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17th April 2020

QA ALThe Government have introduced a support scheme help people who are self-employed who account for around 15% of the UK working population, with a large percentage of these people are between 45 and 54 years of age.

We have been asked by many of our clients about the new self-employed Government support as it affects them and as concern for family members who are self-employed. In this article we explore some of the details of this scheme.

Frequently asked questions

How is the government helping the self-employed?

The Government has announced a new self-employed income support scheme, which will cover up to 80% of self-employed workers’ average taxable monthly profits. If you qualify, you will get a taxable grant amounting to 80% of the average profits from the last three tax years.

How is the income support scheme calculated?

The monthly profits will be judged on average profits over the past three years, and monthly payments will be taxable and capped at £2,500.

To calculate the average, HMRC will add up the total trading profit for the three tax years and divide this amount by three and use this to calculate the monthly amount.

So, say your profit stood at: £25,000 for 2016-17 £21,000 for 2017-18 £22,000 for 2018-19 HMRC would base your grant on the average of these three years; a total of £68,000 divided by three, giving £22,666.

The grant you’d receive would be 80%, which is £18,133 – equal to £1,511 per month.

The grant will be worth up to £2,500 a month for three months, paid directly into your bank account in one instalment. The upper limit of £2,500 a month applies to people with self-employed profits of £37,500 to £49,999.

Annual profits are taken after expenses and capital allowances, but before pension contributions and charitable donations. Therefore, workers who have made significant investments into their businesses are likely to lose out.

Who is eligible for the scheme?

To apply, you must be a self-employed individual or a member of a partnership and: traded in the tax year 2019-20 and intend to continue trading in 2020-21 have trading profits of less than £50,000 a year earn the majority of your income (ie 50% or more) through self-employment have filed a tax return for the 2018-19 tax year.

When will the help be available?

The Chancellor said it will begin ‘no later than the beginning of June’ and will run for three months, or for however long it’s needed. If it’s brought into force in June, workers’ pay will be backdated to March, and the payment would be given all in one go.

HMRC will identify and contact self-employed workers who qualify for the scheme, inviting them to enter their bank details online. The government payment will then go directly into workers’ bank accounts.

What if I don’t have three years of tax returns?

For any self-employed workers who don’t have three years’ of self-assessment history, averages will be taken from whatever history is available – be it one year or two years.

For those who don’t have a year’s self-assessment history, the Chancellor said there is little the scheme can do due to the fraud risk of people signing up to the scheme without any proof of being self-employed.

This means that people who started self-employment in the 2019-20 tax year, and have not submitted a tax return for the 2018-19 tax year, will not qualify for the scheme.

Will I have to pay the money back?

The money available through the new self-employed income support scheme won’t have to be paid back. However, the Chancellor indicated that self-employed workers’ tax might need to be reviewed.

The Chancellor remarked that the equal level of help received by employed and self-employed workers may lead to questions of whether self-employed workers should pay the same levels of National Insurance in future.

Can I claim from this scheme and be furloughed?

If you already have more than one job, and are both employed and self-employed, as long as the income from your self-employment makes up at least 50% of your earnings, you could feasibly take the self-employment grant and be furloughed from your employment. For more information please see our Furlough Q&A.

How to avoid an HMRC scam

Be wary of phone calls claiming to be from HMRC, and carefully check the details of email correspondence you receive.

If you qualify for the scheme, HMRC will contact you to let you know. They will send you a link to an online form, where you’ll be asked to enter your bank details. You’ll then receive a payment from HMRC directly into the bank account you’ve given details for.

If you’re contacted and asked to do anything different to this, check whether or not it’s actually HMRC contacting you.

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