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Covid-19: Help for the Self Employed

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After some waiting the Chancellor has now announced the help that will be made available to the self employed besides that he has already announced such as Universal Credit and mortgage holidays. Here are the details:

Self Employed Income Support Scheme

This scheme will allow you to claim a taxable grant worth 80% of your trading profits up to a maximum of £2,500 per month for the next 3 months. This may be extended if needed.

Who can apply

You can apply if you’re a self-employed individual or a member of a partnership and you:

  • have submitted your Income a Tax Self Assessment tax return for the tax year 2018-19
  • traded in the tax year 2019-20
  • are trading when you apply, or would be except for COVID-19
  • intend to continue to trade in the tax year 2020-21
  • have lost trading/partnership trading profits due to COVID-19

Your self-employed trading profits must also be less than £50,000 and more than half of your income come from self-employment. This is determined by at least one of the following conditions being true:

  • having trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income
  • average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period

If you started trading between 2016 and 2019, HMRC will only use those years for which you filed a Self-Assessment tax return and use data on 2018-19 returns already submitted to identify those eligible.

How much you’ll get

You’ll get a taxable grant which will be 80% of the average profits from the tax years (where applicable):

  • 2016 to 2017
  • 2017 to 2018
  • 2018 to 2019

To work out the average HMRC will add together the total trading profit for the 3 tax years (where applicable) then divide by 3 (where applicable), and use this to calculate a monthly amount. It will be up to a maximum of £2,500 per month for 3 months.

When will I receive the grant ?

HMRC will pay the grant directly into your bank account, in one installment which is not anticipated until June and backdated for 3 months.

For example if your profits on which you were taxed were:

2016/17    £25,400

2017/18    £27,200

2018/19    £23,650

The average would be £25,416. This would be divided by 12 to arrive at a monthly figure of £2,118.

80% of this monthly sum, ie 1,694 would be used to calculate this taxable grant and be payable as one lump sum in June. You would therefore receive £5,083.

Please note that the average is worked out against what information HMRC have for up to 3 years. So if you have been self employed for one or two years the averaged profits will be used. For example:

Two years self employment, 2017/18 and 2018/19 with profits of £20,200 and £25,000 the average would be £22,600.

One years self employment for 2018/19 with a profit of £20,200 the average would be £20,200

How to apply

Please note that you cannot apply for this scheme yet but HMRC will contact you if you are eligible and invite you to apply online. As your Accountant I have no input as regards this scheme or your past declared profits and cannot influence HMRC in any way. 

Combating scams or fraud

This scheme will be administered only via the GOV.UK website and no other means so if someone texts, calls or emails claiming to be from HMRC, saying that you can claim financial help or are owed a tax refund, and asks you to click on a link or to give information such as your name, credit card or bank details, it is a scam.

After you have applied

Once HMRC has received your claim and you are eligible for the grant, they will contact you to tell you how much you will get and the payment details. If you claim tax credits you’ll need to include the grant in your claim as income.