Why help everyone but leave out the self-employed who’ve paid lots of tax? SIMON LAMBERT on the hole in Rishi Sunak’s coronavirus rescue
Rishi Sunak proved dauntless in his coronavirus rescue package but for the self-employed there remains a glaring hole in his support schemes.
While many of Britain’s self-employed got grants that echoed the furlough scheme, those who have made trading profits of more than £50,000 were excluded completely.
Despite being unable to work due to lockdown and having paid plenty of tax in years gone by, this chunk of the self-employed got absolutely nothing.
Many will be the main breadwinner for their family; lots will have lost income essential to their household, some will have had to stop work to home school children – and all are being penalised for declaring their income and paying their taxes in years gone by.
he Chancellor has audaciously splashed the cash to battle coronavirus but left out a chunk of the self-employed with an arbitary cut-off that does not affect the employed
Understandably, the self-employed affected that you speak to consider this something of a kick in the teeth.
The Chancellor has audaciously splashed the cash on a furlough scheme that pays people 80% of their wages up to £30,000 a year, to stem redundancies and relieve businesses of their wage bills.
His largesse ran to grants for pubs, restaurants, retailers and other hospitality firms that had to shut their doors, business rates holidays and interest-free coronavirus business interruption loans and bounce back loans.
But when it came time to assisting the self-employed, Mr Sunak curiously failed to offer all those affected a hand.
The Chancellor’s self-employment income support scheme was meant to echo the furlough scheme by paying grants of up to 80% of average monthly trading profits. It covered three months’ worth of profits and grants were capped at £7,500 in total.
That cap of £2,500 per month puts it bang in line with the furlough scheme’s £30,000 annual salary limit.
Yet, while a higher rate taxpayer earning more than £50,000 can still be furloughed and at least pick up £2,500 each month, a self-employed worker who usually makes £50k-plus gets zero help.
When the self-employed support scheme was announced, many thought the Chancellor would swiftly step in to help those affected by this rare glitch in his bold rescue plans.
After all, when you’re splashing out £330billion to save the economy and have launched a furlough scheme that the OBR expects to cost £60billion, why arbitrarily miss some people out?
There has been no change, however, although there has been criticism from the Treasury Select Committee.
It has called for the Chancellor to step up and help the newly self-employed, freelancers, and those with annual trading profits above £50,000.
It said: ‘Hundreds of thousands of people are potentially suffering hardship because of the arbitrary £50,000 cut-off in the SEISS. The Government should remove the £50,000 cap and allow those with profits just over this cap access to some financial support, up to £2,500 a month.’
The committee also wants help for another group of the self-employed affected by a gap in the support schemes, directors of companies who pay themselves in dividends.
This is a controversial area and you can understand why the Chancellor may have decided to miss out those who pay themselves income in dividends, as this is largely done to lower their tax bills.
Tax on dividends is lower than income tax, and the self-employed who set themselves up as limited companies and take money this way also avoid some national insurance costs.
However, they are operating within the tax system, many have lost vital income that keeps their family afloat – and a key element of the rest of the coronavirus economic rescue was that money was thrown at the problem without moral judgement.
Limited company directors affected are the most vocal element of the fight back from the self-employed who were excluded. Campaigners are pushing for change with the #ForgottenLtd and broader ExcludedUK movements.
At least limited company directors can furlough themselves though and get something.
For many, this won’t come close to their normal income, as they often pay themselves low salaries and more in dividends, but it is a bit.
For the sole traders, who can’t cut their tax bills with dividends and paid income tax on all those £50,000-plus profits, there isn’t even that option.
It’s not too late for Rishi Sunak to step in and help those affected, but you have to question now whether he ever will.
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