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Government measures for self-employed

Many countries have taken exceptional measures to support the self-employed during the coronavirus crisis but it is hard to identify any providing as much support as the UK, says Professor Jill Rubery.

The government can rightly claim that the measures they have announced to support the self-employed during the coronavirus crisis are generous by international standards.

The new scheme will pay a taxable grant for a period of three months, equivalent to 80% of the average per month profit recorded on tax returns over three years (or for over one or two years if in self-employment for a shorter period), up to a limit of £2,500 a month for all self-employed with average profits below £50,000.

In one respect the scheme can be considered more generous than that for employees as there is no requirement not to be working during the three months to receive the payment. This is probably because it would be very difficult for authorities to track when work is actually carried out as payment often comes in with a delay.

Nevertheless, if people become aware that the self-employed grant recipients are continuing to work then more questions may be raised about why the employee scheme provides 80% of earnings only for furloughed workers (that is those not working at all), while those facing reduced hours have not been offered any compensation.

People not covered

However there will still be self-employed people facing major losses in their income who will not be compensated by this new scheme. This will include those whose profits are too high, and those who have not filed tax returns for the last financial year either because they have only just entered self-employment or because they have not been aware of a need to do so.

The government has included the option of filing a tax return in the next four weeks to allow people to make themselves eligible, but it is unclear what mechanisms the state will use to try to publicise this need to act.

The problem is that governments have been so keen to take people outside of the tax system by raising thresholds for tax and national insurance that many workers - both employees and the self-employed – do not have any tax or national insurance to pay, and may not recognise the need to file a return.

Employees will be on the PAYE system, but the low paid self-employed are more likely to be outside the tax system and will not necessarily receive any notification of the need to file a return in the next four weeks.


This means that the recent self-employed, or those who miss out on this four-week opportunity to register a tax return, will find their only source of support to be the benefit system. They, together with those self-employed who cannot wait till June for support, will have to join the half a million people who tried in the week the lockdown was announced - often unsuccessfully - to fill out an online application form for Universal Credit.

The government had initially hoped to only provide the self-employed with support through Universal Credit. To provide apparent parity with employees they increased the very low Universal Credit basic element of around £73 a week to match the employee sick pay level of £94.50 a week.

However what the coronavirus crisis has revealed to the vast majority of the population is how poor the level of support is within the benefit system. People used to a reasonable standard of living have been horrified at being expected to manage on such a meagre income. Before the crisis they may have been quite happy to have the low tax rates which go with a low safety net as they did not expect themselves to have to rely on this form of support.

A key question is therefore whether, when the dust settles, people will remember how close they came to having to survive on poverty level benefits and recognise that a safety net equivalent to not much more than 20% of median income is not acceptable in a rich and civilised society.

Blog posts give the views of the author, and are not necessarily those of Alliance Manchester Business School and The University of Manchester.

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