Daly Park | Tax advice and Accountant News

Financial Support for the Self-Employed

27 March 2020

The Chancellor announced last night that self-employed workers can apply for a cash grant worth up to 80% of their average monthly profits.

With calls on the Government not to forget about the self-employed and freelancers during the Coronavirus outbreak, it was a relief to many to hear they would receive a similar guarantee - a taxable cash grant worth 80% of their average monthly profits - up to a maximum of £2,500 a month - to help them cope with the financial impact of this crisis. 

Unfortunately, the self-employed are unlikely to receive the lump-sum payment until June, over 2 months away, due to the complexity of the process, but the payment will be back-dated to 1st March.

Once we get more detail of the application process for this grant, we will work closely with all our self-employed clients to ensure they avail of this support.  Initial reports indicate that HMRC will contact the self-employed directly inviting them to apply.

The Details

The scheme allows individuals to claim a taxable grant worth 80% of their trading profits up to a maximum of £2,500 per month for the 3 months from March to May 2020. This may be extended if needed.

The taxable cash grant will be in the form of a single lump sum to cover the three months from March to May 2020. It will be paid in June 2020 to those that are eligible directly into their bank account.

The self-employed, including members of Partnerships, will be eligible if their trading profits for 18/19 were less than £50,000 and more than 50% of their income stems from self-employment.

Alternatively, they will be eligible if their average trading profits for the tax years 16/17, 17/18 and 18/19 were less than £50,000 and more than 50% of their income stems from self-employment. For those that started trading between 2016-19 HMRC will only use those years for which a Self-Assessment tax return has been filed.

The scheme will be open to those that have submitted an income tax self-assessment tax return for the year to 5 April 2019 (the 18/19 tax year). Worth noting that HMRC’s guidance does state that the 18/19 tax return must be filed by 23 April 2020 in order to eligible! For those that have yet to file their 18/19 tax return, it represents something of an opportunity.

Additional eligibility criteria include the requirement that the individual must have lost trading profits due to Covid-19 and they must have traded in 2019/2020, intend to trade in 2020/2021 and are trading at the point of application or would have been except for Covid-19.

Individuals who claim Tax Credits would need to include the grant as part of their income on future Declarations.

It is crucial to observe that HMRC will contact and invite those that are eligible to apply. Applications will need to be made online when the invitations have been issued by HMRC.

Individuals do not need to contact HMRC now.

This seems an opportune moment to remind readers that HMRC does not send texts or make calls asking for bank or credit card details. If this happens then it is likely to be a scam. Please be wary.

We will update this guidance as and when HMRC issue further guidance of their own.

 

What can you do now

If you are self-employed there are a number of options open to you while you wait for the grant:

  • Apply for Universal Credit – this is a monthly payment to help with your living costs. The minimum income rule has been removed so that the self-employed can apply for Universal Credit if their work has been affected by Covid-19. The usual wait of 5 weeks for the first payment has also been relaxed so that advance payments can be made within days.  To apply: https://www.nidirect.gov.uk/articles/employedself-employed-while-claiming-universal-credit
  • Any Income Tax Payments can be deferred until 31st January 2021 and VAT liabilities can also be deferred until 31st March 2021.
  • If you have any mortgages or loans, it would be worth contacting your lenders to request a 3-month payment break.

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