Coronavirus: Self-employed feel abandoned by Government

There are more than five million self-employed people in the UK, from window cleaners and driving instructors to designers and IT consultants.

According to the Office for National Statistics, in 2019 Brighton and Hove had 29,500 self-employed people, representing about a fifth of the working population of the city.

While many operate as sole traders, nationally some two million work as private limited companies. This structure allows an entrepreneur to keep their personal assets and finances – such as their home – separate from the business itself.

“I have put in huge amounts of hours and energy to create a successful long-term business which makes me feel proud,” said Sue Popper of Joogleberry Acts, an entertainments agency in Brighton. “I made the choice to have a limited company based on advice from my accountant, but it was also the preferred structure for my clients. .

“My business has been going from strength to strength every year but in one fell swoop last month I lost all this year’s preparation, planning and confirmed bookings, and my income has dropped to zero.

“When Chancellor Rishi Sunak made his announcement last week my heart plummeted as I realised that as a sole director of a small limited company I was in a group that was not going to be mentioned at all. The Government said they would be helping everyone so why not me? It made me feel abandoned and undervalued.”

A limited company must pay corporation tax to HMRC on any profits, currently charged at 19 per cent. On top there is dividends tax.

Many self-employed take the basic personal allowance of £12,500 as an annual salary and then top up their wages from their limited company with a dividend which for 2020 is taxable at an average rate of 18 per cent.

If applicable, limited companies also have to add VAT to their goods and services, also payable to HMRC on a quarterly basis at an average rate of 20 per cent.

The basic rate of general UK income tax is 20 per cent for income from £12,500 to £50,000.

Yet despite the personal advantages of self-employment and the marginally more favourable personal tax situation, there are significant risks.

“We always have the risk of a lack of earnings security and unreliable work should there be an economic downturn or a period of sickness,” said IT consultant Tom Richardson.

“As a self-employed person we have few employment benefits such as sick pay, holiday pay, training, pension contributions or death in service benefits.”

Until recently, the self-employed were fêted by successive governments as the bedrock of the economy and the drivers of innovation.

“Small businesses can be quick and nimble to move into markets, make changes and adapt but it takes a lot of hard work for very little reward at first,” said Catherine Anderson, who works as a self-employed consultant in procurement.

“We don’t necessarily have the finance to cover all eventualities, we must risk our own money and gamble on our own ability to judge markets and potential clients well.

“When your market disappears overnight, you have no protection from losing not only your work but also any other security you put up against the business.”

Helen Taggart, of Metrodeco tea house in Kemp Town, said: “There is a weird assumption anyone with their own business must be ‘raking it in’ when most times the opposite is true.

“The tax benefits should be there to encourage people to make a go of their dreams. All big businesses have to start somewhere and can eventually – hopefully – create job opportunities themselves which then go on to hugely benefit the economy.

“It seems at the moment that the self-employed are seen as the dirty shoe of the economy.”

Many self-employed people feel they are being treated as second-rate citizens compared with the 80 per cent wage subsidy being offered to those furloughed from regular employment. As this group has traditionally taken a combination of salary and dividends, they are not entitled to the Self-Employment Income Support Scheme.

Zoe Cunliffe works alongside her husband Myles at Mixology Group in Hove.

She said: “As we run an event company and training school we have seen our business come to a standstill since Covid-19 was first talked about in the UK and people were advised not to gather at events.

“As directors we are not covered with the self-employed retention scheme and our dividends are not taken into account as salary.

“If we were to furlough one of us we would only be entitled to £575 per month as it would be based on our basic salary and we would not be allowed to work on our business planning, so would come out of this without a business at all.”

Jane Ringe is a self-employed project manager and interior designer based in Hove. She works alongside many tradespeople in the city on home and commercial renovations.

She said: “I’m thinking specifically about trades I come across in my line of work such as handymen, locksmiths and cleaners hired by domestic householders for jobs that may only be for a couple of hours.

“This group typically charge an hourly rate which covers their salary and taxes but with little or no surplus that could be put towards profits.

“There will be many self-employed workers who earn enough to support themselves but because they make little or no profits do not qualify for the Self-Employed Income Support Scheme, meaning Universal Credit is their only support mechanism.”

Kate Alleston runs Market Restaurant in Western Road, Hove.

She said: “To have been ignored by the bail-out schemes is disappointing and means we have some challenging months ahead when our only real option is to get into personal debt, which is worrying as no one knows how business will be when we come out the other side of this.

“Many of us will benefit from the Small Business Grants, which is super, but this will only make the difference to whether we have a fighting chance of reopening and doesn’t – and indeed can’t – benefit us personally in any way.

“You can’t withdraw dividends if there is no profit made.”