Chancellor keeps some supports, but tax rises on the way

This article is part of
Guide to the Budget

Chancellor keeps some supports, but tax rises on the way
Credit: Jason Alden/Bloomberg via Fotoware

The Chancellor has introduced an additional fifth grant for the period of May to September 2021 for the self-employed.

This means the self-employed income support scheme (SEISS) ends in September 2021, coinciding with the end of the furlough scheme.

Richard Churchill, a partner at Blick Rothenberg, explains this grant means there are now two grant periods in 2021: the fourth grant covering February to April and the fifth grant period covering May to September. 

The grant continues to work in a similar way to before with claimants receiving 80 per cent of their average monthly profits capped at £2,500 per month. 

However for the fifth grant to claim at the 80 per cent level of monthly income your self-employed income must have fallen by over 30 per cent as a result of Covid-19. 

If your income has not fallen by 30 per cent then the allowance of 80 per cent of average monthly earnings is replaced with 30 per cent.

Previously to be eligible for the SEISS you had to have filed a 2018/19 tax return covering the period 6 April 2018 to 5 April 2019 recording your self-employment income as well as continue to be trading in 2019/20. 

This meant that anyone who was newly self-employed and had started their self-employed business after 5 April 2019 was not eligible for the first three grants under SEISS. 

The chancellor has now allowed those who filed a 2019/20 tax return recording their self-employment income to be eligible for the fourth and fifth grants meaning that the ‘newly’ self-employed are now eligible to claim the grants, bringing in an additional 600,000 people into scope.

But while the newly self-employed have now been captured there are still those that have been excluded. 

Churchill says for those self-employed who previously earned more than £50,000 there is a “cliff edge” whereby they are ineligible to claim the grants; this is estimated to impact over 200,000 people and surely a form of tapered relief would have been fairer. 

He adds: “Additionally those self-employed who had other income accounting for more than 50 per cent of their total income are excluded. 

“There is estimated to be over 1.1m people impacted by this restriction whereby if you received various forms of income say salary, pensions, rental and these accounted for more than 50 per cent of your total income including self-employment income, then no support has been available.”

Rishi Sunak also made another major announcement which businesses took note of.

The planned increase of corporation tax to 25 per cent from its current 19 per cent signifies a notable departure away from the government’s policy to tax in recent times and stops the trend of corporation tax steadily reducing year on year.

It is in contrast to the stance adopted by Sunak’s predecessors - both George Osborne and Lord Philip Hammond – who repeatedly cut the tax rate and underlined their commitment to further reducing this to 17 per cent as a way of remaining competitive across the G20.