Support for the self-employed
Support for the self-employed
The Government’s response to help the self-employed through this Coronavirus crisis

Chancellor, Rishi Sunak, has unveiled the Government’s response to help the self-employed through this Coronavirus crisis.

Support comes initially in the form of a payment of 80% of average earnings (up to £2.5k per month) for initially up to 3 months.

Round 2
A second round of funding has been announced. Based on the same eligibility criteria as before (outlined below), the second round will take the form of a payment of upto 70% of average earnings, up to a maximum £6,570 for three months.

Applications will open in August and further guidance will be released on 12 June.

Eligibility checker
HMRC have begun contacting individuals whom they believe may qualify based on historic tax return.

They have also set up an eligibility checker to see if you apply. In order to complete this, you will need to set up a government gateway account if you haven’t already done so. You will also need your National Insurance number and Unique Taxpayer reference (UTR), which you can find on any personal tax return.

Applications have now opened. Whilst we cannot directly complete the application for you, we can review the claim amount to determine whether HMRC are correct, or whether a review is necessary.

Qualification Criteria
To qualify, you must have traded as a self-employed individual during 2019/20 and continue to trade (or intend to) throughout and after the Coronavirus crisis. Your business must suffer losses as a result of the crisis.

Furthermore, you must have traded during 2018/19 and submitted a 2018/19 self-assessment tax return with:

  • self-employment income of less than £50,000 in 2018/19; or
  • self-employment income of less than £50,000 per year averaged across 2016/17, 2017/18 & 2018/19.

Finally, more than half of an individual’s income must consist of self-employment income (including from partnerships).

The amount of the grant to be paid will be calculated from the average of trade profits throughout 2016/17 to 2018/19.

The funding grant will be paid in a single lump sum covering all three months (upto £7.5k) to those who qualify (as identified by HMRC) starting from the beginning of June

The grant itself will constitute taxable income for 2020/21.

Company directors
The Chancellor has specifically stated that this grant is not available to people who operate their “sole trade” through a limited company. Many will be aware but they are actually company directors that traditionally pay themselves via salary and dividends (although furlough may still be available on any director’s PAYE salary if those criteria are met). This is aimed solely at those that are self-employed.

This does leave many hundreds of thousands of small businesses to fall through the cracks of government support including many private dental practices and private associates who operate through a limited company. It is clear, however, that it was never the Government’s intention to support everybody.

Such businesses are expected to benefit from the Coronavirus Job Retention Scheme, small business grants and Coronavirus Business Interruption Loans.

The information contained in this article is based on the opinion of Hive Business and does not constitute formal tax advice. Any tax outcomes will be based on individual circumstances, tax legislation and regulation, which are subject to change in the future. You should seek specific advice before embarking on any course of action. Hive Business does not provide regulated Financial Advice, including advice on investment, insurance or lending products or their suitability for you. This article is provided for information only and does not constitute, and should not be interpreted as, investment advice or a recommendation to buy, sell or otherwise transact, or not transact, in any investment including Bitcoin and other crypto. Any use you wish to make of any information contained within this article is, therefore, entirely at your own risk.

By Simon Vincent Senior Tax Accountant
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