Support for Self-Employed Individuals
This note has been prepared from information available at 9 April 2020. This is subject to change and HMRC are expected to publish further guidance.
Self-employment Income Support Scheme
This is a scheme to help some self-employed individuals (including members of trading partnerships) who have lost income due to the Covid-19 (“Coronavirus”) pandemic.
- Eligible individuals will be able to claim a taxable grant (it will not be a loan). The scheme is expected to be available in early June 2020.
- HMRC will contact eligible individuals and invite them to make a claim for the grant. We do not know yet how HMRC will make contact, but access to the scheme will only be online through Gov.UK. Please do beware of scams asking for personal information
- HMRC will use data reported on 2018-19 self-assessment tax returns to identify eligible individuals. HMRC are allowing a catch up by 23 April 2020 for returns not already submitted.
- This scheme will allow individuals to claim a taxable grant worth 80% of trading profits, up to a maximum of £2,500 per month, for 3 months starting 1 March 2020. This may be extended if needed.
- The scheme will be available to self-employed individuals (or partners in a trading partnership) who meet all the following conditions:
- have submitted a Self-Assessment tax return for 2018/19
- traded in the tax year 2019/20
- are trading at the time of applying, 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
- The scheme is limited to individuals meeting at least one of the following conditions:
- Trading profits/partnership trading profits in 2018-19 were less than £50,000 and these profits constitute more than half of the individual’s total taxable income. or
- Average trading profits in 2016-17, 2017-18, and 2018-19 were less than £50,000 and these profits constitute more than half of average taxable income in the same period.
Government announcements have not yet included a definition of “trading profits”.
- If you started trading between 2016 and 2019 HMRC will only use those years for which you filed a Self-Assessment tax return reporting self-employed income to review your position.
- This support is not available to anyone who started self-employment after 5 April 2019.
Amount of the grant
- The amount of the taxable grant will be calculated as follows:
- The grant will be a monthly amount based on 80% of your average trading profits of 2016-17, 2017-18, and 2018-19.
- The average will be calculated by adding the total of the trading profit for these 3 tax years and dividing by 3.
- This calculation will be adjusted where trading does not cover this 3 year period
- The maximum grant will be £2,500 per month. The maximum for 3 months will therefore be £7,500.
- Self-employed individuals can continue to work under this scheme. (This is different to the rules for Furloughed employees.)
- More information is expected to be published by the Government and HMRC. We are monitoring this.
Other measures that will also support self-employed individuals
- Deferral of income tax payment due on 31 July 2020
- The second payment on account of income tax and class 4 NIC for 2019/20 normally due on or before 31 July 2020 can be delayed until 31 January 2021.
- This is an automatic offer and no penalties or late payment interest will be charged in the deferral period.
- Unless there are any further changes before then, the tax payment due on or before 31 January 2021 will therefore include the balance for 2019/20 income tax and capital gains tax liabilities (after the first payment on account which was due on 31 January 2020) plus the first payment on account of 2020/21.
- Deferral of payment of VAT
- VAT ordinarily due for payment between 20 March 2020 and 30 June 2020 until 31 March 2021. https://www.bgm.co.uk/insight/news/deferred-vat-payments
- The Government says that while waiting for the self-employed scheme to be operational self-employed individuals will still be eligible for other government support including universal credit and business interruption scheme loans. If you are considering applying for a loan under this scheme contact your bank without delay to see if you qualify.
We will continue to monitor Government announcements and provide updates as the situation evolves over email, on our website, LinkedIn and Twitter account.
Please contact your BGM advisor or email email@example.com if you would like any assistance.