Coronavirus - paying it forward: supporting the self-employed

With over 5 million self-employed people in the UK, it has been a testing week of uncertainty and financial hardship after being omitted from the package of unprecedented economic measures announced by the UK Government last week.

Today, the self-employed of the UK were centre stage for the right reasons as Chancellor Rishi Sunak announced a much-anticipated and very welcome lifeline of support, of which 95% of self-employed people will be able to benefit.

Critics of the Government’s treatment of the self-employed have derided the delays, however the Government has faced the challenge of wading through all the scenarios and complex calculations to work out how to offer financial aid. Self-employed entrepreneurs can have lumpy, irregular and intermittent income levels. Finding a fair balance has been a huge challenge.

What does the package look like for the self-employed?

Self-employment Income Support Scheme:
  • Taxable grant worth 80% of their average monthly trading profits over the last three years up to £2,500 per month
  • Open across the UK for at least three months and extended if necessary
  • Can claim these grants and continue to do business

Are there any restrictions?

It is recognised that this has been difficult to do in practice, with a very diverse self-employed demographic. There are some initial guidelines:

  • Not open to anyone with trading profits over £50,000
  • Only available to people who make the majority of their income from self-employment
  • You must be trading at the point of application (or would be, except for coronavirus) and intend to continue to trade in the tax year 2020 to 2021

Are your trading profits less than £50,000?

In determining if trading profits are less than £50,000, one of the following conditions must be met:

  • Have trading profits/partnership trading profits in 2018/19 of less than £50,000 and these profits make up more than half of your total taxable income
  • Have average trading profits in 2016/17, 2017/18 and 2018/19 of less than £50,000 and these profits make up more than half of your average taxable income in the same period

If you started trading between 2016-19, HMRC will only use those years for which you filed a Self-Assessment tax return.

How do I access this scheme?

Access to funds is estimated to be from the beginning of June, although this may come sooner. HMRC will contact you directly and ask for a simple online form to be completed. The scheme will be backdated to cover the three months income up to May 2020 and the money will be paid straight into your bank account.

Anyone who missed the 5 April 2019 tax return filing deadline in January must submit their tax return before 23 April 2020 to ensure they are eligible.

Find out more on the Government’s website.

Struggling right now?

  • You can access the CBILS (Coronavirus Business Interruption Loan Scheme)
  • Self-assessment income tax payments can be deferred to January 2021
  • You can access Universal Credit in full in the meantime

Find out more on the Government's website about these options.

If you are affected by the above or would like further information, please do not hesitate to get in touch with me, or your usual Johnston Carmichael contact.