The UK’s self-employed are falling through the Covid-19 policy net

Money Advice Trust chief executive Joanna Elson OBE responds to a gap in the Government’s policy response to Covid-19, as self-employed callers to the charity’s Business Debtline service report incomes are falling dramatically.

Coming at the end of a week that is without precedent in living memory, it is similarly difficult to understate the scale of the measures announced by the Chancellor Rishi Sunak last night. Providing direct support for jobs and wages, injecting £7 billion into the welfare system and deferring tax payments are all big, bold moves that will prevent more people from falling into financial difficulty in the tough months ahead. 

These measures could make all the difference, at a time when household finances are being devastated by the Covid-19 crisis.

There has been less focus so far on measures that could help people who are already in problem debt – such as suspending debt collection and enforcement, and offering payment holidays on key bills.  We will continue to focus on these issues as we talk to Government about our joint Money Advice Trust and StepChange Debt Charity rescue package proposals in the coming days.

Meanwhile, self-employed incomes are falling like a stone

Equally pressing is the need for the Government to take urgent action to support the self-employed – whose incomes, as we are seeing hour by hour at Business Debtline, are being hit extremely hard by the impact of Coronavirus.

Electricians, plumbers, taxi drivers – all of these self-employed trades and more are losing out the most financially from the impact of widespread social distancing.  These are people who cannot work from home – and their businesses rely on the custom of people who now staying at home, in line with public health guidance on social distancing and self-isolation, in ever greater numbers.

Our Business Debtline advisers – who left our Birmingham office on Friday as we switch to continuing our services from advisers’ own homes from next week onwards – are already hearing harrowing stories.  Many self-employed callers are seeing their businesses hit harder and more quickly than they could ever have imagined. 

In the last few days, almost every single call and webchat enquiry to Business Debtline has involved the impact of the outbreak – with the income of some callers falling like a stone, and others collapsing to zero.  We are expecting what could be the biggest surge in demand in Business Debtline’s history in the near future.

Caught between ‘business’ and ‘household’ policy

Despite some action underway, self-employed people are the group that will benefit the least from the Government’s response to the financial impact of Covid-19 so far. 

The team here at the Money Advice Trust have been growing more concerned by the day that the self-employed – which make up the majority of businesses we help at Business Debtline – will fall through the gaps in the emergency netting now being put in place.  They are, perhaps, caught in the middle between the government’s apparent ‘businesses then households’ approach over this last, dizzying, week.

Measures to support businesses came first, including help for what the Chancellor said were “700,000 of our smallest businesses” in the form of £3,000 grants (since increased to £10,000).  However, eligibility is based on Small Business Rate Relief and Rural Rate Relief, so this will only help businesses who have premises like newsagents, small shops and cafes. This help is badly needed by these businesses – but sole traders and others without premises urgently need support too.

Meanwhile on the ‘household’ end of the Government’s response, last night’s guarantee to support 80% of people’s wages if they cannot work will only benefit people who are employed, not those who work for themselves.  

With self-employed people having already seen their income plummet, they are rightly asking what help there is for them, and why they seem to be falling through the gap in the Government’s current action. If left unfilled, or at least narrowed, this gap will rightly be seen as unfair by the millions of self-employed people who make a huge contribution to the UK’s economic and social fabric.

The needs of many self-employed people are falling between these two sets of policy responses – and we need to see further, immediate help for them right away.

Some action has been taken – but not enough

As the nation listened to the Chancellor at last night’s press conference they will have heard him say that his new measures will “strengthen the safety net” for the self-employed – and it’s true that some, very welcome action has been taken.

The Minimum Income Floor in Universal Credit has been removed, ensuring that self-employed people now have the same access to Universal Credit as those in employment.  This is something we have long called for as a permanent measure – and was one of our rescue package proposals published with StepChange this week.  Combined with a higher Universal Credit standard allowance, this in effect means self-employed people on Universal Credit will be able to access the equivalent of Statutory Sick Pay.

Income Tax self-assessment payments due ‘on account’ this year will also be deferred until January 2021, which will give an element of short-term relief for some.

These measures add up to a lot – and we congratulate the Government for implementing them. They fall well short, however, of the kind of support being offered to people in employment.  While employees affected by Covid-19 can be reassured almost all of their incomes will be guaranteed by the Government, the self-employed will have only benefits to fall back on, and some tax forbearance to see them through.

Covid-19 does not discriminate between the employed and self-employed – and to the greatest extent possible, nor should the Government’s policy response.

Some options for Government to consider

It may be that further action is being considered to support people who are self-employed through Covid-19 – and everyone concerned, including Ministers and officials across Whitehall, are doing their very best to develop and implement policy at extraordinary speed to deal with this crisis.

Here are some options that could be explored:

  • There could be immediate, targeted cash payments to self-employed people who have lost work as a result of the economic impact of Covid-19.  As IPSE has pointed out, in Norway they are doing this exactly this, with payments based on 80% of average income over past 3 years.  If HRMC data could be used in the same way, this would come close to effectively extending the Chancellor’s new incomes guarantee to the self-employed.  This would be an enormous administrative challenge – but that is nothing new in this national crisis so far, and we hope this is being considered.
  • A more limited option would be, as we recommended earlier this week, the creation of a dedicated Covid-19 hardship fund for sole traders and other self-employed people – to at least ensure that some support is available.  This should be separate to the main Covid-19 hardship fund for individuals affected, with full funding and guidance for local authorities on distribution.
  • Additional and specific HMRC forbearance targeting the self-employed would be beneficial for the duration of the crisis, over and above the dedicated helpline and new Time To Pay changes – including pro-actively suspending all debt collection activity on self-employed taxpayers’ debts to HMRC.

We will be discussing these issues further in the coming days, as the Government continues to evolve its policy response to Covid-19.

In the meantime, we are continuing our work at pace to transform our services to support all our advisers to work from home – so they can help the growing number of people whose finances are being devastated in this national crisis.

The Money Advice Trust and StepChange Debt Charity have proposed a rescue package for household small business finances affected by Covid-19, available here

For information and advice for small business owners, see Business Debtline’s Coronavirus factsheet at

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