Two million self-employed Brits could miss out on £10bn coronavirus bailout designed to help them

Roshi Sunak

Up to two million self-employed people could miss out on the chancellor’s multi-billion-pound coronavirus bailout, it has emerged.

On Thursday, Rishi Sunak unveiled a scheme handing out cash grants worth up to £2,500 a month, in a massive boost for taxi drivers, musicians, gig economy workers and freelancers.

Only people turning a profit of less than £50,000 a year are eligible however, meaning those earning anything over that will not be able to claim – potentially affecting professionals like accountants, IT consultants, graphic designers and other success stories.

Since the announcement, analysts have said the number of people missing out on the scheme could be as high as two million, or 35 per cent, of the 5.75million people registered as self-employed, according to The Times.

Duncan Swift, president of insolvency and restructuring organisation R3, said the limitations of the Government’s measures to help the self-employed ‘do stand out’.

‘There are quite a few gaps in the support: for people who have only recently started working for themselves or who pay themselves through dividends, there may be no help at all,’ he said.

‘Anyone who is in financial difficulty or starting to see signs it may be around the corner should seek advice from a professional as soon as possible.’

Those self-employed people who are eligible for help unveiled on Thursday will be able to receive up to £2,500 per month in grants for at least three months.

But, in order to be eligible, they need to have been operating for at least a year and have had a trading profit of less than £50,000 in 2018-19 or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2018-19.

To qualify, more than half of their income in these periods must come from self-employment.

Those missing out could include people who are the sole earner in a family who earns £50,001 and will miss out, while someone turning a £49,999 profit would be covered.

Those who invest their profits in their business, or set themselves up as a limited company and pay themselves via a dividend, will also be ineligible.

Also missing out are those who have set up businesses so recently they have not filed a tax return for the 2018/2019 financial year.

In a report on the measures tonight, regarding the £50,000 profit ceiling, the Institute for Fiscal Studies’ (IFS) Stuart Adam and Helen Miller said: ‘This means that those who just miss these criteria will get no support despite looking quite similar to some of those who are eligible.’

Saying he knew people were ‘worrying about their jobs and incomes’, Mr Sunak said: ‘You have not been forgotten.’

But at a press conference in Downing Street he also delivered a stark warning that the government ‘will not be able to protect every single job or save every single business‘ as the deadly disease brings the economy grinding to a halt.

Business Secretary Alok Sharma insisted that the Government is offering ‘the right response’ for self-employed workers.

He told BBC Breakfast: ‘The Chancellor was very clear that we want to do this as quickly as possible, we’ve set a date of June. If we can do it faster we will, but it is a complicated system that we are designing and we want to make sure we get it absolutely right.’

On those who have been self-employed for less than a year not being eligible for the package, Mr Sharma said: ‘The reality is, if HMRC has had no contact from those people during the time they’ve been self-employed, then of course it’s very difficult to make an assessment on that.’

Chancellor Rishi Sunak said the scheme covers 95 per cent of self-employed people for whom the majority of their earnings come from that work.

Tom Evennett, head of personal tax at Ernst & Young, said: ‘There will be a group of taxpayers who are just over £50,000 – such a hard cut-off could be seen as rough justice.’

Nick Hill, a money expert at the Government-backed Money and Pensions Service, said: ‘Hard as it is, the most important thing, now more than ever, is to take a moment to assess all your outgoings, talk to your creditors, and check whether you can access savings which would normally be locked away.

‘If, after that, you are still worried about making ends meet, make sure you have fully considered all your options before looking at credit products to plug any gaps, and that you have understood the terms and conditions and know how much you will have to pay back in future.’

Heather Self, of tax advisory firm Blick Rothenberg, said: ‘People with new businesses starting after 5 April 2019 will not qualify. This is needed, HMRC say, so that grants are based on existing tax returns rather than running a higher risk of fraud, but it’s very harsh for someone who left employment last summer to start a new business

‘Junior barristers – who are typically self-employed but often earn very little in their first year or two – are an example of new businesses who will be affected, as well as the more obvious plumbers, hairdressers and so on.’

Unlike the bailout for employees, which is being channelled through businesses in grants, the government money would go directly to individuals.

Mr Sunak said: ‘Despite these extraordinary steps there will be challenging times ahead.

‘We will not be able to protect every single job or save every single business.

‘But I am confident that the measures we have put in place will support millions of families, businesses and self-employed people to get through this.

‘Get through it together and emerge on the other side both stronger and more united.’

Mr Sunak said: ‘The scheme I have announced today is fair.

‘It is targeted at those who need it the most and crucially it is deliverable and it provides an unprecedented level of support for self-employed people.’

He said: ‘These last 10 days have shaken our country and economy as never before.

‘In the last two weeks we have put aside ideology and orthodoxy to mobilise the full power and resources of the British state.

‘We have done so in the pursuit of a single goal: To protect people’s health and economic security.

‘By supporting public services like our NHS, backing businesses and protecting people’s jobs and incomes.

‘What we have done will I believe stand as one of the most significant economic interventions at any point in the history of the British state and by any government anywhere in the world.’

Mr Sunak admitted the very recently self-employed will not be included in the scheme and must look for welfare support.

He said: ‘For those who are very recently self-employed, we cannot operate a scheme like this, there’s too much complexity both operationally and fraud risk with that, so we would have to say to those people please look at the extra support we’ve put into the welfare system to help you at this time.

‘But, as I’ve said, this covers the vast, vast majority of people.’

Asked what people will do for the next three months until the scheme is up and running, sources said some people would have to sign on as unemployed.