Exclusive: New wave of £7,500 grants for self-employed – but scheme may be scrapped as restrictions end

Ben Riley-SmithTue, 23 February 2021, 9:43 pm

Rishi Sunak has previously floated the idea of the grants being capped at 20 per cent, not 80 per cent, of profits when the economy picks up - Yui Mok/PA
Rishi Sunak has previously floated the idea of the grants being capped at 20 per cent, not 80 per cent, of profits when the economy picks up – Yui Mok/PA

Millions of self-employed workers are due to be offered grants of up to £7,500 in next week’s Budget, but the Chancellor is considering dropping the scheme from May.

The Telegraph understands that people who meet the criteria can claim 80 per cent of average monthly profits up to a maximum of £2,500 a month.

The terms for the fourth round of grants, run through the Self-Employment Income Support Scheme (SEISS), are yet to be announced but have been pencilled in by the Treasury.

The grants will cover February, March and April. The move reflects the fact that many self-run businesses will have to remain shut during that period.

However, the grant scheme could be ditched or drastically scaled back from May, given that lockdown restrictions are due to be fully lifted by late June.

Rishi Sunak has previously floated the idea of the grants being capped at 20 per cent, not 80 per cent, of profits when the economy picks up. It is also understood that more targeted measures than a widely available grant could be adopted from May onwards.

A three-month extension to the stamp duty holiday is also reportedly contained in the Budget. The measure which applies to properties worth up to £500,000 was introduced last July, saving eligible buyers up to £15,000 in tax. Mr Sunak is now poised to extend the holiday until the end of June which could cost as much as £1 billion. He may also increase the rate of corporation tax, it was reported on Tuesday night.

Andy Chamberlain, director of policy at the Association of Independent Professionals and the Self-Employed (IPSE), welcomed the proposed terms for the new grants.

He said it was “good news” that sizable grants would be offered for the next three months but cautioned against pulling support from self-employed workers too soon.

“Throughout the coming months, where there are still restrictions on the economy and businesses, Government must ensure there is proportionate support for this country’s freelancers and self-employed,” Mr Chamberlain said.

In the run-up to the Budget, which will be announced next Wednesday, the Government has stressed that it will continue to support those worst affected economically by the lockdown. Boris Johnson has talked about how the Government will “put our arms around” people who need help. Mr Sunak has made “jobs, jobs” jobs” his priority.

The Government is expected to extend the furlough scheme and business rates holiday for the retail, hospitality and leisure sectors, both possibly until around June.

The temporary £20 per week uplift in Universal Credit is also set to be continued, with a six-month extension among the options under discussion.

SEISS was designed last year as a way to ensure that people who run their own businesses but took a major financial hit during Covid-19 lockdowns received help.

The grants, which do not have to be paid back, have proved exceptionally popular but also expensive for the Treasury.

The first grants saw 2.6m people claim a total of £7.6bn. The second was claimed by 2.3m people at a cost of £5.9bn. The third grant saw 1.9m people claim £5.4bn.

That means the fourth grants are likely to again cost the Treasury billions of pounds. Adopting a £7,500 maximum for a three-month period matches the rules for the last round of grants.

The scheme has critics who see it as a blunt tool. People have to declare that they have taken a business hit from the Covid-19 pandemic but do not need to provide proof.

That means there are concerns, including in quarters of the Treasury, that the money may not be the most effective way of helping self-employed workers worst hit by the pandemic.https://www.youtube.com/embed/jQxxzIk7cYs?enablejsapi=1&modestbranding=1&origin=http://www.telegraph.co.uk&rel=0

Others see the scheme as not going far enough. Because the grants are calculated on past tax returns, anyone who first became self-employed after spring 2019 is not covered.

Anyone who has trading profits of more than £50,000 is not allowed a grant, creating a sharp cliff face for anyone earning around that amount.

Mike Brewer, deputy director of the Resolution Foundation, said: “It’s right that we continue to compensate self-employed hairdressers and beauty technicians, for example, because they can’t run their businesses during the current lockdown.

“The case for giving those people grants when we have opened up is much less clear, even if their businesses are not as strong as they were before the pandemic. That leaves them in the same position as other companies.”

A Treasury spokesman declined to comment.