Policy background Self-isolation support scheme payments
Lump sum payments of £500 are available to be claimed under separate schemes in England, Wales and Scotland for people who have been asked to self-isolate by the relevant authority who cannot work from home and will suffer financial consequences as a result (subject to the eligibility criteria of the relevant scheme). Payments are intended to provide additional financial support to those on low incomes so they can self-isolate and help stop the spread of coronavirus. The English scheme was piloted on a limited basis from 1 September 2020, then rolled out nationally from 28 September 2020. The Scottish and Welsh schemes began in October 2020.
	The schemes are administered by local authorities. Payments made under the schemes to employed people are earnings and liable to employee and employer Class 1 NICs. This means that local authorities would have to account for and potentially deduct the value of employee NICs from any payments made. Additionally, the employer would have to deduct Class 1 NICs on the gross value of the payment received by their employees under the schemes. This would result in administrative and cost burdens on local authorities and on employers. The Chancellor of the Exchequer therefore decided to make secondary legislation to ensure that these payments are not subject to Class 1 (employee and employer) and Class 1A (employer) NICs. The Class 1 and Class 1A NICs exemption in respect of employed people was achieved in regulations (S.I. 2020/1065 and 2020/1532) by exercise of the powers conferred by sections 3(2) and (3) and 10(9)(a) of the Social Security Contributions and Benefits Act 1992, using the existing power to disregard certain payments when calculating earnings liable to Class 1 NICs (for England in October 2020 and for Scotland and Wales in January 2021).
	The Act ensures equal treatment for the self-employed by exempting payments from Class 2 and Class 4 NICs. Payments made under the self-isolation support schemes generally fall to be taxed as trading income in respect of the self-employed and are taxed under Chapter 2, Part 2 of the Income Tax (Trading and Other Income) Act 2005 (ITTOIA 05). Class 4 NICs are payable on profits chargeable to income tax under Chapter 2, Part 2 ITTOIA 05 in the same manner as any income tax is chargeable in respect of those profits. Class 2 NICs are payable in respect of profits that are chargeable to Class 4 NICs.