Self-employed to get 80% of profits in coronavirus support

 

The chancellor has given some welcome relief to the self-employed, promising to pay 80% of profits up to £2,500 a month if they have make annual profits under £50,000.

The news puts the self-employed on a par with the employed and is a welcome relief to the infrastructure sector.

The construction industry has a higher proportion of self-employed than any other sector; some 36% at one point in 2019 according to the Commons Library - compared to the average for the whole economy of 13%.

However, while the chancellor suggested 95% of people who make the majority of their money through self-employment will benefit from the package - thought to be worth tens of billions - they were some drawbacks.

As well as the £50,000 cut off, the payments will be delayed until June, and the grant is taxable and based on profits rather than revenue.

Rishi Sunak said: 'I can now announce a new self-employed income support scheme. The Government will pay self-employed people who have been adversely affected by the coronavirus a taxable grant worth 80% of their average monthly profits over the last three years up to £2,500 a month.

'To make sure the scheme provides targeted support for those most in need, it will be open to anyone with trading profits of up to £50,000. To make sure only the genuinely self-employed benefit it will be available to people who make the majority of their income from self-employment.'

If a self-employed worker has only one year of tax returns, the 80% would be based on that year. However, the Government wanted to include up to three years to average out any variations in profits.

If a self-employed person has only just entered work, they could be in real difficulty as the chancellor admitted that 'those we know nothing about we can really do nothing for'.

This scheme will be available across the UK for three months and will be extended if necessary.

One critical problem is that while HMRC is working on this urgently, it expects access to the scheme to only be available at the beginning of June. At that point, the self-employed will get a lump payment covering March to June, with welfare payments and tax deferrals to tide them over until then.

Self-employed workers who are struggling right now can access the business interruption loans scheme. Self-assessment income tax payments that were due in July can also be deferred to the end of January next year, and self-employed can access Universal credit in full, Mr Sunak said.

Universal Credit claimants can get an immediate advance payment, although full payments can take weeks.

'We are covering the same amount for a self employed person as we are for furloughed employees, who also receive a grant of 80% of wages,' the chancellor said.

'To minimise fraud, only those who are already in self-employment who have a tax return for 2019 will be able to apply - 95% of people who are majority self-employed will benefit.'

If you are eligible for the scheme, HMRC will contact you directly and ask you to fill out an online form. The payment will then go straight into your bank account.

Anyone who missed the filing deadline in January has four weeks from today to submit tax return and still be eligible.

As a sting in the tail, the chancellor hinted that the self-employed would lose their lower rates of tax in the coming years as a result of receiving equal support to the employed.

'The broader point I would make is (rather than be too specific right now about tax policy) it's just an observation that there is currently an inconsistency between contributions from employed and self-employed.

'And obviously, the action taken today, which is very significant tens of billions of pounds of support for the self-employed [is] treating them the same way as the employed.

'It does throw into light that question of inconsistency and whether that is fair to everybody, especially as we look going forward to right the ship afterwards.'

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