New Provisions For The Self EmployedBack
As the coronavirus situation in the UK continues to develop, the government has been forced to strengthen and add to the provisions and benefits package offered to small businesses and the self-employed over the past few weeks.
On Tuesday 26th March, Chancellor of the Exchequer Rishi Sunak announced a set of additional measures designed to ease the financial pressures placed on the self-employed by COVID-19. The government has also assured the UK that even more help will be offered in time, as the situation develops.
Amongst the measures announced, and drafted into the newest legislation - a taxable grant of up to 80% of a contractor or business’s average profits over the past three years (up to £2,500 per month). The grant will be open to applications for at least another three months, and to ensure that no one misses out on the scheme, the government has said that it will allow anyone who missed the January tax return deadline another four weeks to submit theirs.
Mr Sunak said that the package was "generous" and that 95% of self-employed people will be able to benefit from it.
Self-Employment Income Support Scheme
Designed for those who are self-employed and members of partnerships, who have lost income as a result of coronavirus (COVID-19), the Self-Employment Income Support Scheme allows you to claim a grant worth 80% or £2,500 of your taxable profits (whichever is lower), for at least the next three months.
Who Is Eligible?
Self-employed individuals or members of partnerships are eligible to apply for the scheme, as long as they meet the following criteria:
- You must have submitted your Self Assessment tax return for the tax year 2018-19 (those who have missed the deadline have an additional 4 weeks to submit)
- You must have traded in the tax year 2019-20
- You should currently be trading at the time of application, or would be if it weren’t for COVID-19
- You intend to trade in the tax year 2020-21
- You have lost money as a result of COVID-19
To make an application, your average trading profits must be less than £50,000, and more than half of your income must come from self-employment. This is defined as:
- Having trading profits of less than £50,000 in 2018-19, and these profits constitute more than half of your total taxable income for that tax year
- Having average trading profits of less than £50,000 in 2016-17, 2017-18, and 2018-19, with these profits constituting more than half of your average taxable income in the same period
If you started trading between 2016-19, HMRC will use the years available to work out your grant, as long as you have submitted a tax return for each year that you want taken into consideration.
How Is The Amount Worked Out?
The grant is calculated using a figure representing 80% of your average profits from the tax years 2016-2019. To do this, the three tax years will be added together and then divided by three, and your grant will be worked out as 80% of the total, or £2,500 per month, whichever is lower.
Those who believe that they are entitled to the grant don’t have to do anything, HMRC will contact everyone that they believe is entitled to the income support grant, and after the application the money will be paid directly into your bank account.
In Mr. Sunak’s address, the Chancellor announced a suspension of the minimum income floor for the self employed, and a raise to the standard allowance amount by £1,000 for the next 12 months. This means that self-employed people are now able to apply for Universal Credit (UC) at a rate that is equivalent to the Statutory Sick Pay amount for employees.
Can You Claim Universal Credit And A Government Grant?
Whilst the government is moving as fast as possible to ensure that income support grants are processed and paid out as quickly as possible, most estimates are that people won’t start to see the money until June. In the meantime, self-employed people can apply for Universal Credit.
You may still be able to claim UC after your grant, depending on the amount that you receive, as benefits are calculated based on earnings. If your income meets the Universal Credit cap then you will no longer qualify, but if not you will still receive some UC to top up your earnings.
Coronavirus Business Interruption Loan Scheme
Delivered by the British Business Bank and launched 23 March 2020, the Coronavirus Business Interruption Loan Scheme is designed to support SMEs who require loans and overdrafts to bolster their business during the current crisis.
The government has agreed to provide lenders with a guarantee of 80% on each loan, and has promised not to charge either businesses or banks for this guarantee. This gives lenders a little more confidence when it comes to providing loans and helps businesses to comfortably take the help that is offered.
There is an interest-free period of 12 months for loans taken out through the scheme, and loans are supported of up to £5 million in value.
At the time of writing, there are more than 40 accredited providers taking part in the scheme, with more being added all the time. All of the major UK banks will offer the scheme, and businesses are eligible if their company is UK-based and has a turnover of less than £45 million annually.
To access the scheme, businesses can simply contact their current bank or any lender that they prefer directly.
What Should I Do Next?
The official advice for small businesses and contractors is to keep working for as long as you can during the coronavirus crisis, to maximise profits and keep companies working as much as possible. During this time it is still possible to apply for any help that you need, so don’t let this put you off getting a grant or loan.
Make sure that your tax returns and accounts are up to date and put in an application as quickly as possible to try to keep cash flowing into your business during this difficult time.
The team at TFMC are here to help during this difficult time and can help to advise you on what your next steps should be. Please contact us on 0800 470 4820 or via email at email@example.com to find out more.