Authorities should assist self-employed excluded resulting from 50% earnings rule
The government should act to help self-employed excluded from Covid support because more than 50% of their income comes from elsewhere.
This deliberate exclusion is unfair and disproportionately attacks women on modest incomes, says the influential Institute for Fiscal Studies (IFS).
This is the second time the IFS has waded into the argument about the self-employed in as many days. Yesterday, the IFS published a report calling for the self-employed to pay more tax.
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Over a million self-employed people who have less than 50% of their income coming from self-employment have been excluded from the Self-Employment Income Support Scheme (SEISS).
The IFS says that it is manifestly unfair that someone who declares profits of 51 per cent from self-employed income can claim the maximum, while those who claim 49 per cent of profits get nothing.
SEISS provides payments once per quarter worth 80 per cent of pre-pandemic profits up to a cap of £7,500 (per quarter) for eligible self-employed workers who have been adversely affected by the pandemic.
The scheme is expected to have cost £28bn by April 2021, making emergency Covid payments to at least 2.6m people. At least three-quarters of the potentially eligible self-employed population have taken advantage of the SEISS.
However, more than half of the 1.3m excluded with less than 50 per cent of their income coming from self-employment have total personal incomes of under £25,000. Which means their self-employment profits are modest – more than half have profits of under £5,000 per year. And 45 per cent of those in this situation are women, compared with just 35 per cent of those supported by SEISS.
Remedying the unfairness over the self-employed 50% income threshold would cost the government between £500m and £800m per quarter, with average quarterly payments of between £600 and £1,000 per person.
>See also: Thousands of self-employed mothers miss out on Covid-19 SEISS payments
Meanwhile, a further 225,000 self-employed people are excluded from the SEISS because their annual profits are higher than £50,000.
Again, says the IFS, there is “clear unfairness” in the way these people are excluded. If you claim profits of £50,000 you can claim the full SEISS, while someone with profits of £50,001 gets nothing.
They could also be included at a cost of £1.3bn over three months – or less if support was reduced for higher earners.
That compares to around £90bn that the government expects to spend on furlough and self-employment.
IFS director Paul Johnson told the Today programme that for some people, their self-employment pay “is very small indeed, but for some it’s an important part of their income” and that losing it all is “creating serious hardship”.
The money needed to support those excluded is “a very small percentage of the self-employment scheme itself and 1 per cent of the self-employment scheme and the furlough scheme together”.
“The Treasury have drawn a line, in a sense very generously for most, and then just put a complete cut-off for other groups,” he said.
To extend it “would be relatively cheap and it would certainly help some people who are clearly in significant trouble”.
He told the BBC: “It may be a minority, but it’s certainly left some people with real, big problems. If your income goes down from £55,000 to nothing through no fault of your own, you are clearly in big trouble.”
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