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COVID-19: Support for Individuals

Based on the chancellor’s announcement today for the self-employed, we understand the support to be provided to individuals in the following ways:

Employees (including directors in limited companies)

  • If you are off sick with COVID-19 you are entitled to statutory sick pay from the first day you are off sick. Statutory sick pay is £94.25 per week.
  • If your employer cannot cover the staff costs due to COVID-19, you may be ‘furloughed’. You are kept on the employer’s payroll and the employer can obtain a grant of 80% of your wage for all employment costs, up to a cap of £2,500 per month. If you are a sole director in a limited company taking the NI threshold wage (£8,632 per annum – £719 per month), you would be entitled to £575.47 per month. The exact details on how the ‘furloughed’ grant is claimed is not clear as the detailed guidance has yet to be issued.

Self-employment – Sole traders/Partnerships

  • If you are off sick with COVID-19 you can make a claim for Universal Credit or the new style Employment and Support Allowance.
  • If you can no longer trade (or a significant loss of trade – detail not yet clear) due to COVID-19, you can claim the Self-Employed Income Support Scheme. The scheme is open to those with a trading profit less than £50,000 in 2018-19 or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2018-19. In these periods more than half of their income in these periods must come from self-employment. Like ‘furloughed’ employees, it is 80% of profits up to £2,500 per month. As HMRC hold all the self-employment records they can assess who is eligible and will invite them to apply. This scheme is only available for 3 months (currently).

Example scenarios

There are a few interesting scenarios that jump to mind:

  • The individual was a sole trader up to 2018-19 and converted to a limited company/ director in 2019-20. They may be invited to apply by HMRC but as they are no longer a sole trader it is unlikely they could apply for the Self-Employed Income Support Scheme (if they did apply and receive it and then did not submit a self-employment tax return for 2019-20, HMRC would identify this).
  • The individual has portfolio income i.e. it is split between employment and self-employment. They are only entitled to the Self-Employed Income Support Scheme if more than half of their income is from self-employment.
  • The Director of a limited company does not draw any salary, taking only dividends. They would only be entitled to statutory sick pay.

Over the next couple of weeks, we will hopefully receive the finer detail on these schemes and how they can be applied for.

In addition to the above, the self-assessment second payment of account (applicable to self-employment and Directors in limited companies) due on 31st July 2020 can be postponed to 31st January 2021.