Updated 5 August 2020
The rules around claiming governments if you’re self-employed seem to be changing throughout the Covid-19 crisis.
But recent government measures have seen changes made to the benefits system to make them more accessible to the self-employed, as well as a new style taxable grant, as we continue our war against the Coronavirus.
Here is a summary of the benefits you may be eligible for if you need income support over the coming months, according to your situation.
The Covid-19 situation is changing every day. I have based this article on advice that is currently available and will update it as more is released.
Financial Assistance for the Self-Employed Curing Covid-19
In summary, here is what you might be able to claim if your income is hit:
- Self-Employed Income Support Scheme (SEISS)
- Employment & Support Allowance (ESA)
- Universal Credit (UC)
- Payment on Account deferral
- Bounce Back Loan Scheme (BBLS)
- Business Interruption Loan
What you are entitled to depends on whether you are registered as self-employed, your average self-employment earnings and whether you have contracted Covid-19.
Self-Employed Income Support Scheme (SEISS)
The SEISS Scheme has been extended for a further 3 months for the self-employed who can confirm that their income have been adversely affected on 14 July 2020. It will re-open on 17th August at which point eligible self-employed workers will be able to claim a further taxable grant of 70% of their average self-employment trading profits for the last 3 tax years, up to a total of £6,570. It will be open for applications until mid-October
The first round of the grant was announced on 26 March 2020 and has now closed for applications on Monday 13th July. Successful applicants were able to claim a taxable grant (that you do not have to repay) of 80% of your average self-employment trading profits for the last 3 tax years, up to £2,500.
You do not have to have applied for the first grant to be eligible to apply for the second one.
Who is Eligible for the SEISS Scheme
Anyone who is self-employed or in a partnership can apply for SEISS if they:
- Have trading profits of up to £50,000;
- Earn more than half of their income through self-employment;
- Are still in business, or would be if it wasn’t for Covid-19;
- Are intending to continue to trade during the tax year 2020/2021;
- Are already registered as self-employment and have submitted tax return for 2018/2019 (more below).
How Much Can You Claim
You’ll receive a 3 month taxable grant equivalent to 70% of your monthly average profits, capped at £6,570, for the last three tax years:
If you do not have three years, the HMRC will take into account however many tax years you have available. But you must have a return submitted for 2018/2019 so they have some evidence of your earnings to work with.
Details on the scheme are limited because it is so new. But if you want to estimate how much you will receive then add up your trading profits over the last three tax years divide by 36 months and multiply by 3 (reduce these if you have less than 3 tax years available).
If you are employed and self-employed you’ll receive 70% of your self-employment income, not your combined earnings.
Your trading profits for the last three tax years are:
- 2016/2017 £20,000
- 2017/2018 £23,000
- 2018/2019 £19,000
Your total trading profits for the last three tax years are £62,000 so you will be entitled to a total taxable grant of £5,166.67.
£62,000 ÷ 36 months x 3 months
When tax time comes and you complete your tax return, you’ll need to declare this as part of your income and pay extra tax at your highest rate.
You are in a partnership for the last two tax years and show 50% of your partnership profits on your tax return.
- 2017/2018 £18,000
- 2018/2019 £16,000
Your total trading profits for the last two tax years are £34,000 so you will be entitled to a total taxable SEISS grant of £4,250.
£34,000 ÷ 24 months x 3 months
You are employed and have a side hustle for the tax year 2018/2019. Your salary is £20,000 a year and you have self-employment profits of £5,000.
Your salary makes up more than half your earnings so you are not eligible for the Self-Employed Income Support Scheme.
Your trading profits for the last 3 tax years are:
- 2016/2017 £65,000
- 2017/2018 £55,000
- 2018/2019 £35,000
You average trading profits are £51,667 and exceed the £50,000 threshold so you are not eligible for the new scheme.
£155,000 ÷ 3 years = £51,667
You’ve been self-employed for 2 and a half years and submitted returns for 2017/2018 and 2018/2019.
However, during 2017/2018 you were employed for 6 months and self-employed for the final 6 months.
Here are your earnings:
- 2017/2018 £10,000 self-employment and £12,000 employment
- 2018/2019 £18,000
You’ve earned more than half your income through self-employment, so would be entitled to a taxable grant of £3,500.
£28,000 ÷ 24 months x 3 months years = £3,500
How to Apply for the Self-Employed Income Support Grant (SEISS)
From the 17th Augsut, HMRC will contact you if you are eligible for SEISS. Alternatively, you can go online and check whether you will be able to get the grant on the HMRC website.
Successful claims are estimated to be paid from 25 May 2020.
In the meantime, you’ll be eligible to claim Universal Credit to help you cover your bills in the short-term.
The income support scheme is very new and details, even for accountants, are limited. Here are some answers to common questions:
Should I file my 2019/2020 tax return?
Your 2019/2020 tax return will not count towards the income calculation for the grant you are eligible to. That’s because of the risk of people fraudulently increasing their self-employment income to maximise the grant they are entitled to.
I’m in a Partnership, am I eligible?
Yes the rules apply to partnerships as well as the self-employed.
I started working for myself in the current tax year, can I claim?
No, you can only claim if you submitted a tax return for 2018/2019.
However, I recommend you to register as self-employed if you have not done so as the rules around financial compensation seem to be changing regularly. That way you are prepared.
I’m a CIS Worker, can I claim the taxable grant?
Whilst CIS workers have not been specifically mentioned in the new HMRC guidance about the scheme, they have not been excluded.
Registered CIS workers are self-employed (they just handle their taxes slightly differently), so it is most likely that they are eligible to claim if they meet all the criteria.
But we should await official guidance to confirm this.
Why have those earning over £50,000 been excluded?
The scheme, like all other government benefits, is designed to help those most in need.
If you are struggling but don’t meet the criteria, then you may still be able to claim for Universal Credit (there is more below on this).
Can I Continue to Work and Claim the Grant?
No, to get the grant your income must have been affected by the Covid-19 situation. It is there to help the people that need it the most.
Are taxes going to go up post Coronavirus Crisis?
The chancellor has alluded to the fact that something needs to be done to equalise the tax system between those that are employed and self-employed.
That is because when you are self-employed you can deduct allowable expenses against your income, so pay less tax. There are also some self-employed individuals who do not declare their full income.
I seriously doubt any decisions have been made given the current economic climate, but next years budget could be interesting.
I am a Director and Shareholder of my Limited Company, taking a small salary and dividends. Can I claim the 80% self-employed income grant?
Although you may consider yourself self-employed, you actually aren’t and are therefore not entitled to the grant.
Your limited company is a separate legal entity from yourself and it’s is the vehicle for all your income and expenses (including payroll salaries). Once a year it pays corporation tax and can then pay a dividend from whatever profits are leftover.
If your Limited Company is set up as a registered employer, pays you a salary and you have stopped trading for the foreseeable future due to Covid-19 then you’ll potentially be able to furlough yourself. You can then claim for 80% of your payroll salary up to £2,500.
For many, this doesn’t equate to very much.
In order to pay the least amount of tax, those with Limited Companies commonly pay themselves a mix of salary and dividend that reduces their tax liability. That’s because dividend tax is less than the income tax and national insurance you would pay putting the same amount through the payroll system.
This is a perfectly legal thing to do and many choose to do it. But your dividend income is not considered self-employment income.
Say you received a dividend from shares you’ve invested in – that’s not self-employment income! Your dividend from your Limited Company treated exactly the same for tax and earnings purposes.
Although paying yourself with a dividend is tax-efficient, on this occasion it would not count for the purposes of claiming the new self-employment grant.
Do I Have to Repay the SEISS Money?
No, as it is a grant you will not have to repay the money you are given. It is designed to help people stay at home and stop the spread of the coronavirus.
It is, however taxable so you’ll need to show it on your tax return for 2020/2021.
I am a Landlord, can I claim the self-employed income grant?
The scheme is for individuals in partnerships and who are self-employed. Landlords are not considered self-employed and report their income in the Property section of their tax return, so are not eligible to claim the 80% grant.
Employment & Support Allowance (ESA)
ESA is a type of sick-pay originally aimed at helping people who cannot work due to an illness or disability.
In the recent budget, the government announced that they will extend ESA to give financial support to the self-employed during the Coronavirus crisis.
This is because when you are self-employed you are not eligible to claim statutory sick pay, like someone who is employed would do.
That means if you are a sole trader and forced to take time off work due to self-isolating, you could be eligible for ESA.
Under the new style ESA for the self-employed, you will be eligible to claim from the first day of needing to self-isolate, instead of the usual eighth day.
That means you should expect your first ESA self-employed payment around two weeks after you contract Coronavirus.
How Much Can You Claim
ESA is currently:
- £73.10 a week for over 25s
- £57.90 a week for under 25s
So depending on your circumstances, this may not be enough to bridge the gap if your income has totally dried up.
That being said if you’re facing a situation where your income is going down, then I advise you take advantage of all the income support you can.
And don’t feel ashamed to ask for help. This is exactly the reason why we pay national insurance contributions.
How to Claim ESA
To get ‘new style’ ESA you need to have been self-employed and paid enough National Insurance in the last 2 tax years:
You’ll also need to call 111 so the NHS can issue you with a letter confirming that you are self-isolating.
That means you needed to have kept up with your class 2 national insurance payments and paid them voluntarily, even if your business profits were below the threshold (something I have been urging my readers to do for years now).
Head over to the government website to check your eligibility or call the ESA helpline on 0800 169 0154
When Will You Receive Your Money
The government are promising that you will receive the money quickly.
If this is your first claim for ESA you will receive the money immediately, as long as you have all the information you need to hand.
And even if it turns out you weren’t eligible you won’t have to pay it back.
Self-Employed Universal Credit (UC)
Universal credit has always been available for the self-employed in event that their earnings take a dip. It tops you up.
The current UC amounts you:
|Your circumstances||Monthly Allowance|
|Single and under 25||£342.72|
|Single and 25 or over||£409.89|
|In a couple and you’re both under 25||£488.59 (for you both)|
|In a couple and either of you are 25 or over||£594.04 (for you both)|
The amount you can claim will be tapered according to the amount you have in savings. With you becoming ineligible for UC if you have more than £16,000 saved.
How to Claim Universal Credit
I have written a guide to claiming Universal Credit if you’re self-employed but in short, you’ll need to prove that you are “gainfully self-employed”.
That means presenting tax returns, accounts and your UTR number as evidence that you are truly a sole trader.
Payments on Account Deferment
Normal the self-employed must make a tax payment on 31 July, known as a payment on account.
HMRC have deferred this payment to help with cash flow and you’ll need to settle your tax bill in full on 31 January 2021 instead.
You do not need to apply for this deferment, it is freely available.
Bounce Back Loan Scheme (BBLS)
The bounce back loan scheme launched on 4 May 2020 to help small and micro businesses who have been adversely affected by Covid-19.
UK based businesses can apply for a loan of up to £50,000 using a simple one-page form through most British Banks including:
- The bounce back loan scheme is repayable but it is:
- 100% government back so you won’t need to give a personal guarantee
- Available to the self-employed and Limited Company owners
- Interest free for 12 months
- Has no repayments for the first 12 months
Business Interruption Loan
Geared at larger business, rather than the self-employed, the Business Interruption Loan Scheme which is a government-backed loan scheme available from major banks.
What is the Business Interruption Loan Scheme
Loans are being made by major banks, which are 80% government-backed, to give lenders confidence that they will get repaid.
In addition, the government will also make a one-off payment to cover the first 12 months of interest payments, to help reduce the cost and initial repayments.
Who Can Claim the Loan
- UK business with a turnover of no more than £45 million per year
- your meet the other British Business Bank eligibility criteria
How to apply
There are 40 accredited finance providers including Barclays, Metro Bank and Natwest.
Here is the full list of providers.
What happens if you are not eligible for the grant or the bounce back loan?
If you need financial assistance are not eligible for the support offered through the Self-Employed Income Support Scheme or business interruption loan then you may be able to claim Universal Credit and/or Employment Support Allowance.
Which of these you can claim, depends on your circumstances:
If You Are Self-Employed and Self-Isolating Due to the Coronavirus:
- Universal Credit (UC) and;
- Employment & Support Allowance (ESA).
If You Are Self-Employed and Are Experiencing a Loss of Income:
- Universal Credit (UC) only.
New Here? Learn how to set up the financial side of your business with these easy to understand guides and resources:
- Sole Trader or Limited Company? – Download my free calculator to check which business structure would help you to pay less tax;
- Tax Records and Bookkeeping – Understand what tax records you’ll need to keep and how to set up your own bookkeeping system;
- Self Employment Taxes Explained – Learn what taxes you’ll pay, how much and when;
- VAT Guides – From registration to de-registration, VAT schemes and thresholds, these guides will take you through the basics every UK small business owner needs to know;
- Invoice Template – Free template and step-by-step guide so you can get paid by your clients.