Self-employed and COVID-19
Self-employed workers will be able to apply for taxable grants worth up to 80% of their average monthly profits to combat loss of income due to the coronavirus pandemic. The grants will be capped at £2,500 p/m (gross) but not everyone will be able to claim them – we've full details below on who's eligible when you'll get the money and what to try in the meantime if you're struggling.
The Chancellor confirmed that self-employed people across the UK will be able to get an amount equivalent to 80% of their income, based on their average monthly profits – again, up to a maximum of £2,500 a month.
Grants will start to be paid at the beginning of June, as a taxable lump sum covering March, April & May. And while the schemes initially to cover these three months, the Chancellor has said it may be extended.
These measures are expected to apply to about 95% of those who earn the majority of their income from self-employment. But a significant number won't be able to apply for any support at all from the scheme. This includes those with average annual trading profits (loosely your taxable profits) of £50,000 or more and those who have become self-employed since April 2019 and so haven't filed a tax return yet.
Who will be eligible for the scheme?
To apply to the new Self-Employment Income Support Scheme, the following must apply:
- You must earn more than half of your total income from self-employment. This must have been the case for either your 2018/19 tax return or the average of your last three years' tax returns: 2016/17, 2017/18 and 2018/19 tax returns (or both).
- Your average annual trading profit must be less than £50,000. This is essentially a 'cliff-edge' requirement – so those whose average annual trading profit is £50,000 or more won't be able to get any support from this scheme.
Government guidance says your average annual trading profit will be calculated from either your 2018/19 tax return or the average of your 2016/17, 2017/18 and 2018/19 tax returns.
- You must have filed a tax return for 2018/19. This means you must have been self-employed prior to 6 April 2019. If you were due to file a 2018/19 tax return but missed the deadline this year, you'll have until Sunday 26 April to submit your tax return, after which you can access the scheme.
If you're a company director and pay yourself a salary or dividends you won't be covered by this scheme, but you could get support through the Coronavirus Job Retention Scheme for employees if you operate pay-as-you-earn schemes.
How much could the grants be worth?
The grants will be worth 80% of your profits, capped at £2,500 a month, based on your tax returns for 2016/17, 2017/18 and 2018/19 if you were self-employed over that period.
If you became self-employed after April 2018, your 2018/19 tax return will be used instead. But it's worth noting that if you only have a few months' self-employment on your 2018/19 return, this will be counted as your total profit for the year – the Government won't pro-rata it based on your monthly profits.
How do I apply to the scheme?
Those eligible will be contacted directly by HM Revenue & Customs – the Government hasn't said when that'll be, only that it will happen "once the scheme is operational". At that point, you'll be asked to fill in an online form, and the grant will then be paid directly into your bank account.
There's no need to contact HMRC now as there's nothing you can do to apply at this stage.
I'm not eligible for a grant– What other support is available?
The UK Government has announced a temporary Coronavirus Business Interruption Loan Scheme administered by the British Business Bank which will provide support for businesses to access loans and overdrafts from over 40 accredited lenders.
Additional support for businesses include:
- 12-month business rates relief for all retail, hospitality and leisure businesses.
- Grants up to £10,000 for companies in receipt of Small Business Rate Relief or Rural Rate Relief.
- Grants up to £25,000 for retail, hospitality and leisure business with rateable values between £15,000 and £51,000.
Note: Your Supervisor will still need to grant consent for the loan. Speak to our customer service team for further details.
Support from HMRC
HMRC has launched a helpline for self-employed people and businesses concerned with paying taxes during this crisis. Companies may be eligible to receive financial support on a case by case basis. You can contact HMRC Time to Pay Support helpline on 0800 0159 559.
HMRC has stated they will waive any penalties related to late payments and interest in cases where self-employed or businesses have administrative problems in contacting HMRC or paying taxes as a result of COVID-19.
HMRC has proposed a delay to IR35 Tax Reforms. This is likely to affect freelancers as it will now be delayed until April 2021.