Last night, the Chancellor made his announcement setting out the support package available for the self-employed and partnerships in response to the COVID-19 outbreak.
I have been taking a lot of calls, emails, texts and WhatsApps from clients, who understandably, are becoming increasingly worried about the situation.
The following article summarises the key points from the announcement below.
This new scheme will allow you to claim a taxable (meaning it is classed as income and should be declared as income on your tax return for the year ending 5th April 2021) grant of 80% of your trading profits up to a maximum of £2,500 per month for the next three months. The government may extend this time frame.
Who can apply for the scheme?
You can apply if you are a self-employed individual or a partner in a partnership and you:
- have submitted your tax return for the year ended 5th April 2019 (if you haven’t yet done this, HMRC are allowing an additional four weeks in which to get it submitted, meaning it must be submitted by 23rd April 2020)
- traded/worked in the tax year ending 5th April 2020
- are trading/working or would have been except for Covid-19
- have lost trade/work due to Covid-19
Your self-employed profits must also be less than £50,000 and more than half of your total income must come from self-employment. This can be with reference to at least one of the following conditions:
- having trading profits for the year ended 5th April 2019 of less than £50,000. These profits should account for more than half of your income
- having an average trading profit of less than £50,000 for the tax years 2016/17, 2017/18 and 2018/19. These profits should account for more than half of your total income.
If you have only been self-employed for a short period of time, HMRC will only use the data they hold for the years in which you have filed a Self-Assessment tax return.
HMRC will use the data on 2018/19 tax returns to identify those who are eligible.
How much will I get?
You’ll get a taxable grant which will be 80% of the average profits from the following tax years:
- 2016/17
- 2017/18
- 2018/19
HMRC will use the average profits from those tax returns to calculate the amount of the grant.
How do I apply for the grant?
First and foremost DO NOT PHONE HMRC!!
HMRC frontline staff haven’t, as yet, got a clue how it will work. HMRC will use their existing information to check who is eligible for the grant and write to them. It is expected that HMRC will contact all those who are eligible at the beginning of June 2020.
When can I get the grant?
HMRC will contact those who are eligible at the beginning of June, with the grants being paid immediately. The grants will be paid directly to the claimants’ bank account. The grants will be backdated to 1st March and will run for three months. This time frame may be extended, if necessary. In the meantime, the self-employed will still be able to claim Universal Credit and business interruptions loans.
How much will I get?
HMRC will give you a grant of 80% of your averaged monthly profits based over the last three years or £2,500 per month, whichever is the lower figure.
To work this out for yourself, you would need to add together your last three years profits, add them together and divide by 36 (assuming they are full years).
I haven’t been trading for three years…what should I do?
HMRC will average it out across the years that you have completed a tax return. If you have only just started self-employment, it looks as though you won’t fall into this scheme and will have to go down the Universal Credit route.
I’ve got other income from a property that I rent out… can I add this in?
From what has been announced so far, this scheme only covers profit from self-employment. Rental property income falls outside of self-employment so this cannot be added.
What about limited company directors & shareholders?
Company directors & shareholders who pay themselves a minimum salary through their company payroll scheme and then take dividends based on the company profit will not be eligible for this scheme.
Dividends are not classed as self-employment income. It’s possible that the director may be able to make themselves a furloughed employee and make a claim through the Coronavirus Job Retention Scheme,
BUT…the final details of this scheme haven’t yet been released by the government, therefore we don’t know if this scheme will include company directors. The information released last night is simply not aimed at the director/shareholder scenario, just the self-employed.
Beware of COVID-19 scammers
Finally, I would like to stress that if someone calls, texts 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.
If you would like to talk to one of our team now about any concern you may have regarding your taxes and finances in relation to the outbreak, please do not hesitate to contact the office on 02392 324587.
We will continue to update our website and Facebook page as developments unfold.
In the meantime, take the Governments advice and where possible stay home.
