Covid-19 - Help for the self-employed

Following on from the emerging details of the Coronavirus Job Retention Scheme, are details for how the Government proposes to provide support to self-employed workers, throughout the current Covid-19 situation. We detail below, the information available at the moment, and shall update this further, as and when more details are announced.

(Last updated 15.04.20)

Self-employment Income Support Scheme (SEISS)

On 26 March 2020, the Chancellor announced that self-employed individuals may be able to apply for a taxable grant to support them if their business profits have suffered as a result of COVID-19.

Will I be eligible for the scheme?

To be eligible for the scheme you must meet all the following criteria. You must:

be a self-employed individual or a member of a partnership.
have filed your Self-Assessment Tax Return for the tax year ended 5 April 2019 (2018/19).
have continued to trade in the 2019/20 tax year, and are still trading when you submit your application, or would be except for COVID-19; and
intend to continue trading in the 2020/21 tax year
have lost trading profits due to COVID-19 – you will need to confirm this to HM Revenue & Customs (HMRC).

Your trading profits from self-employment must be less than £50,000, and more than half of your income must come from your self-employment. In order to meet this condition, you must meet one of the following:

Have trading profits in the 2018/19 tax year of £50,000 or less and these profits make up more than half of your total taxable income in the same period (6 April 2018 – 5 April 2019).

Have average trading profits over the three tax years (2016/17, 2017/18 and 2018/19) of £50,000 or less and these profits make up more than half of your average total taxable income in the same period (6 April 2016 – 5 April 2019).

If you have yet to submit your 2018/19 tax return you have until 23 April 2020 to file. HMRC require this information in order to assess whether you are eligible for the scheme.

What will I get?

The grant will be calculated at 80% of your average trading profits based on the tax years 2016/17, 2017/18 and 2018/19 ,(where applicable). If your business commenced to trade during 2016-2019, HMRC will only use those years for which you filed a Self-Assessment Tax Return.

To calculate the average HMRC will add together the total trading profit for the three tax years, (where applicable) then divide by three, (where applicable) and use this to calculate a monthly amount. The grant will be capped at £2,500 per month.

The scheme currently covers a period of three months, but the Government will extend if necessary.

More information on how HMRC will calculate total income and the average trading profits on the Government website.

How and when can I access the scheme?

You cannot apply for this scheme yet and HMRC are urgently working on this. Do not contact HMRC directly regarding this as it will cause delays.

HMRC will aim to contact you by mid May 2020 if you are eligible and invite you to claim using the GOV.UK online service. We will provide more details as soon as more information becomes available to advise on the necessary steps you can take to make the claim.

The grant will be paid direct into your bank account in one instalment and the Government is expecting to begin paying these early June.

If you claim tax credits, including Universal Credit, you will be required to include the grant in your claim as income.

Please see link to the Government website for more information

What support can I get in the interim?

You may still be eligible for other Government support as listed below:

We strongly recommend, if you have not already, you submit a claim for Universal Credit as soon as possible. If you are eligible, you can claim advanced payments and the Chancellor announced yesterday that claimants are receiving these payments in a matter of days.

Employment and Support Allowance. For more information on this and Universal Credit – (See below).

Business Interruption Loan

The Government also announced that they are deferring the second payment on account for the 2019/20 tax year for self-employed individuals. (See below)

Frequently asked questions

Is the grant subject to tax?

You will be liable to Income Tax and National Insurance on any payment you receive through this scheme and it will be reported on your Self-Assessment Tax Return.

I am recently self-employed can I apply?

Unfortunately, you are not eligible for this scheme if your self-employment commenced post 5 April 2019. However, as noted above you may be eligible for other forms of Government support.

My business commenced between 6 April 2018 and 5 April 2019 but I reported a loss, will I receive a grant?

No, the grant is based on total trading profits so if you made a loss you won’t receive anything from this scheme.

I am a company director and receive a salary and dividends, can I apply?

No, you are not eligible but may be entitled to claim through the Coronavirus Job Retention Scheme.

Do I have to stop working to apply for a grant?

We understand you can continue to work, if you are able, however the grant is to support self-employed individuals whose work has suffered as a result of COVID-19. More details should be available on this in due course.

We are here to help.

If you haven’t already done so, please let us have your business records to prepare your accounts and file your Self-Assessment Tax Return for the tax year ended 5 April 2019. As noted above, to be eligible, any outstanding 2019 Tax Returns must be filed by 23 April 2020.

If you think you may have overpaid tax for the current tax year ending 5 April 2020 please let us have your business records and relevant information to process your 2020 Tax Return as soon as possible after the 5 April 2020.

Universal Credit (UC)

On 20 March 2020, the Chancellor announced the suspension of the minimum income floor (MIF), which is an assumed level of income, for the self-employed and that the standard allowance was to rise over the next 12 months by £1,000.

If you are self-employed and claiming UC and are required to stay at home or are ill as a result of coronavirus, the MIF will not be applied for a period of time whilst you are affected.

The standard allowance has been raised, from £317.82 to £409.89 a month and there are more elements that you may be entitled to dependent on your earnings, whether you have children, etc.

The new measures introduced by the Chancellor means self-employed people will now be treated the same as employed people within the UC system.

You can find out more information about UC and apply online.

Employment Support Allowance (ESA)

‘New Style’ ESA is a contributory benefit, this means you may be able to claim if you have paid and/or been credited with enough National Insurance contributions in the two full tax years before the year you are claiming in. If you are eligible for the ‘New Style’ ESA, it will now be payable from day 1 of sickness, rather than day 8.

The weekly payment for ESA is typically £73.10 or £57.90 for people under the age of 25.

Further advice regarding your eligibility for ESA and its interaction with UC can be found online. This also provides details regarding how to make a claim, which involved completing a NSESAF1 claim form:

Income tax Self-Assessment payments

Payments due by 31 July 2020 have been deferred until 31 January 2021. This is available for ALL individuals in Self-Assessment, and is an automatic offer with no applications required

No penalties or interest for late payment will be charged for the deferral period.

To take advantage of this we recommend any direct debits are cancelled (and HM Revenue & Customs (HMRC) have confirmed taxpayers should do this). If you would like any further advice regarding this please contact your Accounts or Personal Tax Manager.

Please do get in touch with your normal Shorts contact to talk things through, or one of our Covid-19 support coordinators (David Robinson, Scott Burkinshaw or Martin Dean).

Please be assured that we are ready to help.