Chancellor Rishi Sunak’s latest bazooka of government aid for workers hit by the coronavirus lockdowns was aimed at the self-employed.
While he said it covered 95% of people in the UK who derived their main income from self-employment, there have been widespread complaints about those who remain ineligible. Particularly among those above the £50,000 income level who are excluded.
The situation is a fraught one for the millions of people who are only part-self employed, are owner-employees of their businesses, or who have moved in and out of self-employment.
The complexities of the sector, and messiness of people’s modern day working arrangements have inevitably made it far more difficult to draft a grant than the one for furloughed workers on PAYE.
Londoners in particular are seeking guidance because of their relatively high earning power.
To help them through the quagmire, PWC UK tax partner Aidan Sutton took time out of what is proving a horrendously busy end-of-tax year to help out our readers with some practical advice.
Producer/director of current affairs documentaries
Lives in Chingford
I’ve been self-employed for two years although this year – 2019/20 – I’ve been on a mix of PAYE and self-assessment. I’ve just returned from Cuba and am self-isolating so am out of work.
My question is this:
In my latest self-assessment I went over the £50,000 profit level, which is very unusual for me. The year before it was more like £30,000 and I don’t have a return for the year before that.
How will the government work out how much I would get?
First, you need to have continued your trade into 19/20 which it sounds like you have.
Second, HMRC will take an average of the two years prior to that (17/18 and 18/19) to determine if your average income is less than £50,000. If that is the case (which it sounds as if it is) HMRC will probably determine that you are eligible.
Andrew Wilson AKA Villem
Drum and bass artist, DJ, teacher and mastering engineer.
I’m a full time musician and earn my living through live concerts, teaching, music royalties, sample packs and mastering.
My live gigs have disappeared, which equates to half of my total income. It’s too early yet to tell what will happen to my other revenue streams at this early stage in the virus crisis. Please can you advise me if there’s anything I should be applying for now?
Firstly, I’m assuming you’re self-employed, in which case the question is whether your average profits from self-employment have been below £50,000 for the relevant three years. That’s 2016/17, 17/18 and 18/19.
It might be worth having a look to establish that before making your next plans.
If you are below the £50,000 threshold, then HMRC should be contacting you directly to tell you to apply for the self-employed scheme.
Failing that, there are business interruption loans and also local authority grants that you could explore.
In the worst case, you will need to look at whether you qualify for universal credit or other benefits.
Hopefully your earnings will keep coming in from the some of the non-live music work you do to help tide you over.
Dr Stephanie Hare,
Independent researcher and broadcaster
I am falling through the cracks in the government’s support scheme for coronavirus.
I set up a limited company in August 2018 and am the sole director and the sole employee. I have a range of clients and a range of activities, including broadcasting on the BBC. I’m also publishing my first book this year on technology ethics. I work from home and the London Library (when it was open!)
According to the government’s scheme for self-employed workers, I could, in theory, put myself on furlough as an employee. However, I would only be entitled to 80% of my salary, NOT my dividends. Most people in my situation pay themselves a minimal salary in order to invest in the business, especially in the early days (e.g. me, now at 18 months from when I formed my company). I had a successful year last year and so lived off my dividends, as my salary is minimal and certainly not something that I could live off of for months.
But even if I could somehow manage to live off 80% of my salary, I still can’t do this and accept the government’s support, because if I put myself on furlough, I’m not allowed to work for the next 3 months. That’s the deal in exchange for accepting government support.
Yet as the sole director of my limited company, I must work — to liaise with HMRC, my accountants, my insurers, my lawyers, my clients, and of course, to pay the bills.
Under the government’s support scheme, I would not be allowed to try to hustle up new business. This is an odd contrast to the support scheme for self-employed people who do not have a limited company: they are allowed to receive 80% of their salary through government support AND to keep working.
The only option I seem to have is not to request any government support and to try to keep working, during a pandemic, when all my work has been cancelled for March and the months ahead.
So my questions are these:
:: Do I understand my situation correctly: I cannot access any support from the government as the sole director and sole employee of a limited company? And that this absence of support is different to the support given to other self-employed workers, to say nothing of the support being given to employed workers?
It is correct to say that you will not be eligible for help for the self-employed because you are employed. The job retention scheme for employers is available to all employers so you could explore eligibility for that scheme.
::Is the only option for me therefore to try to drum up work…during a pandemic, in a country on lockdown or is there any chance that the government might adjust its position to include workers in my position?
It is difficult to say at this stage whether the government will introduce any further measures to deal with specific situations but they have signalled an intent to support all businesses and workers through this crisis.
::Will the government make it easier for people to create or update their will so that a solicitor and witnesses can observe the signature over the internet, since we cannot safely conduct this transaction in person?
I understand that the Law Society and others are discussing with government whether wills can be witnessed electronically. The Stamp Office have already put in place coronavirus measures which mean that certain documents do not have to physically stamped for the time being.
Day 12 of self-isolating in Chesham, Bucks
I worked for the NHS for 10 years as a paediatric speech and language therapist until August last year, when I left in order to accommodate school runs with our 4-year-old starting school.
I had done a little self-employed work in recent years, so have previous tax returns. However, this self-employed work was not my main income until late 2019.
Is there any way my change in circumstances might be taken into account when claiming for loss of income?
In your situation, to qualify for these grants you need to meet one of two tests.
You had a majority of self-employed vs employed income in 2018/19 and that self-employed income was less than £50,000
You had a majority of self-employed vs employed income in the last three tax years and the self-employed income averaged less than £50,000.
If you can establish either of those, then you could be eligible. Hope that helps, and good luck with the self-isolating!
Filmmaker and videographer
I earn over the threshold of £50k per year. Had I earned £49,999 in those years I would be entitled to £7500 over the next three months and more if the situation continues. As it stands because I earn over £50,000 I am entitled to nothing apart from statutory sick pay of £95 a week. Quite a big difference! So there are people out there who would average just 1p more than someone else and they will have no entitlement to any money at all. Is there anything at all I can claim?
I’m afraid Michael that as a self-employed individual you would not be eligible for Statutory Sick Pay. The government website lists other areas of support which are available, most notably the availability of the Coronavirus Business Interruption Loan Scheme and Universal Credit.
People who are PAYE could earn £5million a year and still get paid £2500 a month from government help. It makes absolutely no sense at all. So I guess my main question would be, is this correct?
Yes, in relation to the limit for profits and availability of the grant.
Can I submit a tax return after the 5th of April and will this be taken into account to work out my average earnings for the past three years?
No, because the assessment is based on the profits according to your filed tax returns up to and including the 18/19 tax year.
Unfortunately for me, the years of 17/18 and 18/19 were my best years of my whole 15 years as a self employed filmmaker/videographer but the current year dating back to April last year has been very poor in comparison but that will not be taken into account.
Making videos is absolutely impossible under lockdown of course because I can’t be in the same room as anybody else and if this goes on for a few months I will have to leave my flat and go and live with my mum, at the age of 40 with a 5yr old child!
Some people bizarrely think that self-employed people pay less tax. We pay exactly the same tax as everyone else but we don’t get sick pay or holidays and we have to pay an accountant to do our tax returns.
That’s one you’ll have to take to the Chancellor – ed
Graphic designer from Hammersmith, age 35
I’ve been freelance for two years and have a very regular contract but the client has dropped my services during this period of disruption.
How will HMRC work out how much I get?
If you qualify, you will receive a taxable grant of 80% of your average taxable profits for the tax years 2016/17;2017/18 and 2018/19. This is capped at £2,500 per month for three months.
But I’ve not been self-employed for three years. Does that mean I don’t qualify?
No. If you don’t have three years of records – as you clearly won’t – the amount will be based on the average you made for the years when you have been self-employed. Rishi Sunak was asked this question on Thursday at the press conference and said that this should not affect eligibility as long as HMRC have at least one tax return to review.
If my profits are always over £50,000 will I get anything?
If your trading profits for 2018/19 or your average trading profits for the three years were over £50,000 then I’m afraid you will not be eligible to receive a grant.
I’m a bit disorganised and haven’t submitted my tax return for 2018/19 yet. Have I blown my chance of getting the grant?
No, if you submit your 2018/19 tax return before 23rd April 2020 then you will still potentially be eligible
Martial arts personal trainer
Based in Southfields
The Chancellor said self-employed people will get a one-off payment in June. Is this right?
Yes, the Chancellor said that those self-employed people who qualify will receive their payment in early June. Rishi Sunak did say in his press conference on Thursday afternoon that despite the complexities they will work to bring that date earlier if they can.
Will we have to pay tax on this?
Yes, it is a taxable grant
I usually have to pay an advance tax payment by the 31st July, which will be a little under £700 this coming July. Am I going to have to make this payment?
Only if you can afford to pay it. Self-assessment instalments due on 31 July may be deferred until 31 January 2021 if you cannot.
I took the government’s instructions to fill in online forms for universal credit and council tax assistance. Wandsworth council said we should get £12.99 a week but we are still waiting to hear how much universal credit. How long until we get a response, and when are we likely to receive payments?
Local authorities have had a massive spike in inquiries for universal credit so it may take some time to receive a response. When you are registered, there is a process for receiving an advance on universal credit which, if applicable, would mean you do not have to wait for five weeks for your first payment.
How do we apply for the self-employed grants, and do you have any advice on doing so?
You do not apply now. HMRC will come to you based on the records they hold; your earlier submitted tax returns and so forth. They will then invite you to apply online.
Is there any assistance for paying rent to the gym where I teach?
The other assistance available to small businesses is the business interruption loan scheme. Forty lending banks are signed up to the scheme and you would need to approach one of them if you wanted to explore eligibility.