Overwhelmed by criticism for its failure to protect the self-employed, the government yesterday announced a rescue package in the form of a new self-employed income support scheme.
Those who are self-employed will be able to apply for a taxable grant worth 80 per cent of their average monthly income over the last three years. The income of those who have only submitted a tax return for one or two years will be calculated on the basis of those returns.
The maximum amount that can be claimed is £2,500 a month for a period of at least three months. The first payment will not, however, be paid until the beginning of June so it may be that a self-employed worker actually receives a one-off lump sum payment by the time the money is paid.
Those struggling now can apply for Universal Credit but that can take at least five weeks to process. So even though the government had already suspended the Minimum Income Floor (an assumed level of income) when working out the Universal Credit payment for the self-employed (weekly LELR 663) it is going to be some time before the self-employed see any financial support.
The scheme is only open to people who have submitted a tax return for 2019, although the government has said it will give those who didn’t file their tax return at the end of January a further four weeks from the date of the announcement to do so. They will then be covered by the scheme.
People who have only just become self-employed and have not filed any returns are therefore excluded. The government has made clear that it will not be able to help them, meaning that their only option is to claim Universal Credit.
Also excluded are those who have average annual trading profits of more than £50,000, those who earn less than half their total income from self-employment and those who operate through a limited company.
HMRC will contact those who are eligible directly asking them to fill in an online form.
The self-employed cover a wide range of occupations - from hairdressers and childcare providers to musicians, taxi drivers and construction workers. In total, it is thought that they number about 5 million people, equating to about 15 per cent of the total UK workforce.
The scheme to assist those who are self-employed is welcome although it fails to address the immediate threat of hardship faced by many of them, including those bogus self-employed workers in the construction and distribution sectors.
Interestingly, the Chancellor intimated when he announced the scheme that in the future, it may no longer be possible to justify the fact that self-employed people pay less tax than those in full employment. We hope that this should pave the way to end bogus self-employment as employers will no longer be able to try and lure workers onto contracts with self-employed tax arrangements which deny them basic employment rights.
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