Support for the self-employed affected by the coronavirus

Important update as at 22 April 2020 re calculation of trading profits

Having previously introduced the Coronavirus Job Retention Scheme to assist employers suffering from the impact of the coronavirus, the chancellor announced the support available for the self-employed affected by the coronavirus. This is known as the Coronavirus self-employment income support scheme.

Coronavirus self-employment income support scheme

The support for the self-employed affected by the coronavirus comes in the form of a taxable grant worth 80% of your trading profits. It is a capped at a maximum of £2,500 per month for the next 3 months. This may be extended if needed.

Who is eligible?

As a starting point, it is any individual sole trader or member of a partnership who has lost income due to the coronavirus and the following applies:  

  • You have already submitted your Income Tax Self Assessment tax return for the tax year 2018-19. Additionally HM Revenue have also stated that 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. 
  • You have traded in the current tax year
  • You are trading when you apply for the scheme or would be except for the impact of the coronavirus
  • Your intend to continue trading in the 2020/21 tax year
  • You have lost trading/partnership trading profits due to the coronavirus

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

An important point to mention is that apparently an income cap is not applied to The Coronavirus Job Retention Scheme. Therefore an employer can potentially apply for relief under this scheme where their employees earn in excess of £50,000. 

  • You have trading profits/partnership profits in 2018-19 of less than £50,000 and these profits consist of more than half of your total taxable income
  • You have average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits consist of more than half of your average taxable income in the same period

If you started trading between the period 2016-19, HM Revenue will only use those years for which you filed a Self-Assessment tax return.

How much will I get?

An individual will get a taxable grant which will be equivalent to 80% of the average profits from the 2016/17, 2017/18 and 2018/19 tax years (where appropriate)

In order to calculate the average HM Revenue will add together the total trading profit for the 3 tax years (where applicable) divide this by 3 (where applicable) using this to calculate a monthly amount.It will be up to a maximum of £2,500 per month for 3 months

HM Revenue have now provided further guidance on calculating profits for claims - see here.

How to claim

HM Revenue will contact directly those individuals who potentially qualify and invite them to make an online claim. It should be noted that any amounts received are likely to impact on any tax credits claim

Other points

Disappointingly no relief appears to be available for director led companies who take nominal salaries and receive the majority of their income as dividends

However, the Chancellor did imply that they may be eligible to claim under the Coronavirus Job Retention Scheme. However given the above this does not amount to a great deal and is scant compensation for those who contract through their own company whose income may have disappeared overnight.

The Chancellor has also indicated that the disparity in income tax rates between the self-employed and employed will receive further scrutiny in the future. This may indicate a rise in the National Insurance cost for sole traders and partners at a later date.

On a final note we've also included a link here from our institute who has raised various issues about the scheme with HM Revenue. 

For more useful information, check out our Ebooks here.

And if you'd like to know how we can help you with all of this, or with anything else, feel free to give us a call on 01202 048696 or email us at [email protected].

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