Speedy delivery of universal credit and the Coronavirus Business Interruption Loan Scheme is vital to support the self-employed before June, says IFS

New report warns that a quarter of those eligible for the Self-employment Income Support Scheme will need financial help before the grant arrives

Speedy delivery of universal credit and the Coronavirus Business Interruption Loan Scheme is vital to support the self-employed in the run-up to grants from the Self-employment Income Support Scheme (SEISS) being issued in June, the Institute for Fiscal Studies (IFS) has said.

In a new briefing, Income protection for the self-employed and employees during the coronavirus crisis, the IFS highlights that the self-employed will receive more income protection from the SEISS than the employed will receive from the Coronavirus Job Retention Scheme (as the SEISS grant ‘replaces’ most of their income even if their business is only slightly affected). However, warning that the delay in paying the SEISS grant, which will retrospectively cover the three month period to June, will cause significant problems for self-employed workers who have limited amounts of cash available, the IFS says -

‘… it is important to ensure the quick delivery of other mechanisms for the self-employed to access cash in the short term, such as the Coronavirus Business Interruption Loan Scheme and universal credit. A quarter of self-employed people earning less than £50,000 a year do not have enough liquid assets (between themselves and any partner) to cover three months’ lost earnings, and 15 per cent do not have enough to cover a single month.’

NB - the IFS also highlights that the June grant payment to eligible self-employed claimants who have also claimed universal credit may reduce entitlement in future months due to the operation of the surplus earnings rules.

Elsewhere in its report, the IFS notes that many self-employed workers will be better off financially than if the COVID-19 crisis never happened -

‘People who would not be entitled to universal credit if their profits were 20 per cent below their historical average (ie if they were getting the monthly level of SEISS throughout, rather than as a single lump sum in June) are still able to claim universal credit now. So in total for the period before June, they receive both universal credit (now) and (retrospectively) 80 per cent of their historical earnings for three months: their total compensation is more than 80 per cent of their earnings.'

However, the IFS also estimates that more than 2 million of the 5.1 million people who have reported positive self-employed earnings may not benefit from the government’s COVID-19 income protection measures -

‘… some people running their own business are not fully protected by these schemes and will see significant income falls if their work dries up … these include those who get less than half their income from self-employment [an estimated 1.3 million], have historical profits above £50,000 [225,000], or set up their business in the past year [650,000], and those who work not through an unincorporated business (ie self-employment) but through their own company’

For more information, see Income protection for the self-employed and employees during the coronavirus crisis from ifs.org.uk