A new payment scheme will launch on Tuesday 1 September giving people on low incomes in receipt of Universal Credit or Working Tax Credit plus their contacts up to £182 (£13 a day) if they need to self-isolate.

It will operate in areas with high rates of coronavirus and the trial will start in Blackburn with Darwen, Pendle and Oldham.

The health secretary said eligible individuals who test positive with the virus will receive £130 for their 10-day period of self-isolation. Other members of their household who have to self-isolate for 14 days will be entitled to a payment of £182.

Non-household contacts advised to self-isolate through NHS Test and Trace will also be entitled to a payment of up to £182, tailored to the individual length of their isolation period.

Health secretary, Matt Hancock, said: “The British public have already sacrificed a great deal to help slow the spread of the virus. Self-isolating if you have tested positive for Covid-19, or have come into contact with someone who has, remains vital to keeping on top of local outbreaks.

“This new payment scheme will help people on low incomes and who are unable to work from home to continue playing their part in the national fight against this virus.

He added that payments will be provided within 48 hours of the eligible individual providing the necessary evidence. Individuals will be asked to provide a notification from NHS Test and Trace and a bank statement.

If the scheme is successful in the trial areas, it will be rolled-out to other areas with a high Covid-19 incidence. The new payments won’t affect existing benefit claims and will be made to both employed and self-employed workers.

‘Postcode-based Job Retention Scheme would be better’

Karl Handscomb, senior economist at the Resolution Foundation, said this is a welcome step to provide additional financial support to workers who are asked to self-isolate in the event of local lockdowns but this is a “partial response”.

He said: “Up to four million workers in low-income families could be entitled to this new support, with our analysis suggesting a worker earning around £370 a week would have 90% of lost income replaced by a combination of a higher Universal Credit payment and this new support.

“However, this is a very partial approach, with seven-in-eight workers not entitled to this help because their households do not receive benefits. Most obviously, middle and higher earners will miss out, but so too will some low-paid workers with low housing costs and no children.

“The government will need to go further in the event of more severe lockdowns this autumn, with a postcode-based Job Retention Scheme offering the best way forward.”