Businesses across the UK have been affected by the COVID-19 outbreak and subsequent lock down. While support was announced quickly for those in employment, the UKs five million self-employed businesses and freelancers were left in limbo.

Last week Chancellor Rishi Sunak finally unveiled the Government’s plans to help the self employed via the new Self-employment Income Support Scheme.

The Scheme offers a taxable grant with up to 80% of self employed trading profits up to a maximum of £2,500 per month for the next three months. But as news of the grant was widespread many of the practical implications were glossed over by the mainstream media.

What exactly is the Self-employment Income Support Scheme?

As the name suggests the new Self-employment Income Support Scheme targets the self employed, but also members of partnerships who have lost trading profits due to COVID-19.

The Scheme will allow those affected to claim a taxable grant worth up to 80% of the trading profits up to a maximum of £2,500 per month.

Payments will begin in June, but are backdated to cover the a period from March to May. It may be extended depending on situation with a the lockdown.

The payment itself will come in a lump sum, so the maximum of £7,500 could land in your account. Remember the payments are taxable though.

Who can apply?

The Scheme applies to everyone who makes more than half their income from self employment, up to a maximum of £50,000 profit in a year.

It only allies to self employed people who have filed a tax return for the 2018/19 tax year. Those that haven’t done so, have until to 23 April to file. Money Saving Answers recommends FreeAgent for easy online accounting and tax return filing. 

The business itself must be trading when the grant is applied for, and must intend to continue to trade in the 2020/21 tax year.

Who is excluded?

Those that operate under a company structure aren’t eligible, as separate help and support is available for companies.

The Scheme only provides for those who have filed a 2018/19 tax return showing that the majority of their income during that year was from self employment.

Self employed people enjoying profits of over £50,000 for the last three years are not eligible. As it stands it is possible that two self employed individuals living a household and each earning £49,999 profits, would both be eligible for the scheme, but an individual earning £50,001 would get nothing.

How are profits and payments calculated?

HMRC will take an average of the last three years declared profits, and use this figure to decided if you are eligible, and how much you will receive.

Some that have previously under-declared their profits or tried to game the system, will now potentially earn less than might have otherwise been eligible for.

If your self employed trading profit has been over £50,000 in the last three years, you could still be eligible provided that average profit during that period is below the £50,000 threshold.

To see how much you might be entitled to, try the new COVID-19 grant calculator courtesy of CountingUP.

How are the funds accessed (how to apply)?

One curious aspect about the Scheme is that as it stands it cannot be applied for. It is being operated through HMRC and as such HMRC will contact eligible self employed people directly.

It is understood that there will be a form to complete to verify your identity, confirm that you are still trading/intending to trade, and have been adversely affected by the virus.

Once processed, payments will then be made directly into your bank account, though more details are yet to be announced.

It is important to note that the Government has urged people not to contact HMRC about the Scheme – they will contact you using previous tax data. You can still contact HMRC about other matters such as paying tax, or for help and advice. In fact a new HMRC helpline has been setup for self employed individuals, and other businesses.

What if I need additional help?

Payments from the Self-employment Income Support Scheme won’t start hitting accounts until June. Understandably many self employed people will be worried about the shortfall in the meantime. There is additional help available via the following:

The Coronavirus Business Interruption Loan Scheme (CBILS), which opened for applications on 23 March. It provides loans for businesses that make up to £45m turnover and have experienced cashflow problems due to the virus. The government will pay any interest and fees for 12 months, and self-employed people can apply for the loan from 40 lenders. More information can be found on the British Business Bank website.

Delaying paying tax – The Chancellor has deferred the deadline for completing your self-assessment 2019/20 tax return until January 2021, which may provide a cash lifeline for a few months. For this, you need to contact HMRC

Universal credit – The self employed now have access to the universial credit system and can claim cover uo to the level of £94.25 per week. That is equivalent to Statutory Sick Pay

Your local council – Councils have been given extra funding to help those in need. Whether it is paying rent, businesses rates, or other matters, Contact your local council to find out more.

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