UK Chancellor announced self-employment income support scheme for self-employed people who are getting less work or no work and have been adversely affected due to coronavirus. Self-employed workers will be able to claim this taxable grant worth 80 per cent of their average monthly profits over the last three years, up to a maximum of £2,500 per month. This self-employment income support scheme will be available for 95 per cent genuinely self-employed people who make their majority of income through self-employment for at least three months and will be extended if necessary.

Who is eligible for income support grant?

Self-employed individual or member of the partnership will be able to claim this grant and continue to work after receiving the grant. So you can apply for this taxable income support grant if you:

  • have submitted your Self-Assessment tax return for the tax year 2018 to 2019 and which consists of your self-employed profits
  • Traded in the tax year 2019 to 2020 and want to continue you’re trading in the next tax year 2020/21.
  • are trading when they apply, or would be except for coronavirus
  • have lost trading profits due to coronavirus

This taxable income support grant provides targeted support if your self-employed profit is less than £50,000 and more than half of your income from self-employment. This applies to you if one of the following conditions is fulfilled:

  • Trading profits of up to £50,000 for the tax year 2018-19 and these profits create more than half of your total taxable income
  • Average trading profit of less than £50,000 for the tax year from 2016-17, 2017-18 and 2018-19 and these profits create more than half of your average taxable income in the same period.

If you are Directors of limited companies or who work through your own company and receive wages through PAYE then you are not eligible for this grant but may get support from job retention scheme.

HMRC Work out the Grant: how much will be your grant under the self-employed income support scheme?

HMRC will use your data on submitted tax returns showing your self-employed income to identify your eligibility for self-employment income support scheme.

To calculate your average, HMRC will add together the total trading profits for 3 tax years, then divide by 3 and use this to calculate a monthly amount.

For example, you have self-employment profits for the last three tax years given below, have no other income and are not able to continue work because of coronavirus

  • 2016/17 tax year £30,000 (trading profits)
  • 2017/18 tax year £20,000 (trading profits)
  • 2018/19 tax year £25,000 (trading profits)

HMRC will add together your total profits for three tax years and work out your grant by using your submitted tax return data for three tax years as

Total Profits = £30,000 + £26,000+ £30,000 = £75,000

And averages at per tax year will be calculated by dividing the total profits by 3.

Average per tax year = £75,000/3 = £25,000

So, your average profit for per tax years is £25,000 that is less than your average profits of £50,000 and you can receive taxable income support grant 80% of your average profits £25,000 for three months calculated as

2018/19 tax year £25,000 (trading profits)

Grant = £25,000 × 80/100 × 3/12 = £5,000 (Grant)

Your grant will be £5,000 for three months and £1,666.67  per month.

How much you will get under self-employed income support scheme if you had been self-employed only for the tax year 2018/19 or have submitted your tax return only for the tax year of 2018/19?

If you had been self-employed from 2018/19 and before this you had not been self-employed for the previous three years, then HMRC has to look at your submitted 2018/19 tax return information to calculate your grant. For example,  if you have total profits £30,000 for the tax year of 2018/19, you can receive taxable income support grant 80% for three months at total profits £30,000 for the tax year 2018/19  calculating as

Grant = £30000 × 80/100 × 3/12 = £6,000

You will receive the total grant of £6,000 for three months and £2,000 per month.

If you are self-employed and have not submitted your income tax self-assessment tax return for the year of 2018/2019, submit it by the deadline of 23rd April.

If your self-employment began after 5th April, you will not be eligible for this self-employment income support scheme because HMRC will not have any data of your already submitted tax returns showing your self-employed income to identify your eligibility and to calculate your taxable income support grant.

HMRC is working on this scheme urgently and people will be able to access this self-employment income support scheme no later than the beginning of the June and this scheme will cover three months from March 2020 to May 2020.

You will have to disclose this taxable grant on your self-assessment tax return later on to pay income tax and national insurance on it.

How to apply for self-employed income support scheme?

If you are eligible HMRC will contact you directly and ask you to fill out the online form and then pay the grants in straight into your bank accounts.

UK Government coronavirus business support schemes for Britain self-employed:

Government is also providing other supports to self-employed people who have been adversely affected by coronavirus including self-assessment deferment scheme, VAT deferment scheme, business interruption loan scheme, statutory Self Employment Pay scheme, statutory sick pay relief.

How can our accountants in Reading help you in your accountancy, taxation and financial needs?

If you are self-employed and want to submit your tax return and need any advice for your self-assessment tax returns, other tax affairs and government support schemes, you can contact our expert team of Berkshire accountants at Berkshire accountants limited. We are professional accountants, tax advisors and registered auditors who deliver services on the personal and business basis.