“Alarming” number of self-employed don’t qualify for government support

Stress at work

An “alarming” number of self-employed individuals in the UK won’t qualify for government support, a new survey suggests.

The results challenge the government’s reassurance that 95% of self-employed individuals would be covered by the unprecedented support packages announced on 26 March.

Just under a third of sole traders who said they were unable to work due to COVID-19 were identified as ineligible for any of the self-employment grants due to becoming self-employed after April 2019.

Of these, 34% had an annual profit of between £20,000 and £50,000, thus likely to feel the biggest hit by the drop to the only source of available income, Universal Credit.

What’s more, just under a third of the directors and shareholders who responded to the survey will be unable to make a claim for furlough pay through the Coronavirus Job Retention Scheme, as they do not pay themselves a salary through PAYE.

Of the 67% of directors and shareholders who were eligible to claim, just under half paid themselves less than £10,000 per annum through PAYE, despite 25% of these reporting an annual turnover of between £125,000 and £500,000.

The responses of the people who took part “provide justification for the anger felt by self-employed people across the nation”.

“Yes, the schemes created by the government will undoubtedly provide financial support to many, but as expected, the survey shows many will also fall through the cracks” it added.

Since COVID-19 was declared a global pandemic on 12 March 2020, the government has introduced several support packages designed to prevent further damage to the UK economy.

Up until 26 March, the nation’s self employed had been left out of these support schemes, which received a lot of negative attention from the media and the general public.

Chancellor Rishi Sunak responded by outlining several multi-billion-pound packages for the self-employed.

The Self-Employed Income Support Scheme will see eligible self-employed individuals receive 80% of their average monthly trading profit over the last three years, up to a maximum of £2,500 per month, as a cash grant in June 2020.

Coronavirus Job Retention Scheme will see self-employed directors and shareholders of their own companies be able to furlough themselves and claim 80% of their salaries up to a maximum of £2,500 per month, if they pay themselves a salary through PAYE.

However, Shenward Chartered Accountants and Business Advisors, who carried out the survey, is concerned that next to no profit for many individuals despite impressive turnovers means individuals will receive hardly anything from the self-employed grant, and experience financial hardship.

The survey, which was carried out in April, supported these concerns, revealing that:

·         70% of respondents were unable to work at all due to the COVID-19 pandemic, and a further 18% had lost more than 50% of their work.

·         73% of respondents had no access to reserve funds or savings.

·         63% of respondents were already experiencing financial difficulties, and 33% feared they would shortly.

·         50% of respondents had children who were financially dependent on them living in the same household.

Many respondents also left comments on the survey detailing their own personal situation, one of which read:

“I cannot work at all, yet the packages are being given to people who are still able to work. Some get the max £2500, although yes, they will be taxed on it. I was employed up until 05/04/19 then due to mental health reasons had to leave and set up self-employed. I have sent invoices up to week 50 of this year and have receipts for these so I’m heartbroken I won’t get any help at all .My wife is a frontline Nurse currently training new recruits into nursing, so I just pray they reconsider the support for newly self-employed people.”

Sherad Dewedi, managing partner at Shenward said the comments and results were both alarming and worrying:

“There’s no denying that the financial measures put in place are outstanding and the government has responded quickly to the needs of the country, but we feared that more people than initially predicted wouldn’t meet the criteria for support and would be left without sufficient income.

“It’s worrying to see the number of individuals who are already experiencing financial difficulties, and it’s alarming that half have a family to feed. Yes, there is the option to apply for the Business Interruption Loan Scheme, but approval has been slow with only 12,000 loans issued thus far.

“What’s more, for those who own small retail businesses which have a rateable value of more than £51k owing to being based on high street and not necessarily representative of being from the larger, profitable population, won’t be eligible for the £25k Small Business Grant Fund.

“Our main concern surrounding all of this, is the negative effect financial hardship will have on individuals and so we aim to campaign for a review of the support.”

Shenward now plan to present the full data to relevant decision makers in the hope that new criteria will be considered.