Self-Employed Income Support Scheme

Ever since the Covid-19 (Coronavirus) pandemic has started preventing people from working, the self-employed have been wondering “where is the support for me?”.  Well on Thursday 26 March 2020 the Chancellor, Rishi Sunak, finally put us out of our misery and told us the measures that are being taken to support the self-employed population, with the announcement of the Self-Employed Income Support Scheme.  But what is the scheme all about, how do you qualify and how do you claim?  These are the questions we plan to answer for you in this article.

What is the Self-Employed Income Support Scheme?

The Self-Employed Income Support Scheme is being developed to provide self-employed workers with the same level of financial support as their employed counterparts.  The scheme is going to allow self-employed individuals who are currently unable to work as a result of the Covid-19 (Coronavirus) pandemic, with the ability to claim a taxable grant from the Government to financially support them through this difficult economic time.

Who qualifies for the scheme?

The Chancellor announced some very specific criteria for the people who will qualify under this scheme and they are as follows:

  1. You have submitted a self assessment tax return for the 2018/19 period
  2. You have traded as self-employed during the current 2019/20 tax year
  3. You are trading when you apply (or would be trading if it wasn’t for Covid-19)
  4. You intend to continue to trade in the 2020/21 tax year
  5. You have lost trading income as a result of Covid-19
  6. Your self-employed income must make up the majority of your total income (i.e. more than 50%)
  7. Your trading profits must be less then £50,000

You must meet ALL of these criteria to apply for the scheme.  This means that the following people do not qualify for the scheme:

1. The 2018/19 late filing population

If you haven’t yet filed your self assessment tax return for 2018/19 then all is not lost, you have a small window of opportunity to make yourself qualify.  The Chancellor has given you 4 weeks from the date of his announcement to file your return to qualify for the scheme.

2. The newly self-employed

If you have started your self-employed trade after 6th April 2019 then we’re afraid this scheme will not cover you. 

3. The part-time self-employed

If you were trading self-employed on a part time basis whilst you maintained an employment (a lot of people do this in the early days of self-employment before taking the leap into full time self-employment) then the likelihood is that your employment income makes up more than 50% of your total income.  In which case you do not qualify either.

4. The self-employed loss makers

If you have invested a lot of money into your self-employed business over the past few years and as a result have made trading losses, then it doesn’t appear that you would qualify for support under this scheme.

5. Limited company directors

Limited company directors do not make trading profits in their own right, their company’s make them.  This means that for the purposes of this scheme you are not self-employed, and should therefore refer to our “Covid-19 Guide For Limited Company Directors

6. Landlords

If you make your living from rental income, then this scheme doesn’t cover you either.  On your self assessment tax return your income is classified as “income from UK property” (if of course your properties are in the UK), but either way, it is not classified as self-employed trading income, which is all that qualifies under this scheme.

For all those that don’t qualify for this scheme, the Government advice is to apply for Universal Credit if you are struggling to cope financially, and to take advantage of your 3 month mortgage holiday if you are a homeowner.

How is the grant calculated?

The grant being paid out under the scheme is a taxable grant, which means that you will need to record it in your financial records as trading income, and then include it on your next tax return.

The grant is 80% of your average trading profits over the 3 years leading up to 2018/19.  Please note that the calculation is based on taxable profits and not on turnover.


Tax year Taxable profits
2016/17 £10,000
2017/18 £12,000
2018/19 £16,000
Total for 3 years £38,000
Average per month (divide by 36) £1,056
80% of monthly average £844

In the example above the scheme would make a payment to you of £844 per month for the period you were claiming.  HMRC has stated that the payment will be made in one lump sum directly into your bank account.

There is a monthly cap on the claim amount of £2,500 per month, which is the same as the cap for employees under the Coronavirus Job Retention Scheme, and the payments will be backdated to 1 March 2020.

What if I don’t have 3 years of tax returns?

If you don’t have 3 years tax returns then the Chancellor said that they would need to look at the average of the information you do have (i.e. if you only have 2 years then the average would be trading profits divided by 24 months).

How do I make a claim from the Self-Employed Income Support Scheme?

At this current moment in time the scheme itself and the associated claims system are still in development with HMRC.  The Chancellor did not want to formerly commit to a time when the system would be up and running for people to make a claim from, but he was hopeful that it wouldn’t be any longer than June 2020.

It is anticipated that HMRC will contact those individuals who qualify and invite them to complete an online application.

We will of course keep you updated on any changes to this timeline that we are made aware of.

Overall Assessment

Our overall assessment of this scheme is that the Chancellor has done his best to provide the self-employed with the same level of support as the employed population, but it was an understandably difficult task to administer.  He mentioned in his announcement that this situation has brought to light the inequality of the national insurance system, where the self-employed contribute less than the employed, but have been demanding the same level of support when times get tough.  We therefore wouldn’t be surprised if he looks to increase class 4 national insurance contributions (currently 9% in the basic rate band) to be more in line with class 1 national insurance contributions of employees (currently 12% in the basic rate band) in his next budget.

We endeavour to update this information as and when it becomes available to us, but in the meantime if you do need accounting help then please don’t hesitate to contact us on [email protected] or 01634 540340.