The self-employment income support scheme (SEISS), which was due to close for new applications on 19 October 2020, will now remain in place until 30 April 2021 on similar terms as the new support scheme.
Sunak said this extension will support viable traders who are facing reduced demand due to COVID-19.
It will only be available to self-employed individuals who are currently eligible for SEISS and actively continuing to trade.
The extension will come in the form of two taxable grants, with the first covering 20% of average monthly trading profits, paid in a single instalment for the three months from 1 November 2020 to 31 January 2021, and capped at £1,875 in total.
The Government has said it will review the level for the second grant, which will cover the period from 1 February to 30 April, and “set this in due course”.