Coronavirus: Self-employed to get 80% of average monthly profits paid by government - up to £2,500 a month

26 March 2020, 16:50 | Updated: 27 March 2020, 05:21

The chancellor has announced that self-employed people will be able to claim grants worth 80% of their average monthly profits - up to £2,500 a month.

Rishi Sunak said the support for those affected by coronavirus would be in place for at least three months and amounted to "one of the most generous packages in the world".

The chancellor said it would deliver parity with his previously announced support for employed workers, and was "an unprecedented level of support" for cleaners, plumbers, electricians, musicians, hairdressers and others.

"To all those who are self-employed... you haven't been forgotten, we will not leave you behind," he added.

Unveiling the measures at a Downing Street news conference, the chancellor said the scheme was open to anyone with trading profits of up to £50,000.

The taxable grants would be based on people's average monthly profits over the last three years.

But the income support scheme will only be available to those who make the majority of their income from self-employment and who filed a tax return for 2019.

This would ensure only the "genuinely self-employed" benefit from the scheme and minimise the risk of fradusters applying for help, Mr Sunak added.

Anyone who missed the 31 January deadline for filing a tax return will now have four weeks to submit their return in order to not miss out on the scheme.

The chancellor said the support would help 95% of people who are majority self-employed, with Mr Sunak saying those who were not eligible had average earnings of more than £200,000.

Those who do qualify will be contacted by HMRC and the money will be paid directly into their bank accounts.

For those who are struggling right now, Mr Sunak said self-employed people can now access welfare payments, through Universal Credit, in full.

Other existing government measures will also allow them to access business interruption loans and a three-month mortgage holiday, while self-assessment income tax payments can be deferred until the end of January.

The chancellor pointed the very recently self-employed, for whom he said there is "too much complexity" to cover with the scheme, to government support through the welfare system.

Mr Sunak hinted at future changes to the tax system as the government later seeks to "right the ship" following its huge bailouts for businesses and workers due to the coronavirus pandemic.

He said it was now "much harder to justify" the difference in tax contributions between those who are self-employed and those who are employed.

"If we all want to benefit equally from state support, we must all pay in equally in future," he added.

Treasury officials believe there are 3.8 million people eligible for the scheme, which will cost an estimated £3bn per month.

Applicants will be required to prove they have lost income due to coronavirus via an online declaration form.

They are being told not to contact HMRC immediately but to wait to be approached in due course.

HMRC can use details already supplied through previous tax returns.

The government's package was criticised after the Treasury said income support grants would only begin to be paid at the start of June, even though they will cover the three months to May.

It was also suggested the help had already come too late for some self-employed, almost a week after help was announced for employed workers.

Labour's shadow chancellor John McDonnell said: "My worry is that if people cannot get access to the scheme until June it will simply be too late for millions.

"People need support in the coming days and fortnight.

"So there is a real risk that without support until June the self-employed will feel they have to keep working, putting their own and others' health at risk."

Mike Cherry, the chair of the Federation of Small Business, called for the Treasury to ensure the scheme "is ready on-time and delivered as soon as possible".

Tim Roache, general secretary of the GMB union, said the government action would mean "millions of self-employed workers will sleep easier tonight".

"When this is all over we will need to ask how many workers classed as 'self-employed' genuinely fall into that category - the explosion of fake self-employment has undoubtedly made this much more difficult," he added.

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Last Friday, the chancellor promised to pay 80% of salary for staff employees who are kept on by their employer, covering wages of up to £2,500 a month.

Treasury officials were said to have been working around the clock this week to prepare a similar package for the self-employed.

Mr Sunak has previously admitted he "will not be able to protect every single job or save every single business" amid the economic crisis caused by the coronavirus pandemic.

Earlier on Thursday, Prime Minister Boris Johnson took part in a virtual summit with G20 leaders, after which he announced a further £210m in UK funding for international efforts to find a coronavirus vaccine.

He called on governments around the world to help create a vaccine as quickly as possible.

The Coalition for Epidemic Preparedness Innovations, which the UK cash is being funnelled to, has said it requires £2bn in extra funding to develop a vaccine.