IPSE (The Association of Independent Professionals and the Self Employed) represents the interests of the self-employed, consultants, contractors and freelancers. Starling Bank partners with IPSE to provide the freelance and contractor community with support on their business banking needs.

In this guest blog post, Tristan Grove, IPSE Head of Press and PR, outlines the help currently available to the self-employed.

Updated 27 October 2020: Since this article was first published, the support measures available have changed. For the latest information, it’s important to check the government website.

From the start, coronavirus has been not only a serious health crisis, but also an income crisis – and one that threatens the self-employed more than most. The problem isn’t just that self-employed people don’t get sick pay and so lose money if they are ill or have to self-isolate, it’s also that the unprecedented disruption to the economy and our daily lives means many are losing projects and contracts.

For several weeks, at IPSE, we have been inundated with calls and emails from members saying they are seeing their work dry up almost overnight.

To begin with, the government responded by allowing self-employed people to claim up to two weeks of statutory sick pay if they were ill or had to self-isolate, but that simply wasn’t enough. The self-employed are 15 per cent of the UK workforce – more than 5 million people – who contribute £305bn to the economy every year. IPSE mounted a national campaign to get this vital sector the support it needed. This included an open letter to the Prime Minister and a petition.

Support for sole traders

On Thursday 26th March, Chancellor Rishi Sunak announced a new support fund for freelancers and the self-employed. He said that the government would pay self-employed people who lost income because of the coronavirus crisis a taxable grant worth 80 per cent of their average monthly profits over the last three years – up to £2,500 a month. It would be open for three months to begin with, then potentially extended if necessary.

The scheme gives generous support to many of the UK’s sole trader self-employed – but it does not help a lot of other freelancers and contractors.

  • It is only open to freelancers who submitted a tax return for 2018/19. People who became self-employed more recently than that are not eligible at the moment.

  • There are also many people who work through agencies or on temporary contracts with different employers who are not covered. Although most of these people consider themselves self-employed, they are generally on worker contracts that do not have guaranteed hours. Because they are not technically self-employed, they are not covered by this scheme, and still do not seem to have access to extensive support. For these people, the government has opened up access to Universal Credit at an elevated rate equivalent to Statutory Sick Pay. This is a step in the right direction, but IPSE believes more needs to be done.

Limited companies

Many self-employed people, in everything from IT contracting to the creative industries, work through limited companies. They are essentially the director and sole employee of their own company.

Many choose this way of doing business on their own, but many others operate this way because it’s standard practice in their industry or accountants have advised them to.

The government’s Self-employment Income Support Scheme does not offer help to these people. IPSE is working hard on this, talking to the government and trying to come up with solutions that could work for limited companies. However, this is complex and may take time. Meanwhile, there is a range of different support measures sole limited company directors can draw on. They interact in complex ways, however, and navigating them is not easy.

The Job Retention Scheme

If limited company contractors find their work is drying up, they may be able to use the government’s Job Retention Scheme. This scheme is designed to make sure businesses are not laying off staff who may not be needed during the coronavirus crisis. The government essentially agrees to pay 80 per cent of the salary of staff who are “furloughed” by a company – up to £2,500. A limited company contractor could therefore apply for this and get 80 per cent of the salary they pay themselves.

This is complicated, however, by the way many limited company directors choose to pay themselves. In a lot of cases, instead of wages, they choose to have a minimal salary and pay themselves mostly through dividends. The Job Retention Scheme does not work for dividends and at the moment, it does not look like limited company contractors will be able to adjust their wages to make use of the scheme.

Business Interruption Loans

Another option for limited company contractors at the moment is the government’s Coronavirus Business Interruption Loan Scheme. Run through the British Business Bank, this essentially offers government-guaranteed loans of up to £5 million, interest and fee-free for the first 12 months.

This is the main support the government is offering for businesses. However, some self-employed people and contractors are reluctant to take on debt at a time of such uncertainty.

Other measures

There are a number of other measures that could help many limited company contractors as well as sole traders. A crucial one is that the government has deferred the next round of self-assessment tax payments until January 2021. The proposed changes to IR35 tax legislation in the private sector have also been deferred from April 2020 until April 2021.

Contractors can also call the new COVID-19 Helpline to make Time To Pay arrangements that allow them to defer HMRC Liabilities and agree a long-term payment plan. They may also be able to have HMRC late payment penalties and interest waived.

Overall, there is a generous package of support available for many sole trader self-employed, but there are still significant gaps. IPSE is working hard to find solutions to support limited company contractors and others. We want to make sure no self-employed people in need are left behind.

This is a rapidly changing situation: you can find regular updates on the advice and support available for the self-employed on the IPSE website

The above is intended as general information and does not constitute advice in any way. You should take independent advice if you have any questions about your specific circumstances.

Starling Bank is partnering with IPSE to provide the freelance and contractor community with support on their business banking needs. Starling business customer? You can join IPSE as a premium member with £100 off the price, essentially a free upgrade. Membership provides a wealth of business insurance products and access to tools and resources to help your business fly. Get in touch through our in-app chat for details on how to redeem.

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