The federal government should assist the self-employed who’re excluded as a result of 50% revenue rule

1.3 million people have been excluded from Covid support because less than 50% of their income comes from self-employment

The government should act to help self-employed who are excluded from Covid support as more than 50% of their income comes from other countries.

This deliberate exclusion is unfair and disproportionately attacks women on modest incomes, says the influential Institute for Financial Studies (IFS).

This is the second time in so many days that the IFS has dealt with the dispute over the self-employed. Yesterday the IFS published a report calling on the self-employed to pay more taxes.

> See also: You should submit your tax return by January 31st despite the HMRC extension

Over a million self-employed people whose income is less than 50% from self-employment have been excluded from the Self-Employment Income Support System (SEISS).

The IFS says that it is obviously unfair that someone who declares a 51 percent gain from self-employed income can claim the maximum while those who claim 49 percent of the profit get nothing.

SEISS offers quarterly payments equal to 80 percent of pre-pandemic profit, up to a cap of £ 7,500 (per quarter) for eligible self-employed persons affected by the pandemic.

The program is expected to cost £ 28 billion by April 2021 and provide emergency Covid payments to at least 2.6 million people. At least three quarters of the potentially eligible self-employed have made use of SEISS.

However, more than half of the 1.3 million excluded on less than 50 percent of their self-employed income have a total personal income of less than £ 25,000. That means their self-employment profits are modest – more than half have profits below £ 5,000 a year. And 45 percent of those affected are women, compared to only 35 percent of those supported by SEISS.

Eliminating injustice above the 50% self-employed income threshold would cost the government between £ 500 and £ 800 million per quarter, with average quarterly payments between £ 600 and £ 1,000 per person.

> See also: Thousands of self-employed mothers are missing out on Covid-19 SEISS payments

A further 225,000 self-employed are now excluded from SEISS as their annual profit is over £ 50,000.

Again, says the IFS, there is “clear injustice” in the way these people are excluded. If you claim a win of £ 50,000 you can claim the full SEISS while someone with a win of £ 50,001 gets nothing.

They could also be borrowed over three months at a cost of £ 1.3 billion – or less if support for higher earners were reduced.

This equates to around £ 90 billion that the government is expected to spend on vacation and self-employment.

IFS Director Paul Johnson told the Today program that for some people their self-employment salary “is very low, for some it is an important part of their income” and that losing everything “causes serious trouble”.

The money needed to support the excluded is “a very small percentage of the self-employment system itself and 1 percent of the self-employment system and the vacation system combined”.

“The Treasury Department drew a line, in a sense very generous for most, and then simply set a full cut-off for other groups,” he said.

Expanding it “would be relatively cheap and would certainly help some people who are clearly in serious trouble”.

He told the BBC: “It may be a minority, but it has certainly faced some people with real, big problems. If your income goes from £ 55,000 to zero through no fault of your own, you are clearly in big trouble. “

further reading

National Small Business Blocking – What Support is Available?

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