A week after announcing that the Government would underwrite salaries for all employees whose jobs were at stake because of C-19, the Chancellor Rishi Sunak took similar steps to support the UK’s estimated 5m self-employed – among them tens of thousands of TV and film freelancers.
The Self- Employed Income Support Scheme was, he said, was ‘’one of the most generous schemes in the world’’ and would cover 95% of all self-employed people working the UK.
How does it work?
The government said it would pay up to 80% of a self-employed person’s income, up to a maximum of £2,500 per month. Initially, this would be for up to 3 months, but Sunak indicated it would be extended for longer if necessary. This would put them on parity with the support being given to employees, announced last week.
The calculation of a freelancer’s income would be based on using their last 3 years’ tax returns to work out their average monthly profit.
Sunak said there would be cap to ensure the support was targeted at those who needed it most. Anyone whose annual profits were more than £50,000 would not be able to apply. This cap would be based on average profits across the 3 years.
One important caveat: to be eligible, you must earn at least 50% of your income from self-employment. If self-employed work constitutes only a small fraction (or less than half) of your total earnings, they you cannot access this scheme.
How do I claim?
HMRC will contact self-employed people directly (it has their details from their tax returns) and ask them to fill out ‘’a simple online form.’’ It will then pay the income support directly into the freelancer’s bank account.
How quickly will I get my money?
The Government said it aimed to have the scheme operational by the beginning of June. You will receive the money in a lump sum - ie 3 months' worth.
I can’t wait that long. I need money now to pay for food and essentials.
Although it is currently taking up to 5 weeks to start receiving Universal Credit, Sunak said the government is providing advance payments to people ‘’within days’’ of them making a claim. He said the Department of Work and Pensions had made this a priority, although we know lots of people are having great difficulty registering claims due to the overwhelming demand for the benefits service.
I forgot to file my tax return for last year and have missed the January deadline. Will I miss out?
To scoop up as many people as possible, Sunak said that anyone who had missed the January deadline for filing their 2019 tax return would now be given another 4 weeks (to 25th April) to do so.
I was on maternity leave last year so haven’t got a full 3 years of tax returns. What can I do?
Sunak promised that HMRC would take a pragmatic approach. He said if someone did not have a complete set of 3 year accounts, and perhaps have filed only 1 year of accounts as a self-employed person, it would look at them on a ‘’case by case’’ basis.
The core principle – which it is worth referring back to because so much detail is still to be worked out – is that the government is trying to support people whose work has dried up due to C-19. If you have only 1 year of accounts, but can establish that you have genuinely been working mainly as a self-employed contractor during that time, then you should be ok but it may take a bit longer to resolve your case.
I have only recently started working as a Self Employed person
The government said it will calculate how much support they'll give you based on annual tax returns. So if you started working as a self-employed person half way through the year, they will treat that as your annual earning figure rather than factor it on a pro rata basis. For example, if you set up in September 2018, and earned £10,000 in the 6 months before filing your first tax return in April 2019, they will use this (£10,000) as the basis for your calculating your Income Support rather than saying that you would earn £20,000 in a 12 month period, and use the higher figure.
Unfortunately, if you have only just started out and have no tax return history at all - ie you set up after 6th April 2019 - then this scheme is not going to help, and you will probably have to look at what benefits are available including Universal Credit.
Despite the unprecedented amounts being spent by government to support people and companies, Sunak admitted that ‘’we will not be able to support every single job, or save every single business.’’
What if I still have some bits of work coming in?
Unlike furloughed employees – who are not supposed to carry on doing any work for their companies – Sunak said that the self-employed could continue to work for clients while also claiming income support under this emergency scheme.
The logic is that he/ the government doesn't want all work to cease. Any work that can be done (safely) should continue. If your work is completely or largely unaffected by the Covid-19 crisis, and you are still earning as normal, you could still apply for this Self-Employed Income support. There is nothing to stop you other than your conscience.
I’m a freelancer but I work on short term PAYE contracts and don’t file my own tax returns. None of these government schemes seem to help me. What do I do?
If you were on a contract that was cut short due to C-19, then you should go back to your employer and ask them to take you back and ‘furlough’ you. This would mean that 80% of your salary would be covered by the government.
It won’t cost the company anything as they will be reimbursed by the government.
Be aware that companies are still as flummoxed by what is happening, and how these schemes work, as many freelancers – so may initially be resistant to the idea. But the core principle behind everything the government is doing is to prevent/ reverse mass redundancy caused by C-19.
Also, some companies may have cash flow problems – paying salaries, even 80% of them – while having no income and having to wait for HMRC to reimburse them. So be patient.
Under the Job Retention scheme, furloughed salaries can be backdated to 1st March.
My contract wasn’t cancelled but ended, naturally, in March. I now can’t find any more work because most production has stopped?
This is still a bit of a grey area. However, referring again back to the core aim of all this government action – to prevent mass unemployment – you may be able to go back to your employer and ask them to ‘extend’ your contract, and then furlough you.
Essentially, the government is using companies as a vehicle to provide mass income support directly to people because they can do it far more quickly and efficiently than through the DWP or benefits system. So, while we’re expecting more details in the next few days, it is very unlikely government will quibble over whether or how a contract extension was justified.
My last job was in February, and now I can’t find any work. What can I do?
This is probably the hardest category. The TM is trying to get clarification from HMRC and will let you know soonest.
In the short term, your best bet is to register for Universal Credit and other benefits, including emergency payments if cash flow is short.