Britain’s five million self-employed workers have been thrown a lifeline by the Government, however it may come with a sting in the tail in the form of higher taxes in the future.
Chancellor Rishi Sunak has announced that freelancers and contractors will be able to claim up to 80pc of their profits from the state if they can prove they have been adversely affected by coronavirus.
However not all people who work for themselves will be eligible and Mr Sunak warned that everyone wanting to benefit from state support will have to pay in equally in the future. So what is available and what caveats are there?
What support is available?
Those who do qualify for the scheme will receive the same levels of support as PAYE employees who lose work to coronavirus: up to 80pc of their typical earnings. This will be paid as a taxable grant and calculated based on their profits over the past three years. The maximum payment will be £2,500 a month.
Who will be eligible?
Mr Sunak said that 95pc of self-employed workers would benefit. Any freelancer or contractor whose profits exceed £50,000 a year will be excluded as well as anyone who has newly become self-employed and did not fill in a self-assessment tax return for 2019. The majority of your income must come from your freelance or contractual work to qualify.
When can you claim?
The scheme will not launch until around June. Joanna Elson OBE, chief executive of the Money Advice Trust charity, said that the delay would cause real hardship for many.
The Chancellor said that in the meantime self-employed workers can apply for Universal Credit. This has been temporarily increased to match the levels of statutory sick pay (£94.25 a week). However those applying for Universal Credit for the first time will usually have to wait for five weeks to receive a pay cheque.
Ms Elson said that the Government should also introduce a dedicated hardship fund for people who are struggling in the meantime.
Self-employed workers will also be able to claim business interruption loans worth up to £5m and delay tax payments due in July until January 2021 to help stop the gap until then. People do not need to apply for the grants themselves. HM Revenue and Customs (HMRC) will contact them directly with an online form and the money will be paid straight into their bank account.
The grants will be available for up to three months, although the Chancellor said he would extend them if necessary.
Will taxes for the self-employed go up?
Catherine Kerr of law firm Primas said the Chancellor’s comment about all workers paying in equally suggested he is planning to change how the self-employed are taxed in the future. The Chancellor may choose to raise the National Insurance threshold to ensure more of the money earned by the self-employed finds its way into the hands of the taxman.