31

March

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Covid-19 Support for the Self-Employed

What is this about?

A new government self-employed scheme to be taken under advisement alongside the Coronavirus Job Retention Scheme (CJRS) and short-term changes to the benefits system.

Who does it support?

  • a) those who earn the majority of their income (i.e. more than half their income) from self-employment and
  • b) those who have a trading profit of less than £50,000 in 2018-19 or an average trading profit of less than £50,000 from 2016-17, 2017-18 and 2018-19.

What benefit will they be able to access?

  • A taxable grant equal to 80% of the average profits they reported across the three years from April 2016 to April 2019, up to a cap of £2,500 per month, if they report that their income has been negatively impacted as a result of coronavirus.

Caveats

  • The payment will not be made until June, so the self-employed will have to rely on borrowing or benefits to cover short run falls in income; this should be easier now that they can be certain that a payment will be made.

Implications

  • It is expected almost everyone who gets more than half of their income from self-employment and earns less than £50,000 to take up this policy, both because very few businesses will have been unaffected by coronavirus and because it would be extremely difficult for HMRC to know if people were misreporting a negative impact.
  • The grant, which is based on past profit rather than current incomes, will give just as much to those who have seen only a small fall in profits as to those who have lost all of their income.
  • Some people, including those whose profits fall by less than 80% as a results of the coronavirus and those whose profits were falling, will be better off than they would have been without coronavirus.
  • The policy does not disincentivise people from continuing to work, either in their original trade or by taking a new job.

Who does it not support?

  • Those who earn the minority of the income (i.e. less than half) from self-employment and who have an average trading profit of greater than £50,000 from 2016-17, 2017-18 and 2018-19.
  • People who set up a business in the last year (and did not therefore file a 2018-19 tax return) do not have access to the scheme.
  • Company owner-managers who pay themselves mostly through dividends. Those running their own incorporated businesses are not eligible for the new scheme. It is believed they are eligible for the CJRS in relation to their salary if they stop working.

How to apply

The scheme is not open for applications yet. HMRC will contact you if you are eligible for the scheme and invite you to apply online.

More information is available here


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