Interactive Investor

Self-employed get new government support

3rd November 2020 14:57

Marc Shoffman from interactive investor


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New support scheme will cover 80% of trading profits for November, but SMEs say they are being sidelined.

Self-employed workers stand to gain from renewed government help during the second national lockdown, but there are fears this does not go far enough.

The Treasury has unveiled new details for its Self-Employment Income Support Scheme (SEIS), with three-month grants now covering 80% instead of 40% of average trading profits for November.

Applications were originally set to open in December but the claims window has been brought forward to 30 November. The scheme is only open in England.

The first grant will cover a three-month period from 1 November 2020 until 31 January 2021, with the second covering 1 February 2021 until 30 April 2021. 

The Government is due to review the level of the second grant.

In total, this means the self-employed will be able to access a grant covering 55% of average monthly trading profits, capped at £5,160.
These grants still count as taxable income and are also subject to national insurance contributions.

However, critics are unhappy that there have been no efforts to amend the scheme to include the estimated three million self-employed people who are excluded.

This is because the scheme is keeping to its original rules that excludes those who were not trading during the previous two tax years.

Average trading profit must have been less than £50,000 a year and more than half of someone’s income has to have been earned from self-employment.

Limited company directors who mainly take income from dividends are also excluded.

Liz Barclay, chief executive of online resource warns the SEISS increase is too little too late.

She says: “We have already seen nearly a quarter of a million self-employed people leave the sector and this will increase dramatically as we hit 2021, especially if the government continues to ignore the three million excluded, who are being offered nothing and are facing ruin.

"Small businesses and freelancers are the backbone of our economy. 

“Many are facing serious financial uncertainty and for a Conservative government to leave them unsupported is a disgrace. We risk losing vital skills and resources the UK needs to drive our economic recovery.”

This was echoed by Ed Molyneux, chief executive of accountancy software provider FreeAgent, who agreed that the needs of small businesses are being ignored.

He says: “While the government is doing its best to make the right choices to keep people safe in this turbulent climate, I the overwhelmingly negative impact on small businesses and, for that matter, the economy, are not being taken as seriously as they should be. 

“Many small businesses and self-employed people are not covered by the scheme, including those that are currently not making a profit, which is not unusual for early-stage, growing companies, or new businesses that started in 2020. 

“My hope is that the government rethinks this stance and commits to providing help to every small business owner who needs it.”

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