Chancellor to pay 80% of self-employed wages

Chancellor of the Exchequer, Rishi Sunak announced yesterday (26/03/20) a support package for the self-employed, where contractors and freelancers will be able to claim 80 per cent of their earnings, a maximum of £2,500 a month from HM Revenue & Customs (HMRC).

This is similar to the scheme Mr Sunak unveiled earlier which supports employees’ salaries, but at the time came under fire as it did not support the self-employed. However, an issue that has already arisen from this package, is that this scheme is unlikely to be up and running before the end of June.

The key points of the relief package according to Daniel Barnett, employment law barrister are:

  • Income will be calculated by taking the average income over the last three years
  • Self-employed people can claim these grants and continue to do business
  • The scheme is only open to anyone with trading profits of up to £50k (this covers 95 per cent of self-employed people).
  • The scheme is only open to those who make the majority of income from self-employment; if you are employed but have a ‘side job’ which is self-employed, you will not be eligible
  • The scheme is only those who have submitted a tax return for 2019 (this is to minimise fraud).  However, those who did not submit their tax return by the due date of 31 January 2020, and have not yet submitted one, can still submit a tax return for 2019 for a further four weeks from today
  • There are no steps to take.  HMRC will contact eligible self-employed people directly and pay the grant straight into their bank account after inviting them to fill out an online form

 

Rhys Wyborn, employment partner at law firm, Shakespeare Martineau, said:

The Chancellor has finally done what the UK’s self-employed business community has been crying out for. Announcing that self-employed workers will be able to receive 80 percent of their average monthly net earnings will bring huge relief to all those who felt excluded from the Government’s generous support packages so far. Although, more details will be needed as to how this will be calculated.

It was touch and go when the emergency Coronavirus Bill passed through Parliament yesterday, without any additional help for the self-employed, however the Chancellor has stepped up and recognised that more support is needed.

Time will tell as to whether these measures are enough to support self-employed workers during this unprecedented time and many will be watching closely as further details emerge around how to claim the financial aid. However, those who are still unsure about what the new package means for them should consider professional advice. In such an uncertain period, seeking clarity where possible is vital to survival.

Dave Chaplin is CEO and founder of contracting authority ContractorCalculator believes the scheme has pros and cons and said:

I applaud the Chancellor’s package to provide financial support for the UK’s freelancers and contractors. Just like employees, the UK’s flexible workers have had their lives and livelihoods turned upside down and they have mouths to feed and bills to pay. They are the tax-paying flexible talent who provide essential skills and expertise to the UK economy and it is vital they are supported so that they are still there to help rebuild the economy as we emerge from this crisis.  It is right and proper that they are not penalised and are supported through these unprecedented times.

It does seem unjust that all employees can access the Job Retention Scheme, but there is a cap on the scheme for the self-employed. Also the delay until July could cause considerable cash flow problems for many.

Neil Carberry, chief executive of the Recruitment & Employment Confederation (REC) said:

This is a cashflow crisis. The support initiatives are the big action businesses and self-employed people need. But to really work effectively and protect jobs, cash needs to come in quickly and be easy to access. The Chancellor should now turn his attention to ensuring supported loans are quickly available, businesses receive furlough cash quickly and the self-employed scheme can pay out before June. We will be working to make sure that this package supports the UK’s full flexible jobs market, including one million temporary agency and contract workers.