What is the Self-Employment Income Support Scheme?

Definition of Self-Employment Income Support Scheme

The Self-Employment Income Support Scheme is a temporary initiative that aims to provide financial support to self-employed people whose businesses are affected by the coronavirus (Covid-19) pandemic.

The Self-Employment Income Support Scheme was announced in March 2020 by Chancellor Rishi Sunak and was extended on 24th September 2020.

The scheme initially enabled self-employed workers to claim two taxable grants:

  • the first worth up to 80% of their trading profits, up to a maximum of £2,500 per month
  • the second worth up to 70% of their trading profits, up to a maximum of £2,190 per month

For the first grant, the scheme was backdated to 1st March 2020 and was open for applications until 13th July 2020.

The second grant opened for applications from August 2020 with applicants entitled to apply for it even if they hadn’t applied for the first grant. In order to apply for the second grant, applicants have to confirm that coronavirus affected their business after 14th July 2020.

Extension of the scheme

The extension of the Self-Employment Income Support Scheme offers two additional grant payments for self-employed people. These grants will be available for those who qualify for the scheme and are “continuing to actively trade but face reduced demand due to coronavirus”.

For these businesses, the government will provide an initial taxable grant to cover 40% of the business’s average monthly profits in November 2020, December 2020 and January 2021, up to a total of £3,750.

The government has advised that a second grant will be made available to cover the months of February, March and April 2021.

Who is eligible for the scheme?

Only sole traders and partners are eligible for the Self-Employment Income Support Scheme.

To qualify, a business must have been required to file a tax return for the 2018/19 tax year, which ended on 5th April 2019. Businesses who have not filed this tax return must do so by 23rd April 2020 in order to qualify. A business must also:

  • have traded in the 2019/20 tax year
  • intend to continue trading in the 2020/21 tax year

More than half of an individual’s income must come from self-employment in order for them to be eligible for the scheme.

Each individual’s profit must also be either:

  • less than £50,000 in the tax year 2018/19
  • less than £50,000 on average over the tax years 2016/17, 2017/18 and 2018/19

As partners in a partnership typically share the business’s profits, they are treated as individuals for the above criteria. For example, if a partnership made £60,000 profit and shared that equally between two partners then the partners would still qualify, as each would have a share under £50,000.

Sole traders and individual partners whose profits exceed £50,000 during the above periods are not eligible for the scheme.

Businesses that made an overall loss over the last three tax years (2016/17, 2017/18 and 2018/19) don’t qualify for the Self-Employment Support Scheme. However, they may be eligible to claim Universal Credit at £94.25 per week, the same rate as Statutory Sick Pay (SSP).

If an individual started trading between 2016-19, HMRC will only use the years for which they filed a Self Assessment tax return when determining eligibility for the scheme.

You can find more information on how HMRC calculates trading profits and non-trading income on the government's website.

How to apply

If you're eligible for the Self-Employment Support Scheme you should apply through the government's website. If your application is successful you should receive the grant as a single payment in your bank account within six working days.

You can find out more about the support available for small businesses during the coronavirus pandemic on our small business coronavirus support hub.

Got questions?

Bookkeeping and tax tips

We are committed to keeping your information safe. Read our Privacy Policy to find out more.

Are you an accountant or bookkeeper?

Find out more about FreeAgent for your practice.