The scheme will provide the self-employed with a taxable grant of the lower of:
- 80% of your average monthly profits based on an earnings period of the last 3 tax years; or
This scheme will only be open to those individuals who have submitted a self-assessment tax return for 2018-19.
This scheme will run for the 3 months, 1 March to 1 June, and may be extended if needed. HMRC will contact those who are eligible for the scheme and will invite you to apply online. The scheme may not be up and running until the beginning of June 2020. Once HMRC has received your claim, they will tell you how much you will receive and will pay the grant directly into your bank account, in one instalment.
To be eligible for this scheme, you must meet all of the following criteria:
- be self-employed or a member of a partnership before 6 April 2019;
- have submitted your Income Tax Self-Assessment tax return for the tax year 2018-19 by 23 April 2020;
- traded in the tax year 2019-20 and are trading when you apply, or would in the absence of COVID19;
- intend to continue to trade in the tax year 2020-21;
- have lost trading/partnership trading profits due to COVID-19; and
- your self-employed trading profits must also be less than £50,000** with more than half of your income coming from self-employment.
** The £50,000 limit will be average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period. If you started trading between 6 April 2016 – 5 April 2019, HMRC will only use those years for which you filed a Self-Assessment tax return.
Compared to employees, the Government are encouraging the self-employed to continue working where possible, within the Government lockdown guidelines, and you should not close-down the business. Employees will be required to stop working in order for the employer to receive the grant, which could create issues with continuity of trade.
Where you may be facing initial cashflow difficulties, the Government are advising businesses, including the self-employed, to apply for a Coronavirus Business Interruption Loan Scheme (CBIL’s). These loans are interest/fee free for 12 months and could be used to bridge the gap whilst you wait for the grant to come through.
Also hidden within the Chancellors speech, was a hint at levelling the tax field between the employed and self-employed. The Chancellor will not increase tax rates in times of austerity, but it may be included in next year’s budget.