The nationwide shutdown prompted by Coronavirus (COVID-19) saw the government announce major changes to the benefits system to support the country through the crisis. Policy in Practice is working hard to keep organisations updated on the complex changes so they can maximise their Coronavirus response efforts, and we’ve responded to hundreds of questions about the Coronavirus welfare safety net from people who are worried about their financial situation.

Policy in Practice’s Head of Policy Zoe Charlesworth gave a comprehensive overview of these emergency measures in a recent webinar that was attended by over 750 organisations. As well as the policy changes, Louise Murphy, Senior Policy and Data Analyst for Policy in Practice, shared some of the most common queries we’ve received from hundreds of people, each with understandable concerns about their own situation.

Three new policy measures that make up the Coronavirus welfare safety net

The government made substantial changes to the benefits system to better support the millions of households facing a loss of income and potential unemployment due to the Coronavirus crisis and subsequent nationwide lockdown.

These new government schemes that make up the Coronavirus welfare safety net are historically unprecedented. The measures have no means testing and work almost like a Universal Basic Income (UBI) for those eligible. Unlike social welfare systems, however, where the power lies with the claimant, in the Job Retention Scheme it is up to the employer to apply for funds and to decide whether to furlough employees.

On its opening day alone, the Job Retention Scheme received over 140,000 applications from companies paying the wages of the equivalent of a million workers, whilst DWP says that in the 6 weeks to 12 April 2020, they received over 1.8 million declarations to Universal Credit. This is almost 5 times higher than the number of declarations received from people in the same period last year.

1. The Coronavirus Job Retention Scheme

The government is offering employers grants to cover 80% of employees’ wages, up to £2,500/month per employee. Employers can use this grant to pay wages of employees, part-time, full time, or on a zero-hours contract, who then no longer work (known as being ‘put on furlough’). Employers can furlough employees that were on a PAYE payroll scheme on or before 19 March 2020.

  • This is a temporary scheme in place for four months starting 1 March 2020 but may be extended if necessary. Employees need to be furloughed for a minimum of three consecutive weeks. 
  • It is up to the employer whether or not to furlough employees. Employees on all types of contracts, including agency and zero-hour contracts, can be furloughed. Those with no recourse to public funds, apprentices, and students are also eligible.
  • Employers can also furlough employees who are shielding in line with public health guidance, (or who need to stay at home with someone who is shielding) as well as employees that are unable to work because of caring responsibilities.

See more details about the Coronavirus Job Retention Scheme on the government page here.

2. The Self-employment Income Support Scheme

This scheme will allow the self-employed to claim a taxable grant worth 80% of their trading profits, up to a maximum of £2,500 a month. It will be available for 3 months but may be extended. HMRC will invite claimants to apply in mid-May.

  • The scheme is open to those who have completed a self-employed tax return for 2018/19, who are currently self-employed, who intend to remain self-employed and who have lost money due to COVID-19.
  • Eligibility conditions include having self-employed income exceed half of your taxable income, and not having trading profits exceed £50,000 for either 2018/19 and during the average of the past three tax years (2016/17, 2017/18, and 2018/19).
  • The grants will be the average of 80% of the claimant’s trading profit calculated over the last 3 tax years, up to £2,500/month. The grant will be paid as a lump sum and count as business income for tax credit and UC purposes.

There is also other help available for the self-employed, including:

  • There is the possibility of deferring VAT (March – June 2020) and tax (July 2020), applying for business interruption loans, and small business grants (£10,000 for small business exempt from rates through Small Business Rate Relief or Rural Relief)

More details about the Self-employment Income Support Scheme can be found on the government page here.

3. Big changes in means-tested benefits: Universal Credit and legacy benefits

The government announced changes to some existing benefits in order to increase their generosity and bring them closer to pre-austerity levels.

  • To provide a broad increase in support, the basic allowance in Universal Credit and Tax Credits has been increased by £20/week. There was no change, however, to IS/ESA/JSA.
  • To help private renters, the cap on rental costs, which is called the Local Housing Allowance (LHA), was increased to align with the 30th percentile of local rents
  • To support the self-employed during the coming months, Universal Credit awards are based on actual income rather than a notional income (otherwise known as the Minimum Income Floor)
  • To acknowledge the fact that many people’s changes in working hours are temporary due to the crisis, Tax Credit hours and self-employed rules are suspended for 8 weeks

Other temporary changes have taken place, such as the suspension of DWP overpayment recoveries, changes to claiming procedures, and the suspension of sanctions and work capability assessments.

The increased support is welcome, but some gaps remain

With these three systems in place simultaneously, many more people are getting support through the Coronavirus crisis. There are still some gaps in coverage, however, where households are falling through. Those who are not eligible for the new COVID-19 response schemes should be directed to apply for Universal Credit, Council Tax Support, Free School Meals and food vouchers if eligible.

What are the main concerns for households?

Since the nationwide shutdown, we have received hundreds of queries about these new schemes and policy changes that make up the Coronavirus welfare safety net.

Q: How does the Job Retention Scheme work?

  • Zero-hours contracts: People on all types of contracts are eligible, as long as they are on a PAYE payroll. 
  • How the 80% is calculated: 80% of an employee’s salary will be based on the average of their regular monthly wages. It is 80% of their gross wage. Income tax, National Insurance, Student Loan repayments, and pension contributions will be deducted as normal. 
  • Working while on furlough: Workers who have been furloughed cannot do any work for their employer. However, they can work another job while on furlough, as long as nothing in their contract prevents them from working a second job.

Q: I’m shielding, what support can I claim?

  • Job Retention Scheme: Employers can furlough employees because they need to shield in line with public health advice, or if they live with someone who is shielding.
  • Statutory Sick Pay: If someone’s employer will not furlough them, or if they are not otherwise eligible for furlough, new guidelines state they can be eligible for Statutory Sick Pay (SSP). Claimants must earn an average of at least £120 a week to be eligible and be classed as an employee.
  • New Style ESA: is only an option for people who are self-isolating due to suspected Coronavirus in the household – not for people who are shielding.
  • Other benefits: Use the Benefits and Budgeting Calculator to see if you are eligible for other help, such as Universal Credit, Council Tax Support, or free school meals.

Q: I’m receiving working tax credit, will I be moved onto Universal Credit?

  • There is an 8-week reprieve for employed and self-employed: If households are having a temporary change in work hours/stopping trading due to Coronavirus, HMRC will ignore this change in working hours for at least the next 8 weeks. During this time, tax credits will continue to be paid based on their previous working hours. If this change becomes permanent, they will need to inform HMRC and move to Universal Credit if eligible.
  • Council Tax Support: Making a claim for Council Tax Support will not trigger a move to Universal Credit.
  • Some households may be better off moving to Universal Credit: The Benefits and Budgeting Calculator is a useful tool when comparing a household’s income between Legacy benefits and Universal Credit. When applying, it is important to also consider the five week wait and the future impact of the Minimum Income Floor for self-employed households.

Image of a benefits calculation from Policy in Practice's BetterOff Calculator showing the difference in a person's income between working tax credits and Universal Credit

Q: I don’t qualify for the self-employment scheme or any support, what help is there for me?

  • People with no recourse to public funds: cannot claim Universal Credit, but are eligible for the Job Retention Scheme/Self-employment Income Support Scheme and National Insurance contributory benefits, such as New Style JSA/ESA. Couples in which just one partner does not have recourse to public funds can apply for Universal Credit based on a single person entitlement. As of April 2020, EEA nationals will need settled status to claim Council Tax Support.
  • Students without parental support: cannot claim Universal Credit, but are eligible for the COVID-19 response schemes and National Insurance contributory benefits.
  • Self-employed who don’t qualify for the Self-employment Scheme: cannot claim New Style JSA, but may be eligible for Universal Credit and Council Tax Support if their savings are under £16,000 and other help like a business interruption loan.

There are some limited third sector organisations that these populations can turn to, but their options are limited.

Policy in Practice is here to help

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2 Comments. Leave new

  • 1) They’ve shout hospitality venues down so I can’t trade as a DJ until they re open, then social distancing rules will make that hard.

    2) I may have to move onto UC if they don’t review the 8 weeks rule.

    3) I can’t get the SE income grant because I’m only in my third year of training and did not register a profit till this year. Also, tax credits make up more than 50% of my income so i’d still not qualify.

    4) I’m probably entitled to about £10 of UC a week because of savings.

    So, compared to a person in PAYE employment I’m receiving bread line support through no fault of my own.
    Myself and other part time self employed people are pretty shafted.

    • Alannah McGhee
      April 28, 2020 09:03

      Hi Stuart,

      I’m really sorry to hear about your situation. it does sound like you’ve slipped through the net and aren’t eligible for any of the main types of support.

      Regarding the tax credits 8 week rule – we will update this page as soon as we hear any more about this. We would also encourage you to report your change of income to HMRC – this won’t force you over onto Universal Credit, but will mean that your future tax credit income might increase to take account of your current lower income.

      All the best.


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