If you think about accounting firms, you will probably imagine a company that deals with standard...
Last week Rishi Sunak announced measures offering support for self-employed workers. In today's article we'll explain exactly how it works and if you can apply.
Support for self-employed workers had been a notable omission from the chancellor's initial Coronavirus Job Retention Scheme. This was addressed a few days later with a package called the Self-Employed Income Support Scheme. We'll outline the critical information in today's article.
If you’d like more information about the changes so far, check out our Coronavirus Tips. And be sure to visit our Coronavirus Update page. You may also find the following Budget articles helpful:
2020 Budget - First Thoughts
2020 Budget Update
The Tax Implications Of The Coronavirus
R&D Tax Relief - 2020 Budget Update
Support For The Self-Employed... Finally
Until now, the chancellor’s announcements have been directed at businesses and employees. VAT has been deferred, Universal Credit has been extended and employees can be “furloughed” until the business can afford to bring them back.
This has met with criticism from the self-employed. They argue that they are also losing income from being unable to work. They can’t be furloughed, as there is no employer to furlough them. And the tax breaks for businesses don’t help them.
This is why the Chancellor last week announced another enormous cash handout – this time directed at self-employed individuals. We’ll summarise the details here, but feel free to check out the official HMRC page for the small print.
How It Works
The scheme, in effect, treats the self-employed in the same way as those in salaried employment. They will be able to claim (in cash) 80% of their profits, up to £2,500 a month. This is a taxable grant however.
Now obviously this is more complicated than staff who are paid a salary. Salaries are fixed payments, so it’s very easy to calculate how much they should get. But the self-employed, by their nature, often have good months and bad months. And they might find it harder to prove what their “typical” income is.
The government is also keen not to hand out cash to wealthy contractors and consultants who don’t need it. So they have put a few controls in place.
Controls & Restrictions
Only those self-employed individuals with a trading profit of less than £50,000 last year (or less than £50,000 per year on average for the last 3 years) will be able to apply.
The scheme is also not supposed to allow people who use self-employment to “top up” a regular income. So it is additionally restricted to those who earn more than half of their income via self-employment.
Finally, it’s only those who are currently self-employed who can apply. In other words, you can’t decide now to become self-employed and start to claim the grants.
Payments & Exceptions
The scheme is due to last for 3 months (trading months of March, April and May). The self-employed who qualify will receive the whole payment in a single lump sum in early June.
Of course, there may be some people who fall through the cracks having recently arrived in the UK or recently changed from self-employed to employed or vice versa. We will have to look at the details as it is presented and make enquiries for these exceptional cases.
We are still in the very early stages of this announcement. Further details of the scheme are due to be released shortly by HMRC. We’ll have all the updates as and when they happen. With the Prime Minister recently testing positive for coronavirus, it’s clear that things could change very quickly.
If you’d like to discuss any of the issues raised in this email, please feel free to contact me.
