Help for the self employed affected by coronavirus
The UK Government has now announced 3 main measures to help self-employed workers through the coronavirus outbreak and the associated impact on their business. Here, we summarise the 3 main measures, and what you can do now. If you're a company director and pay yourself a salary or dividends have a look at our more relevant support page.
1. Claim a Grant
- 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
- 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
- traded in the tax year 2019-20
- are 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 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, get in touch with us and we'll help, whether you're already a client or not. You must do this by 23 April 2020.
- 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.
You cannot apply for this scheme yet. HMRC will contact you if you are eligible for the scheme and invite you to apply online. Once HMRC has received your claim and confirm you are eligible for the grant, they will contact you to tell you how much you will get and the payment details. If you get contacted by HMRC and want help, or if others are being contacted and you think you should be but aren't, get in touch and we'll be happy to help.
Q. How much will I get?
A. 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. HMRC will pay the grant directly into your bank account, in one instalment. If you claim tax credits you’ll need to include the grant in your claim as income.
Q. What if I get a phone call from HMRC?
A. You will 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.
Q. How long's all this going to take?
A. Those eligible will be contacted by HM Revenue & Customs directly – HMRC haven't said when this'll be, only that it will happen "once the scheme is operational". At that point you'll be asked to fill in an online form, and the grant will then be paid directly into your bank account. Guidance is that you're unlikely to see any money before June.
Q. I can't wait til then. What can I do?
A. There are 3 things you can do now;
- Apply for a Business Interruption loan through your bank - there's more information on our general page here and also below.
- Don't pay your VAT bill if you are VAT registered. You don't have to pay your VAT bill on time if it's due between now and end June - it's possible to delay it until end Jan. 2021
- Don't pay your payment on account at the end of July - you can delay this until January 2021 without penalty.
You can also apply for Universal Credit.
Q. If I apply for the grant, do I have to stop working?
A. No, that’s not a requirement – you can continue working and earning if you’re able to once you’ve applied, and this won’t have any impact on you getting a grant.
Q. I’ve only become a new business this year and haven’t yet had the chance to file a tax return – can I apply?
A. No, unfortunately not. If you weren’t able to file a tax return for self-employed earnings in 2018/19, you won’t be able to apply.
Q. What if my business was just getting started and I made a loss?
A. The grant you’ll get is based on your average monthly profits – so if you made a loss, unfortunately you won’t be able to get anything.
2. Apply for a Business Interruption Loan.
More details of this are on our general page. In summary;
- This scheme is a Government loan guarantee which secures bank loans to any viable business with a sound borrowing proposal but which may lack adequate security. There is no fee required for Government guarantee, and no loan arrangement fee or loan prepayment fee, should you wish to repay early.
- An interest free period of 12 months will apply.
- No repayment of capital is required during the period of 12 months from drawdown.
- For sole traders and partnerships, the amount available is between £25,001 and £5,000,000.
- The loan can be repaid over any period up to 6 years.
- Variable interest rate with option to fix
3. Defer your income tax payment.
If you have income tax payments due in July 2020 under the self-assessment system, you can defer them until January 2021. See our general page for details.