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Help for the Self Employed

Hello to you all

I hope that you and your families are all well.

Help for the Self Employed

The Government has finally issued a plan to assist the Self Employed. I must warn you that not every Self Employed person will benefit from this system and this is addressed at the end of this letter.

I would also advise you that there is unlikely to be any payment of this assistance before the end of June and so this may cause cashflow issues for many of you. Again, I have addressed how you may be able to access help, to varying degrees, at the end of this letter.

How does the scheme work?

This scheme will allow you to claim a taxable grant worth 80% of your trading profits up to a maximum of £2,500 per month for the next 3 months. This may be extended if needed.

How do you apply?

You can apply if you're a self-employed individual or a member of a partnership and you:

  • have submitted your Income Tax Self Assessment tax return for the tax year 2018-19
  • continued to trade in the tax year 2019-20
  • are still trading when you apply, or would be except for COVID-19
  • intend to continue to trade in the tax year 2020-21
  • have lost trading/partnership trading profits due to COVID-19

Your self-employed trading profits must also be less than £50,000 and more than half of your income must come from self-employment. This is determined by at least one of the following conditions being true:

  • having trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income
  • having 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 2016-19, HMRC will only use those years for which you filed a Self-Assessment tax return.

If you have not submitted your Income Tax Self-Assessment tax return for the tax year 2018-19, you must do this by 23 April 2020.

If you think you will be eligible then contact us today and we will prepare and submit your outstanding Return.

HMRC will use data on 2018-19 returns already submitted to identify those eligible and will risk assess any late returns filed before the 23 April 2020 deadline in the usual way.

How much will you get?

You'll get a taxable grant which will be 80% of the average profits from the tax years (where applicable):

  • 2016 to 2017
  • 2017 to 2018
  • 2018 to 2019

To work out the average HMRC will add together the total trading profit for the 3 tax years (where applicable) then divide by 3 (where applicable), and use this to calculate a monthly amount.

It will be up to a maximum of £2,500 per month for 3 months.

The grant will be paid directly into your bank account, in one instalment.

How to apply

You cannot apply for this scheme yet.

HMRC will contact you if you are eligible for the scheme and invite you to apply online.

Individuals do not need to contact HMRC now and they say doing so will only delay the urgent work being undertaken to introduce the scheme.

You can access this scheme only through GOV.UK If someone texts, calls or emails claiming to be from HMRC, saying that you can claim financial help or are owed a tax refund, and asks you to click on a link or to give information such as your name, credit card or bank details, it is a scam.

What happens after you have applied

Once HMRC has received your claim and you are eligible for the grant, they will contact you to tell you how much you will get and the payment details.

If you claim tax credits you'll need to include the grant in your claim as income.

In the meantime, what help is available?

The government is also providing the following additional help for the self-employed:

If you're a director of your own company and paid through PAYE you may be able to get support using the Job Retention Scheme.

In summary…

This scheme will prove, in the medium term to be very helpful for a lot of self employed people. It does leave some people unprotected though and I would urge you to apply online for Universal Credit if you do not think that you will be entitled to any assistance or if you cannot get by until the Government makes the first payment in 3 months time.

Also, this grant is taxable and will need to be included on your 2021 Tax Return. Please be mindful of this as, even if you get the maximum £2,500, some of this income will be the tax that needs to be paid down the line, possibly at a higher rate than current tax rates. The Chancellor highlighted that this support that they are providing now has to be paid for in the future so be prepared for a tax rise.

As ever we are here to help you through this time.

Stay safe and be kind to each other.

Take care


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