The lockdown in the UK due to the Coronavirus pandemic has pushed self-employed workers into an incredibly trying period. The government had previously unveiled plans for government-backed loans to keep small and big businesses afloat during this period.
How the Self-Employed Income Support Scheme Helps
This scheme covers a lot of groups such as hairdressers, builders, childminders, Taxi driver and many others. Those eligible will be able to claim taxable grants of up to 80%. These grants have a maximum amount of £2,500 every month for the next three months which may be extended if there is a need to.
The grant consists of three monthly payments that will start in June. It is projected by the Treasury that this scheme will give up to £940 average for each person which will be approximately £3 billion every month.
Who are Those Eligible for It
It isn’t enough to be self-employed or a member of a partnership to benefit from this scheme. Other requirements to benefit from the scheme include:
– You must have filled in the Income Tax Self Assessment tax return for the 2018-2019 tax year. This is put in place to reduce fraudulent activities.
– You must have traded and done business in the 2019-2020 tax year.
– You must be trading at the time of application or COVID-19 must be preventing you from doing so.
– You must plan to keep on trading in the 2020-2021 tax year.
– You must have lost profits in partnership trading or individual trading as a result of the COVID-19 pandemic.
Another major requirement that must be met is: your trading profits from self-employment must not be greater than £50,000 and over half of your income must be from being self-employed. This can be confirmed if at least one of these conditions are true:
– You have profited from trading/ partnership trading profits that are less than £50,000 in the 2018-2019 tax year. Also, the profits must make up for greater than half of your income that can be taxed.
– You have average trading profits lower than £50,000 in 2016-2017, 2017-2018, and 2018-2019 tax years. These profits must also make up for greater than half of your average income that can be taxed within the same period.
If you fall into the category of those that only started trading between 2016-2019, there is no need to worry. HMRC will go ahead and use the years you filed a Self-Assessment tax return.
It is important to note that if you haven’t submitted your Income Tax Self-Assessment tax return for the 2018-2019 tax year, you need to do so before 23 April 2020. This is to ensure workers that need this grant don’t miss out on it.
The details HMRC will use to determine those eligible are those that have already submitted their 2018-2019 returns. It will risk assess to all the late returns that are filed before the 23 April 2020 deadline as usual.
How Much Do You Stand to Gain
If you fulfil all the conditions and HMRC finds you eligible, you stand to gain a taxable grant which is up to 80% of all the average profits from the following tax years:
– 2016 to 2017
– 2017 to 2018
– 2018 to 2019
To get the average amount, HMRC will determine the total trading profit for the three tax years by adding it together and dividing by three. This will, therefore, be used to determine a monthly amount. The number of tax years will be as applicable to the person.
This can add up to £2,500 every month for up to three months. HMRC will pay into your bank account in three monthly instalments.
How to Apply
This scheme isn’t presently open for people to apply. HMRC will identify those eligible for the grant and send an invitation for them to apply online. It is expected that workers will be able to benefit from it latest by the beginning of June.
You don’t need to contact HMRC now as it would only delay the process of introducing the scheme further. Also, be wary of people trying to contact you claiming to be from HMRC and telling you to claim financial help or a tax refund. Don’t click any suspicious link or give out important information such as your bank details, credit card, or name. When the time is right, HMRC will contact the eligible people with the right information.
Once you have sent your claim to HMRC and it has been received, your eligibility status will be confirmed. HMRC will get back to you with how much you will receive as well as other details about the payment.
If you claim tax credits, it is necessary to add the grant in your claim and list it as income.
How Many People Stand to Benefit From This
The most recent numbers from the Office for National Statistics (ONS) show that the number of workers that are self-employed in the UK has increased to 4.8 million in 2017 from 3.3 million in 2001.
Roughly 20% of these workers are in the construction industry and over hundreds of thousands in education, motor trade, and professional services.
What of Those Working for a Company
The government has encouraged businesses to not lay off any of their staff because of the coronavirus pandemic by pledging to help them financially. The coronavirus job retention scheme will help protect employed workers from layoffs and take care of up to 80% of their wages, totalling up to £2,500 per month.
Employers that want to use this scheme will classify their employees as a furloughed worker which will keep them on the payroll. While on furlough, employees are not allowed to work for another employer. The company can then decide to take care of the difference between the furlough payment and the employee’s salary if they wish to.
You don’t need to panic. Just keep your ears to the ground so you will know when the invitations to apply for the scheme are sent.