Self-Employment Income Support Scheme
After several days of wild speculation and a reported rift between the residents of numbers 10 and 11 Downing Street, the government have confirmed measures to assist self-employed people during the coronavirus outbreak.
The Chancellor announced those actively self-employed who have lost revenue due to the coronavirus situation will receive a monthly payment representing up to 80% of average monthly trading profits – capped at £2,500 – from March 2020 until January 2021.
This is in the format of three grants are various income points, with the first period covering March, April and May 2020 and the final month covered in January 20021, yet the government will look to extend this scheme should they consider it appropriate.
It is important to note that this scheme is for self-employed people (sole traders or partnerships) and not company directors who are in receipt of dividends.
The self-employed person must also earn less than £50,000 per annum on average in order to qualify and their self-employed income must represent at least half of their overall taxable income.
Moreover, the sole trader or partner must be profitable – the cash grant is based on average monthly profits and not turnover.
Another group who will be disappointed not to be included in the scope of this scheme will be those who took up self-employment since 06 April 2019 – only those who have filed a tax return for the year ended 05 April 2019 will qualify.
The government will calculate the typical monthly earnings by averaging the last three years’ filed accounts to produce a representative monthly trading profit.
If sole traders or partners have been trading for less than three years, an average will be taken from the available tax returns.
We understand that a weighted average will not be applied and therefore the calculation is a simple exercise of combining the net profits from the tax returns ended 2019, 2018 and 2017 and dividing this figure by 36.
Remember, you will only receive 80% of this figure, consistent with the job retention scheme already announced for employees.
This will be made available to the self-employed tax payer in the form of a grant.
Applications for the scheme opened as of 13 May 2020 and you can read more about this process via our news article on the subject.
The three month payment will be combined and made as one single grant paid directly into your bank account.
This income will be taxable in the usual way and hence will need to be included in your next tax return.
Ask Us For Help
We are here to help and have set up a dedicated team to help you during this crisis.
If you believe you qualify for this scheme, please contact us on firstname.lastname@example.org and we will advise on your eligibility and the next steps in processing the application.