Following the announcements last Thursday (26th March 20) from the Chancellor on the self-employed, we’ve put together another blog to help you make sense of things.
The government also announced further details for furloughed employees, you can read that here – https://www.gov.uk/guidance/check-if-you-could-be-covered-by-the-coronavirus-job-retention-scheme.
We are also setting up another live Q&A Webinar to go through questions here and furlough of employees. Click the link below to sign up for it at 12pm Tuesday 31st March.
What was announced for the self-employed?
Last week the Chancellor announced financial support for the self employed – i.e. sole traders and partners of partnerships. The government are going to pay out 80% of your average monthly earnings based on taxable profits in the 3 years to 5/4/19.
It will be initially be paid for 3 x months starting from 1st March, and the first payment is expected early June 2020.
The full government rules on the self employed are set out here https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme
What was previously announced?
The government have offered to defer your July 2020 payment on account. You can pay it by 31st Jan 2021 instead.
If you have a business premises with small business rate relief, you should get a £10,000 grant. Other business s in certain sectors could be eligible for £25,000. You can read the grant information here –
As the self employed grant will only be released in June, the government have suggested the following to get you through:
- Ask your mortgage lender for a three month payment holiday.
- Apply for a corona-virus business interruption loan
- If you are VAT registered, defer the VAT for the quarterly payment to 30/6/20 but you will need to catch up by 5/4/21. It’s important you still file your return though!
How the scheme will work
- All late returns for 2018-19 must be submitted within the next 3.5 weeks! These returns will incur penalties.
- HMRC will send a form in the next 4-8 weeks.
- You fill in the form (with our help as needed).
- HMRC send the money!
Who’s not covered?
- Anyone with average profits in excess of £50,000 over the last 3 years.
- Director / shareholders of limited companies with no self-employment.
- Anyone who started after 6th April 2019.
- If your self employed taxable profit on average over the three years to 5/4/19 is less than half your total income. (i.e. if you also get a salary and your salary is the larger part of your income). You need to look to your employer, and perhaps the furlough rules.
- Your income is unaffected with the virus.
- You aren’t trading in 2020/21.
By excluding a number of groups particularly 2) and 3) above there will be some hardship; if you are in that group all you can do is look to the benefit system and universal credit.
Can I claim with less than 3 years trading?
Yes, your income will be averaged over the period you traded.
What if you started trading half way through 2017/18?
The implication is that they will take the average of the two years where you have submitted tax returns. i.e. your declared profits for the two years divided by 2. The whole of the year you started will be taken regardless of the exact date you started.
What if I have two self employments?
We’ve not seen anything to the contrary, so presume that’s in a average of the two.
What if I bought a van/asset in 2017?
This will reduce the profit in that year. However, over a 3 year period, it will be diluted.
What if my profits average £48,000 pa and I also have a £10,000 pa employment?
You qualify because your profits are under £50,000.
Husband and wife partnerships where you each have taxable profits of £40,000.
You both qualify, although your joint income is over £50,000 this is calculated on an individual basis not as a couple.
What if I’ve found a job?
The intention to compensate you for loss of earnings, if you have not lost earnings it is unlikely you can claim in full. This is not specifically addressed in the briefing.
Can I change my tax return?
They have specifically said they will take the tax returns already submitted. No you can’t change them.
Is the grant taxable?
The chancellor said it’s time to address the difference between the tax rates between the employed and self-employed. We think there will be a tax rise on Class 4 NI from 9% to 12%.
As previously said, you can sign up the webinar here.