In his announcement last week, Rishi Sunak outlined a scheme which will see all those who are self-employed – including members of partnerships - eligible to claim grant funding of up to £2,500 for three months.

This will, of course, be hugely welcome news for a group of workers which has been excluded from the financial support measures put in place by the Chancellor until now.

To be eligible for the funding, the individual must be genuinely self-employed, however there is no discrimination against any specific trade and being an off-payroll worker on IR35 will not discount anyone from being eligible.

Although the grants will be taxable and may not get paid until June, the funding could provide a lifeline for many self-employed workers who are currently prevented from working, whether through self-isolation or illness.

While the headline news is good news for most self-employed people, the devil is in the detail and some will not qualify for the funding.

For example, only those who were self-employed in 2018/19 will be eligible, meaning that the newly self-employed will miss out. In this situation, those ineligible for the scheme will likely have no other option but to apply for Universal Credit or apply to their Local Authority for a Hardship Fund.

There is also no support available for those individuals who pay themselves through dividends, rather than salary, and the grants are only accessible to individuals whose trading profits are less than £50,000, or average profits for the last 3 years are lower than the £50,000 threshold, while there is no cap for furloughed workers.

While this will be a relief for many people, the Chancellor has made it clear that there will be a sting in the tail. Once normality resumes, the tax system will very likely change for the self-employed, who currently pay less national insurance than their employed counterparts. These changes have been on the cards for some time so it shouldn’t come as a surprise if, or when, the Chancellor decides to level the rate of national insurance contributions payable by self-employed people.

Many individuals will no doubt have questions about how they go about accessing the grant funding. The good news is that HMRC is due to contact all eligible individuals directly to set the wheels in motion. However, it is essential that all tax returns are filed and up to date, including the return for 2018/19. Anyone who hasn’t done this yet can take advantage of a four-week amnesty scheme to submit the documentation and still be eligible for the grant.

In summary, the majority of self-employed people can breathe a sigh of relief for now. However, it would still be advisable to speak to advisers wherever possible, to understand the level of grant likely to be awarded, and some of the wider tax implications. Having full knowledge of the money coming their way, and how the tax landscape might change in the future, will put them in a better position to manage their finances and protect their families and loved ones in the months ahead.     

David Ansdell is a senior tax manager at top 20 accountancy firm Menzies LLP. He has nearly 20 years of experience and specialises in personal tax matters. He is a member of the Chartered Institute of Taxation, and Fellow of the Association of Taxation Technicians.