Coronavirus: government support for individuals during the first lockdown

The Covid-19 pandemic has caused major social and economic disruption. Following the announcement in March 2020 of a ‘lockdown’ across the four nations of the UK, the government put in place a series of financial measures to mitigate the short-term effects of these restrictions.

The financial measures announced by the government during the first lockdown fell broadly into two categories – those aimed at business and those aimed at people. In addition to this direct support, the Bank of England, the UK’s central bank, took action to help ensure businesses had access to low-interest loans and to ensure that the markets for UK government bonds continued to function. Read about the support that was available for businesses, and the actions taken by the Bank of England.

At the start of the first lockdown, it was not clear how long such restrictions would last. Each of the four nations has faced further restrictions since the easing of the first lockdown in the summer of 2020. This has led to many of the support measures being extended. Read an up-to-date summary of support currently available for individuals.

What did the government do to support individuals?

The government supported people who might fall ill, lose income or risk losing their job by:

• subsidising the wages of employees who were unable to work due to the lockdown
• making payments to self-employed people
• increasing the generosity and ease of access to statutory sick pay for those required to take time off work due to Covid-19
• increasing the generosity of benefits for those out of work or on low incomes.

Support for employees

On 20 March, Sunak announced the Coronavirus Job Retention Scheme, aimed at encouraging employers to keep workers on their payroll, even if there was no work for them to carry out during the Covid-19 outbreak. The government paid businesses up to 80% of the payroll costs for workers who were furloughed (including wages, employer National Insurance contributions and pension contributions required by the government’s auto-enrolment policy). Payments could be backdated to 1 March 2020 and were capped at a maximum contribution to wage costs of £2,500 a month for each worker.

This scheme was initially put in place for three months but has since been extended until April 2021. Employers were required to pay National Insurance contributions and pension contributions in August, 10% of wages in September and 20% of wages in October. The scheme also allowed for employees to return to work part-time from 1 July, with the government continuing to pay some of workers’ wages for the remaining lost hours.

Support for self-employed people

For self-employed people, the government announced a similar scheme to that available for furloughed employees, although self-employed people did not need to show they had lost income due to Covid-19 and could continue working while receiving government support.

For the first three months of the scheme, from March to the end of May 2020, self-employed people could receive 80% of their average monthly profits over the previous three years (or shorter if they have not been trading that long) up to a cap of £2,500 per month. In the second phase of the scheme, covering the three-month period from June until the end of August 2020, they could claim 70% of their previous profits as a second lump sum, capped at £6,570 in total. Self-employed people were eligible if they were:

• still trading (or would be in the absence of Covid-19)
• filed a tax return for the 2018/19 tax year
• received more than half of their income from self-employment
• had profits below £50,000 in 2018/19, or on average between 2016/17 and 2018/19

The scheme was especially generous because those who qualify could receive the grant even if they continue to trade. However, the scheme has also been criticised because of its gaps, with a number of newly self-employed people, as well of those for whom self-employment made up less than half of their normal income, did not qualify.

Self-employed people could apply for the first scheme until 13 July and could apply for the second scheme without having applied for the first. Payments were backdated to the beginning of March for the first scheme, and the beginning of June for the second. While waiting for the scheme to pay out, these people could apply for loans under the CBILS or individuals in low income households could apply for Universal Credit.

Enhanced sick pay entitlement

For people entitled to statutory sick pay (SSP)

Employees with sufficiently high earnings can normally claim SSP from the fourth day of any illness. The rules were amended so that anyone having to take time off work due to Covid-19 qualified for SSP from the first day of absence. This applied to anyone who had to take time off due to Covid-19, whether through illness or self-isolation. SSP is worth £94.25 per week for up to 28 weeks.

For people not entitled to statutory sick pay

Low earners (those on less than £118 week) and the self-employed do not qualify for SSP. This group would ordinarily be able to claim employment and support allowance (ESA) if they are unable to work due to illness.

However, this is normally only available from the eighth day of illness. The government announced that this would also be available from the first day for those affected by Covid-19. ESA is worth £74.10 per week for the first 13 weeks.

Extra support for those on low incomes or without work

Universal Credit

Universal Credit payments were increased by £1,040 a year. The government planned for this uplift to last 12 months (with the same increase applied to the basic element of tax credits).

For the self-employed, the ‘minimum income floor’ (MIF) in Universal Credit ceased to apply for the duration of the pandemic. Ordinarily the MIF means that – for the purposes of assessing benefit entitlement – self-employed people are assumed to earn as much as they would in a full-time job paying the minimum wage, even if their income is lower than that. The chancellor said that removing the MIF meant self-employed people were entitled to receive an income from Universal Credit equal to the income from SSP that employees receive.

Housing benefit

The government also offered more generous support to meet rent payments for those who received housing benefit, by increasing the local housing allowance. This increase meant that renters receiving housing benefit got an amount that was enough to cover the cheapest 30% of properties in their area.

Other support for households

The chancellor also allocated £500m to a hardship fund to be used by local authorities to support vulnerable people. The government’s guidance recommended that the bulk of this grant be delivered in the form of reductions in the amount of council tax that people owed. Local councils were given discretion over how to allocate any remaining funds. People who paid tax via self-assessment – mainly but not exclusively the self-employed – were also given an extra six months to make their next payment for self-assessment income tax. The next payments, which were due at the end of July 2020, were deferred to the end of January 2021.

The government and the Financial Conduct Authority also encouraged mortgage lenders to offer payment holidays for people who were in financial distress due to Covid-19. The government encouraged landlords to do the same for renters. The emergency Coronavirus Act included provision for tenants to be given three months’ grace before being evicted, and on 22 May, the government announced a further three-month extension of this grace period.