Self-employed workers and freelancers affected by the Coronavirus pandemic will receive at least 80% of their pay from the government, the Chancellor has revealed.
The Self Employment Income Support Scheme will allow self-employed workers who have lost earnings to claim a taxable grant totaling 80% of their average monthly earnings over the past three years, up to the value of £2,500 per month.
It effectively puts self-employed workers on an even footing with employed workers. Last week, Mr Sunak announced that businesses unable to operate during the Coronavirus pandemic would be able to furlough staff and claim 80% of their wages.
He told self-employed workers: “You have not been forgotten, you will not be left behind.”
It is understood the government was keen to avoid providing support to those who do not need it. The Chancellor, therefore, said the Scheme would be available to those only to those who earn the majority of their income through self-employment and those already in self-employment with a tax return for 2019.
Mr Sunak claimed the measures would ensure 95% of self-employed workers in the UK will have access to support. However, the Chancellor does not expect HMRC to have the system to process claims set up until June.
With that timeline, many self-employed workers will have no option but to claim Universal Credit until the HMRC’s system is up and running. Mr Sunak reiterated that people can get advance payments almost immediately after making their claim for Universal Credit.
The Chancellor outlined the measures at the daily Coronavirus briefing in Downing Street, Boris Johnson confirmed.
Business leaders have been calling for urgent support for the UK’s five million self-employed workers, who as of yet, have not been the subject of any government measures.
Earlier this week, the Chancellor told Parliament the government had been working in “intense detail” to come up with a solution after stressing that it is “incredibly complicated” to introduce measures for self-employed workers, whose pay often fluctuates month-to-month.
Speaking to the BBC, Dr Adam Marshall, director general of the British Chambers of Commerce, said: “For many people that have seen their businesses disappear in the blink of an eye, things like statutory sick pay or universal credit just isn’t enough.
“It doesn’t need to be perfect – we just need a system in place.”
Proof of concept
Over the weekend, a group of entrepreneurs in the fintech space worked together on a potential solution to the ‘operational difficulty’ of proving self-employed workers’ loss of earnings.
Covid Credit is a platform that allows a sole trader to self-certify that they have lost income and prove their previous 12 months of income by connecting to their bank account.
This is possible due to the unique capabilities in the UK banking system called “open banking”. Recent transaction history provides proof that income has been affected recently and by the crisis.
The group said: “Whilst the proof of concept is not publicly available, it works, and by creating something that works the hope is to demonstrate that this service could help the 5 million self employed through the COVID-19 crisis.
“We urge the UK Government to collaborate with us, the Fintech community, to help solve the rapidly evolving problem facing the UK self employed community.”
It added: “We are here and we are able. This service is ready to go live, but we are waiting on input and support from the UK Government before we do so. Sole traders could use Covid Credit’s proof of concept to generate a self-certification of income loss to send to HMRC.”