According to the Office of National Statistics, the number of self-employed people in the United Kingdom grew from 3.3 million in 2001 to 4.8 million in 2017. The self-employed now make up roughly 15% of the labor force.
This 15% had seemingly been forgotten when the government launched its Coronavirus Job Retention Scheme, not being eligible at all for the grant. Recently, under some pressure, the government announced a similar grant for the self-employed.
Below, you'll find all the information about the Self-Employment Income Support Scheme.
Self-Employment Income Support Scheme (UK):
What is it?
The Self-Employment Income Support Scheme is a cash grant that allows the self-employed, and those in partnerships, to apply for 80% of their trading profits up to £2,500 per month for three months. The government expects the average once-off, lump-sum payment to be roughly £940 per person.
Who is eligible?
You are eligible for the Self-Employment Income Support Scheme, if:
- More than half of your income comes from self-employment.
- Your profits from the past few years don't exceed £50,000 on average.
- You've submitted an Income Tax Self Assessment tax return for the tax year 2018 to 2019.
- COVID-19 has caused you to lose profits.
- You were doing business last year.
- You were conducting business this year.
- And you intend to continue doing business.
How is it calculated?
The HMRC will add together your annual trading profits for the past three tax years and divide them by three. This will give them your average trading profit, 80% of which will be used to calculate the monthly payments of your Self-Employment Income Support Scheme grant.
Let's say you earned an average profit of £10,000 in 2016, £12,000 in 2017, and £15,000 in 2018.
First, add all the averages.
£10,000 + £12,000 + £15,000 = £37,000.
Now, find 80% of the average profit.
£37,000 x 0.8 = £29,600.
Now, break this down into a single month's pay.
£29,600 ÷ 12 = £2,466.67
Finally, multiply this single month's payment by 3.
£2,466.67 x 3 = £7,400.
HMRC will pay a once-off grant payment of £7,400 into your bank account.
Note: The grant is subject to national insurance contributions and income tax, but it will not need to be repaid.
How does one apply?
You do not need to do anything until the HMRC contacts you to tell you you're eligible for the scheme and invite you to apply online. You will be invited to apply through the government website.
If you are planning to claim Universal Credit, keep in mind that any grant you receive will affect the amount of Universal Credit you can claim.
Scam Warning: The government has warned people not to trust emails, texts, or phone calls from people claiming to be from HMRC and saying that grants can be accessed via a link.
- UK Small Business Grant Funds.
- Retail and Hospitality Grant Schemes.
- Coronavirus Business Interruption Loan Scheme.
- COVID-19 Corporate Financing Facility.
- Resources for UK Businesses Affected by COVID-19.
- Government Aid for U.K. Small Business Owners Affected by COVID-19.
- UK Jobseeker's Allowance.
- Unemployment Benefits in Northern Ireland.
- Resources for UK Workers Laid Off due to COVID-19.
How much will the Self-Employment Income Support Scheme pay?
The Self-Employment Income Support Scheme will pay you a lump sum payment of 80% of your average trading profits from the last few years, broken down into monthly payments. It will pay you three month's worth of this amount. Calculate your grant amount using our example.
When will the Self-Employment Income Support Scheme begin paying?
Self-Employment Income Support Scheme will begin paying eligible people in June.
Who is eligible for the Self-Employment Income Support Scheme?
Those who make more than half of their income from self-employment, have average annual profits of less than £50,000, have submitted an Income Tax Self Assessment tax return for 2018 and 2019, and who have lost profit to the COVID-19 pandemic, are eligible.
How do you apply for the Self-Employment Income Support Scheme?
You do not need to apply. If you are eligible for the grant, HMRC representatives will be in contact. They will invite you to apply through the government website.
How do the HMRC calculate the Self-Employment Income Support Scheme grant?
They calculate it by taking your trading profits from the last few years, which they get from your self-assessment tax returns, and finding the average. They then work out what 80% of that average profit is. Break that down further into a monthly payment. Multiply that by three, and they have your once-off grant amount.
How will the Self-Employment Income Support Scheme make a payment?
HMRC will pay grants directly into the bank accounts of eligible individuals.