The Chancellor announced further financial measures to support the self-employed in yesterdays Coronavirus update. The relief is in the form of a grant of 80% of your profits, closely in-line with the support given to furloughed employees last week.
The Self-Employed income Support Scheme (SEISS) grants will be based on the tax return data already held by HMRC for the 2016/17, 2017/18 & 2018/19 tax years. Profits from these returns will be averaged over the three years to find your average monthly profits and 80% of this, capped at £2,500 per month will be paid as a taxable grant in June, for the previous three months.
To Qualify:
- The majority, more than 50%, of your income must be from self-employment for the 2018/19 tax year, or
- The majority, more than 50%, of your avergae trading profits between 2016/17 – 2018/19 must be more than your average taxable income over the same period.
- Your business profits must be under £50k. If your profits are more than £50k you will not qualify for the grant funding.
- You must complete a disclosure form to confirm that you are continuing to trade when the claim is made.
Other Criteria:
- You can claim the grant and continue to trade, subject to medical restrictions and social restrictions for certain businesses. This is different to the furloughed workers scheme as they must stop all work for their employer to qualify.
- The grant is taxable and will need to be included as part of your business income.
- If HMRC does not hold tax return data for you for 2016/17, 2017/18 and 2018/19, they will look at the years that they do have, i.e. 2018/19 if that is the only one.
- You do not have to apply, HMRC will contact you directly if you are eligible.
- If you have not yet submitted your 2018/19 tax return and are self-employed, there is a 4-week extension to file your 2018/19 return to enable you to qualify for the grant.
Who will not qualify:
- Businesses with profits of more than £50k
- New businesses that commenced trading after 5th April 2019. You may qualify for Universal Credit and should claim this instead if you meet the other qualifying conditions.
- If you started your business before 5th April 2019, but the majority of your income came from employment, you will not qualify for the grant.
- If you operate your business via a limited company you will not qualify for SEISS. However, you may qualify for the Coronavirus Job Retention Scheme (CJRS) but you will need to stop all work to do so. Only 80% of your PAYE salary will be covered, not any dividends that are paid in addition to your salary.
- If you were self-employed and have recently incorporated your business, since 5th April 2019, you are unlikely to qualify for the scheme.
If you do not qualify for the SEISS, you may qualify for Universal Credit instead. The minimum income floor has been temporarily removed, so all businesses should qualify for the full rate of Universal Credit, subject to the other qualifying conditions, such as having less than £6,000 of savings.
If you have filed a 2018/19 tax return and have a payment on account to make in July 2020, this can be deferred until January 2021 without interest being added. This will apply to all self-employed people and is not restricted in the same way as SEISS.
If you need help navigating your way through the various options, please do get in touch we are happy to help.