Self-employment Income Support Scheme

Information and step-by-step breakdown

The government page is here: https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme for reference.

The scheme allows you to claim a taxable grant worth 80% of your trading profits (income minus expenses) up to a maximum of £2,500 per month for 3 months, the government started paying in June, backdated to March. If you are eligible for the scheme and would like to claim the first payment, then you must make this claim by 13 July 2020.

This scheme is being extended: if you are eligible for the second and final grant, and your business has been adversely affected on or after 14 July 2020, you will be able to make a claim from 17 August 2020. You can make a claim for the second grant if you are eligible, even if you did not make a claim for the first grant.

Don't worry, you can still claim Universal Credit now and get access to this scheme.

Who can apply?

You can apply if you’re a self-employed individual and you:

  • have submitted your Income Tax Self Assessment tax return for the tax year 2018-19 (by 23rd April 2020);
  • traded in the tax year 2019/20;
  • are trading when you apply, or would be if it wasn't for COVID-19;
  • intend to continue to trade in the tax year 2020/21; and
  • have lost trading profits due to COVID-19.

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

  • having trading profits in 2018/19 of less than £50,000 and these profits are 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 and 2019, HMRC will only use those years for which you filed a Self-Assessment tax return.

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.

An eligibility check is now available. Follow the link below and then enter your UTR number and N.I. number. It will then tell you whether or not you are eligible and, if you are, how much you can claim.

Government Eligibility Checker here: https://www.tax.service.gov.uk/self-employment-support/enter-unique-taxpayer-reference

If you receive the grant, you can continue to work, start a new trade or take on other employment, including voluntary work.

How much you’ll get

You’ll get a taxable grant which will be 80% of the average profits from the tax years 2016/17, 2017/18 and 2018/19 - if you have not worked in some of these years, then they simply won't be included, but you do need to have worked in 2018/19 and completed your tax return.

‘Taxable grant’: a) ‘taxable’ meaning it needs to be included in your taxable income for tax year 2020/21; and b) ‘grant’ meaning money you don’t have to pay back.

To work out the average HMRC will add together the total trading profit (this is your self-employed income minus your relevant allowable business expenses) for the relevant tax years then divide by however many tax years this is. This gives an annual amount, so it will use this number to calculate a monthly amount (80% of this divided by 12).

It will be up to a maximum of £2,500 per month for 3 months, but so long as your trading profits average under £37,500 this limit won't impact you.

The grant will be paid directly into your bank account, in one instalment, to cover the 3 months up until the start of June.

As you can see, this is based on a pre-tax figure, and so it will be included as taxable income on your 2020/21 tax return and you will be taxed on it if you earn more than the personal allowance (£12,500), as well as paying any relevant national insurance contributions if you earn more than the earnigns threshold (£9,500). But we will cover this is the tax return guide next year.

How to apply

Unfortunately, we are hearing a lot of cases of criminals using phishing attack to get people's personal data off them by playing on people's fear around CV-19. The government page states clearly:

You will access this scheme only through the GOV.UK website. 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.

After you’ve applied

Once HMRC has received your claim and you are eligible for the grant, they will contact you to tell you how much you will get and the payment details.

If you claim tax credits you’ll need to include the grant in your claim as income.

Our thoughts and concerns (some examples)

Firstly, we think this is a good offering from the government - at a time when we are all feeling the pinch of cancelled contracts and no new work out there, this is a real lifeline. However, we fear that our industry is one that may fall through the cracks on this. Here are some examples where you may find this is not as good for you as it could be:

  • If most of your work is on fixed length employed contracts e.g. cruises the you will likely not be eligible as your income will be primarily employed. Even if you are eligible, then it is likely that your grant will just be based on the self-employed bit.
  • If you graduated this year, then you may not have compelted your 2018/19 tax return (since you probably had no work) and will not be eligible.

As the government said, "don't let great get in the way of good", and this scheme is good, we just hope that they take steps to make it great as quickly as possible.

What other help is out there?

Check out our COVID-19 post to see the other ways you can support yourself at this time. The main alternative is Universal Credit, which we have a post for.


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