paid Class 1 National Insurance contributions
If you were working as an employee during the past two to three years and paid enough Class 1 National Insurance or received National Insurance credits, you may be able to apply for new style Jobseeker’s Allowance. You will also be able to make a claim for Universal Credit to help with the costs of housing, caring responsibilities or bringing up children if you have household savings of less than £16,000.
If you are not entitled to claim new-style Jobseekers Allowance (JSA) and have savings of less than £16,000 you will be able to make a claim for Universal Credit straightaway.Find out more about Jobseeker’s Allowance on the Gov.UK website.
If you work in the gig economy
Unless it has been agreed as part of your contract, you will not be entitled to Statutory Sick Pay, sick leave or paid holiday leave.
Some employers have said they will offer sick pay if you have to self isolate because of coronavirus. Others have said they might offer some kind of compensation if you have been diagnosed with coronavirus.
If you’re working in the gig economy, check with the company to find out what your rights are.
You will be able to claim sickness benefits available for self-employed people if you’re eligible.Find out more about claiming Universal Credit if you’re self-employed.
Coronavirus help if you run your own business
The government has said they will fund the costs of Statutory Sick Pay (SSP) for employers with workforces of 250 people or fewer for up to 14 days.
You can also apply to HMRC for a grant to cover up to 80 percent of your employees’ salaries, up to £2,500 a month.
The government has announced grants and business rates support for small and medium sized business.
Banks will also be offering loans to small and medium sized businesses under the governments Coronavirus Business Interruption Loan scheme.
Small businesses can access loans of between £2,000 and £50,000 through the Bounce Back Loan Scheme. These are interest free for 12 months and no repayments will be due during this time.
If you have taken out a Bounce Back Loan you now have more options for repaying it under the Pay as You Grow scheme. You can apply to:
- extend the length of the loan term from six to ten years, which could cut monthly repayments by nearly half
- make interest-only payments for up to six months
If you’re registered for VAT, the government has announced VAT payments due between 20 March 2020 and the end of June 2020 have been deferred until March 2021.
If you will struggle to pay in full, you can spread repayments over 11 smaller payments with no interest charged over the 2021/22 tax year.Find out more about the help available to businesses on the Gov.uk website.You can also find out more about what support is available on the Gov.uk Business Support website.
There is some additional support available if you’re in Wales, Scotland and Northern Ireland.In Scotland, visit the gov.scot website.In Wales, visit the gov.wales website.In Northern Ireland, visit the NI Business Info website.
Self Assessment tax return payments deferred from July 2020 and due in January 2021 can be deferred until January 2022.
HMRC has expanded its Time to Pay Scheme if you are struggling financially because of anything to do with coronavirus and you owe outstanding tax.
If you already have missed a payment or are worried you will miss your next payment, call the HMRC Time to Pay helpline on 0800 015 9559.
If you’re business is struggling from the impact of coronavirus, then you can call Business Debtline on 0800 197 6026.Find out more about what help might be available for your business on the Business Debtline website.In Northern Ireland you should visit the Advice NI Business Debt Service.
If your business is forced to close because of coronavirus restrictions
If your business is forced to shut because of a local or national coronavirus restrictions, you might be able to claim a grant to cover fixed costs, such as rent for your business premises.
Small business with a rateable value of £15,000 or less can claim £1,300 a month.
Medium sized business with a rateable value of between £15,000 and £51,000 can claim £2,000 a month.
Large businesses with a rateable value of more than £51,000 can claim £3,000 a month.Find out more about grants if your business is forced to close on the Gov.uk website.
This article is provided by the Money Advice Service.