The Chancellor has announced help for the self-employed – but what does that mean for me? 

Chancellor Rishni Sunak unveiled a financial rescue package for the self-employed last week, which will give up to £2,500 per month in grants for at least three months.

It comes as millions of self-employed workers have struggled to cope financially amid the nationwide coronavirus lockdown. 

They have been hit by restrictions on travel, a cut in income from not being able to service customers and follow through with orders, and many report having work and jobs cancelled.

The help will prove invaluable for many, but while it has been broadly welcomed, there has also been criticism of gaps within it. So, if you are self-employed can you get help? We explain.

Chancellor Rishi Sunak says the scheme will be open to those with a trading profit of less than £50,000 in 2018-19 or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2018-19.

Announcing the support, Mr Sunak said: ‘Self-employed people are a crucial part of the UK’s workforce who’ve understandably been looking for reassurance and support during this national emergency.

‘The package for the self-employed I’ve outlined today is one of the most generous in the world that has been announced so far. It targets support to those who need help most, offering the self-employed the same level of support as those in work.

‘Together with support packages for businesses and for workers, I am confident we now have the measures in place to ensure we can get through this emergency together.’

The package has largely been welcomed by several industry commentators, although there are gaps and people will have to wait until June for grants to kick in.

Emma Jones, founder of small business support network, Enterprise Nation said: ‘This is a very generous package of support for the self-employed and I know our members will see it as an acknowledgement that the work they do is valued’.

Emma Jones, founder of Enterprise Nation says the package for the self-employed is a generous one

Emma Jones, founder of Enterprise Nation says the package for the self-employed is a generous one

The Association of Independent Professionals and the Self-Employed (IPSE) called the move a ‘historic lifeline’ of financial support for the UK’s self-employed.

Derek Cribb, CEO of IPSE said: ‘We welcome the fact that the government has heeded our calls and actively worked with IPSE in designing a historic lifeline of financial aid for the self-employed.

‘This will offer essential support to the many hard-working self-employed people across the country who are losing projects and contracts because of the coronavirus outbreak.

‘We understand this is an immense and complex undertaking and urge the government to get this vital support to freelancers as soon as practically possible.

‘This is an unprecedented package and a very welcome response to our campaign for freelancers and the self-employed.

However, not all self-employed will qualify for this vital support and many will slip through the net. 

Here we provide answers to key questions that several unemployed workers are asking following the announcement:

How do I qualify?

The scheme is accessible to self-employed people with a trading profit of less than £50,000 in 2018-2019, or an average annual trading profit of less than £50,000 from 2016 to 2019.

To qualify more than half of a self-employed person’s income in these periods must come from self-employment.

Only those who are already in self-employment will qualify for the grant – the Chancellor said this was to prevent fraudulent claims.

When will I get help?

The grant will be paid in June in single lump sum instalments covering three months.

The HMRC will use the average trading profits from tax returns in 2016-2017, 2017-2018 and 2018-2019 to determine the size of the grant.

I’ve created a limited company and pay myself a salary? Do I qualify?

No. In a statement, the Treasury said that those who pay themselves a salary and dividends through their own company are not covered by the scheme.

We can’t claim because we run a limited company 

Matt Rann and his wife Annalise (pictured here with their three children) stated their jewellery business back in 2014. Even though they've been operational for six years they don't qualify for the self-employed scheme

Matt Rann and his wife Annalise (pictured here with their three children) stated their jewellery business back in 2014. Even though they’ve been operational for six years they don’t qualify for the self-employed scheme

Matt Rann, 27, and his wife, Annalise, 25, from Portsmouth run Annalise Jewellery Ltd, which they stated back in 2014. 

He said that as it is a limited company and they are directors they will fall through the gaps of the rescue scheme. 

‘On paper we are employed by our own limited company and paid through a PAYE. 

‘Like many directors we pay ourselves the minimum salary and the rest is dividends. 

‘We’re told we can’t furlough ourselves as we are directors, and we can’t claim under self-employed as we’re not classified as such.’

‘I think that the government have done a good job and done as much as they can but it’s almost like they have rushed a little bit.

‘I think it leaves quite a big gap and a lot of people in the same situation as us.’ 

What if I haven’t made any profits?

Unfortunately, you won’t qualify for the grant. The same is true for those that are newly unemployed and that haven’t filed any tax returns yet. 

What happens if my profits came to £50,001?

Unfortunately, you will not qualify, as help only applies to those with profits less than £50,000. Anyone with trading profits over that amount won’t get the grant. 

The £50,000 cut-off is one of the strange elements of the scheme and will exclude many self-employed people who are not particularly wealthy and may be their families sole or main breadwinner. Even if they aren’t their income is often essential for household finances.

Self employed workers, from plumbers and electricians, to management consultants, photographers and freelance designers could end up being hit by this. If they earn over £50,000, they get no help at all.

What can I do if I can’t get money from the self-employment scheme?

Those in financial trouble could also apply for Universal Credit, which has been boosted by £7billion. 

The self-employed working through their own limited companies could apply for the Coronavirus Job Retention Scheme, if they operate a PAYE scheme. 

There are also business interruption loans available and there is other help on VAT and business rates that it may be possible to get.

I think I qualify but I need money NOW what can I do?

Before grant payments are made, the self-employed will still be able to access other available government support if their income has been affected by the coronavirus pandemic including Universal Credit.

Business continuity loans can be accessed by those who have a business bank account.

I haven’t filed a tax return yet so don’t qualify for self employed help 

Julia Page, 50, from Wales, became self-employed last May and works as a funeral and wedding celebrant. 

She hasn’t filed any tax returns yet. She said: ‘From what I can make out there will be nothing for me. 

Julie Page has just recently become a funeral and wedding celebrant and doesn't qualify for the self employed grant

Julie Page has just recently become a funeral and wedding celebrant and doesn’t qualify for the self employed grant

‘I was a teacher for 25 years but gave up last year to become a funeral celebrant. I am now wondering whether it was such a good idea.

Her business is likely to be cut further as the lockdown measures become more extreme. 

She explains: ‘Funerals have narrowed down to 10 people and it looks like in the next few weeks funerals I will have no mourners as the dead go straight to cremation. 

‘It looks like my income will be hit in the next few weeks. A lot of celebrants are self-isolating but I can’t as I need to work.

‘So those who have not yet filed a tax return are not going to get helped at all. I am hugely disappointed by that and distressed if that happens. I am not entirely sure what I am going to do. 

‘I am going to have to keep trying to do funerals, going out there and working as long as I can. I hope it won’t be too long before everything goes back to normal.’

What if I’ve started my business up recently?

Unfortunately you fall into the 5 per cent that will lose out. If you’re newly self-employed or have only just started your business and haven’t filed any tax returns then you won’t qualify for this particular grant.

Do I still have to pay my taxes?

The Government has deferred income tax self-assessments for the self-employed until July and is deferring VAT until the next quarter. Bills will still eventually have to be paid though.

We pay ourselves in dividends but we pay our tax – yet we get no help 

Josh Memour, 29, from Croydon in London says his family run business Eternity Home Finance, which he owns 50/50 with his dad.

It was set up as a limited company and provides mortgage and protection advice. He’s not covered by the Chancellor’s scheme that was announced last night as he isn’t seen as self-employed.

Josh Memour (pictured left) part owns his family business Eternity Home Finance with his father

Josh Memour (pictured left) part owns his family business Eternity Home Finance with his father

But he argues: ‘We do not see how this can be the case. We are clearly self-employed, we have none of the protections that come with being employed such as sick pay and holiday.

We understand this risk, it is nothing new to us, but it feels like the government is making a direct attack on those like ourselves who run our business responsibly and in an entirely properly manner.

‘We are made out to be tax dodgers, but how can this possibly be the case? The dividends are paid from our profits, on which corporation tax is paid, and they are then subsequently subjected to income tax.

What’s the catch?

The self-employed can expect that the government will go full throttle on IR35 tax changes, potentially raise national insurance and cut back further on self-employed tax breaks.

Emma Jones says: ‘It comes with a warning shot that this will give the government a very good reason to change employment law and implement IR35 and other tax measures with renewed vigour as the self-employed, on this occasion, have asked to be treated in the same way as employees. If this applies to tax, there will be more changes ahead for the self-employed down the line.’

I’ve been reinvesting my profits, so I won’t get help 

Ruth Mary Chipperfield owns her owns her own jewellery company but she reinvested all her profits into the business

Ruth Mary Chipperfield owns her owns her own jewellery company but she reinvested all her profits into the business

Ruth Mary Chipperfield, 30, from Birmingham owns Ruth Mary Jewellery  and has done so for three years. But because she reinvests her profits she doesn’t believe she qualifies for the self-help scheme.

 She said: ‘Right from the start I chose to reinvest all my profits because I pay for gold so I am forking out quite a bit. I have zero profit as far as my tax returns are concerned.  

‘I had £20,000 of leads coming in that have all dried up. They may still go ahead after all this but the problem is that my clients’ own finances are drying up too. 

‘I wasn’t surprised about what they government have announced. I wasn’t expecting to get anything. It makes things tricky, but I’d rather think positively.’

Small Business Essentials

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