Martin Lewis: A glimmer of hope for excluded new-starter self-employed
In March, at the start of the coronavirus pandemic, the Chancellor was rightly lauded for putting together decades' worth of financial support measures in days. Millions of people, then and since, have had their incomes covered in a desperate time. Yet that has created a society of the helped and helped-nots. Up to three million people have been excluded from specific support schemes.
That excluded group of freelancers, job changers, furlough refusees, limited company directors and more includes many now desperate people who have very little income, impacting their pockets and wellbeing.
Alongside many others, I've written, spoken and lobbied about it repeatedly, and blogged here, such as 9 tweaks the Chancellor should do to help (for full details on what help there is, see our Employment and Self-Employment Covid guides).
Yet while there have been some tweaks, even though we're now close on nine months later, little has gestated. This is deeply frustrating. We all knew the initial schemes understandably had to be set up at speed, leaving gaps. In the early weeks I was involved in helping to get guidelines tweaked, to fill a few smaller ones of those – and I'm thankful for the Government for listening – though in the months since, little more has changed.
The furlough relaunch will help a few who were not helped before, but that's more because it's a new scheme rather than changing the old one. However, now I do think there is a glimmer of hope for one category of excluded. So I wanted to bash out a quick blog explaining why.
This is all about the self-employment grants
The third self-employment grant will go live on Monday 30 November. In a nutshell, it'll pay 80% of monthly trading profits for three months, up to £7,500, for those who have seen demand drop due to coronavirus, to cover 1 November to 31 January 2021.
Yet the eligibility criteria remain virtually unchanged since the first grant back in March. This means you need…
- Average trading profits below £50,000 a year
- Over 50% of your income to be from self-employment
- To have filed self-employment income for the 2018/19 tax year
For those who have started self-employed ventures in the past few years, the last two clauses when combined are a nightmare. Obviously, anyone who started their self-employment after the end of the 2018/19 tax year – 5 April 2019 – is clearly excluded from support. But in practical terms the exclusion starts far earlier.
This is because you need 50% of annual income from self-employment. So if we were to (very generously) say that someone who was self-employed would immediately match their employment earnings – even then they would've needed to have set up their business before 6 October 2018 to qualify.
That's now well over two years ago.
Self-employment grant four may be different
It's important to understand that unlike excluding limited company director dividends, or setting a profits cap of £50,000, excluding new self-employed is likely viewed by the Treasury and HM Revenue & Customs (HMRC) as a practical issue, not a dogma issue.
And I hope I'm not adding up 2+2 and getting five, but there are two clues that it could be different in grant four.
- There's wriggle room. In September when this was launched, it was by far the earliest notice we've had of any self-employment grant, five months before it starts. At the time of the announcement it was stated that "it may be adjusted to respond to changing circumstances" and even now we don't know the level of the payout. So the door is still ajar for change.
- The tax filing for 2019/20 will be done and dusted. The fourth grant covers February, March and April 2021 – and will likely be open from late February. The deadline for filing tax returns for the 2019/20 tax year is 31 January 2021.
So when grant four launches, HMRC will have the data on people's self-employment earnings for the year to 6 April 2020 (which should be mostly normal, with just a few pandemic-impacted weeks in it), making it plausible these could be counted. So I'd ensure you get your filings in, in plenty of time.
In fact it should be more than plausible. As, by next March, to continue to exclude all new-starter businesses set up after October 2018, two-and-a-half years earlier, seems ludicrous. The opportunity is there to fix it, so it should be fixed.
A possible negative reaction may stop this happening
My concern here is I suspect the Government is debating whether, politically, changing the eligibility for new starters for grant four would be a losing scenario.
Just for a moment imagine it announced it would allow 2019/20 filings to be included, thus allowing many who have started businesses between roughly October 2018 and October 2019 to be included in the grant. There would still be cries of unfairness because…
- There's little chance it will be paid retrospectively for the first three grants, but that's understandably what people will demand once their income's proved.
- Grant four is likely to be at a lower rate than the others, as hopefully the level of lockdown will be less severe then, so it will be seen as a paltry offering.
- It simply won't be enough money to help many who have been struggling over that time.
That's the political danger. The Government can, and possibly even does want to, extend the eligibility criteria for this fourth grant, but if it does it may be on a hiding to nothing.
Therefore my suspicion is excluded campaigners have a difficult circle to square if they want this payment to be made: how to make the Government feel it will be palatable and accepted, even if most would ultimately feel it's too little, too late.
I'd love your views below.
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