Critical Support for the Self-Employed

Announced on Thurs 26 March by the Chancellor

Millions of us are self-employed – and our business models vary massively. Some are high fee-earning consultants. Some are small-time freelancers and contractors. For many and most, its a small business model with limited cash flow and savings.

Earnings are critical, and the aim of the game is to keep your profits low – because that means a lower tax bill.

Coronavirus has been devastating. Many have seen their income evaporate overnight. No customers. Orders cancelled. Projects halted. Deliveries and materials stopped. Many do not have official company premises, therefore cannot claim the grants available against business rates relief.

This blog sets out the key facts of what you need to know from the ‘Coronovirus Self-Employment Income Support Scheme’.

The Key Facts

Self-Employment Income Support Scheme

  • This scheme will pay a cash grant of 80% of your average monthly profits (That’s net profit folks. Not turnover).
  • Averaged over 3 years.
  • It is capped at £2,500 per month.
  • It will run for 3 months (initially).
  • It will pay you a lump sum in June (directly into your bank).

“HMRC will identify eligible taxpayers and contact them directly with guidance on how to apply”

NOTE: The grants are taxable, and will need to be declared on tax returns no later than 31 January 2022 – that means you’ll have until July 2022 to pay.

Who is eligible

To be eligible to claim you must:

A) Be registered as self-employed with HMRC for the current tax year.

To be clear – that means HMRC have you on the system and are expecting you to submit a self-assessment tax return for this year – that’s the tax year we’re currently in which ends 05 April 2020.

B) Have earned 50% of your total income from self-employment.

C) Your profits must have been under £50,000 either last year (ending April 2019) OR on average for the last 3 years

See the official HMRC Guidelines HERE

What Happens Now?

Do nothing. Do not contact HMRC. Wait to hear from them.

“HMRC will identify eligible taxpayers and contact them directly with guidance on how to apply”

Further notes:

See the official HMRC guideline HERE

Those who are in Partnerships

Yes this applies to Partnerships. It’s likely that your profits and grants will be apportioned in-line with your usual ownership percentages (i.e 50/50).

Those with low profits

The irony here of course is that many try to keep profits low because it means a lower tax bill. The bad news, is that if your profits are small, this scheme will not be hugely supportive.

If you’ve just gone self-employed

Those who have just gone self-employed and have not yet submitted a tax return will not be included. If you don’t already have a start-up loans in place then the ‘Business Loan Interruption Scheme’ may be the life-support you need.

If you missed the filing deadline of 31 January

If you are already registered as self-employed but you missed the submission deadline on 31 Jan, an extension of 4 weeks (from now) is being put in place to capture your profit calculations.

Further news: See the official HMRC guideline HERE

We’re business support services – we help self-employed and partnerships.

If you would like some help understanding this scheme, or how to calculate your profits – get in touch 01326 727 112