Financial provision for some self employed

The assistance on offer as outlined today by the Chancellor – a ‘taxable grant‘ – applies only to self-employed taxpayers who are trading or intending to continue when circumstances permit, and who

  • Have submitted their tax return for the year ended 5 April 2019, including trading income (self employed or partnership income)
  • Have taxable profits from self employment of £50,000 or less, based on either

– profits under £50,000 for the year ended 5 April 2019 and more than half of total income is self employed (including partnership income); or

– an average of their last 3 years’ profits in their tax calculations being not more than £50,000

Taxpayers who are still working (maybe much less) can claim and still keep earning during this time.

Profits in a year a taxpayer didn’t have to pay tax (eg because they were under the tax-free personal allowance) still count.

Anyone newly self employed who did not have to submit a tax return yet does not qualify for assistance, although taxpayers one or two years in do based on tax returns so far.

The taxable grant will be 80% of self-employed profits per month up to a maximum of £2,500 per month. This will be available for at least 3 months. It is possible to claim the grant and also continue to earn for those who can.

HMRC will contact eligible taxpayers directly about the taxable grant, and there will be an online form to fill in. The aim is to make this available by early June. At the moment my understanding is that individuals will be contacted personally – not via tax advisers – and will need to make their own declaration online to apply. More news as any is released. (This is an entirely new system but I am hopeful that something simple and efficient will be put together.)

https://www.gov.uk/guidance/claim-a-grant-through-the-coronavirus-covid-19-self-employment-income-support-scheme

I have put a link to the right – TAXABLE GRANT: PROFIT FIGURES – to clarify which figure(s) from clients’ tax calculations are relevant. This may be useful when making an application. (Although as HMRC already holds the relevant information it may not be needed.)

Taxpayers who have not yet submitted their 2019 return have 4 weeks’ grace to do so (before 23 April), and can do this without the usual £100 penalty, and then apply for the taxable grant if eligible.

Income in the year to 5 April 2020 is ignored for the taxable grant.

Points not clear to me yet on the taxable grant, which I shall try to find out, are:

  • How HMRC will contact people (letter/email. Letter would seem less than ideal, since many have moved in with other family members for the time being and may not be at their home address.) We must be especially alert to possible scam emails around this
  • How a loss-making year is treated in the three-year average (I would guess counts as zero)
  • How the grant will be taxed (though I assume it will be taxed as part of earned income in the tax return)
  • Whether the £100 late penalty will be waived entirely (including for anyone who has already paid this) this year.

Business interruption loans may be available, including to those with profits over £50,000. There are details here https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-scheme-cbils-2/for-businesses-and-advisors/

And some taxpayers will qualify for Universal Credit. There are many reports of difficulty getting through online/by phone with applications but more staff are being brought in to process these.

The Chancellor also hinted at raising national insurance in future for the self employed, to the levels paid by employees (broadly 3% more). This is too far in the future to know how it might work at this stage.

Calls for financial provision for the self employed

There is much speculation as to whether the Chancellor will announce any substantial help for self-employed taxpayers. Clearly everyone whose self-employed work is affected (including me) is hoping for news sooner rather than later, and some statement on plans is expected in the next few days.

Clients are understandably asking what is available and what information they will need to provide to access this. If anything is rolled out, I shall add a further update here. Taxpayers with mortgages are used to providing various information based on previous tax returns. If assistance is offered to the self employed which is administered by HMRC, it is highly unlikely that they would request previous years’ tax calculations, since this is information HMRC already holds.

In the meantime, anyone wanting to find out about Universal Credit can find information here, and check availability https://www.gov.uk/self-employment-and-universal-credit 

Taxpayers with children, but who do not claim Child Benefit because of income levels may wish to start claiming this now. This could provide some extra cash within the next few months. Worst case, this would be taken back in tax later (but not until 2022 if received from 6 April onwards this year). Child benefit can be backdated by  maximum of three months. Information on claiming is here https://www.gov.uk/child-benefit/how-to-claim

Some clients have asked about tax credits. These have been replaced by Universal Credit for new claims, but continue for taxpayers already receiving tax credits: there is information here https://www.gov.uk/claim-tax-credits

There is a BBC article here which explains some of the challenges of making aid to self-employed taxpayers work practically and fairly https://www.bbc.co.uk/news/business-52021299.

20 March 2020

We can expect further announcements from the Chancellor in the coming weeks.

Cashflow is pressing for many. Announcements today affecting tax:

  • VAT-registered businesses can wait from now until the end of June to pay their next VAT bill
  • Those with income tax payments due this July can wait to pay until January 2021

There is also a business interruption loan scheme which will offer interest-free loans for up to 12 months.

Do be especially watchful for scam emails and calls at this time. These are likely to be on the rise, including increasingly convincing ones pretending to offer refunds from HMRC, at a time when people are understandably preoccupied.

Spring 2020 Budget

There was no 2019 budget – the expected autumn date was moved, because of uncertainty over Brexit.

Since then, a new Chancellor, a new Budget and the far greater uncertainty mean that it is difficult to advise my tax clients for the best (also at present difficult to keep up with the many calls and messages, so please bear with me).

Aside from health, most people’s financial focus at this time is on cashflow and short-term future. I chose not to send any Budget comment last week, since with things changing so rapidly, I expected some of the measures in the Budget to change.

The Chancellor is due to make a further announcement later today, likely to be around further concessions to help people in immediate difficulty. As with the measures already offered, some of these will relate to tax, others will not.

I think the most useful thing for me to offer at this time will be links to Government-issued information. This already includes a much extended version of the type of ‘time to pay’ arrangements HMRC previously offered.

Tax planning during March, before the start of April and in time for the end of the tax year, generally revolves around spending: pension top ups, charity donations, items of work equipment. That is unlikely to be useful to anyone this year. But anyone with particular tax questions relating to the end of the tax year is welcome to be in touch. And as always, any client receiving an unexpected demand for payment from HMRC, a refund they do not think they are owed, or an enquiry notice, should please contact me as soon as they can.

 

Spring Statement

Everything at the moment feels rather provisional. A high likelihood this year of some mid-tax year changes, depending on what happens or doesn’t with Brexit.

The new digital platform for VAT is going ahead from April 2019. The information needed and the rules on what is included in the VAT return stay the same. It is the method of storing and transmitting the information to HMRC which are changing. Further details on my Making Tax Digital page.

Digital returns for income tax are not planned until 2021 at the earliest.

Budget Day 2018

A great deal of spending was outlined, all worthwhile and much sorely needed, including for example funds going into mental health services, help for small retailers, and some measures to take the sting out of the move to Universal Credit. Pledges to ‘leave more of people’s hard-earned money in their pockets’ include raising the tax-free personal allowance to £12,500 and the higher-rate (40%) threshold to £50,000 in April 2019, earlier than preannounced.

On first glance, it isn’t obvious to me where the savings or extra tax are coming from to balance these (although the Chancellor seems willing to accept a greater deficit for longer, and a new Digital Services Tax has been announced to tax giant online businesses trading in the UK). I shall be looking carefully to see whether ‘Fiscal Phil’ has in fact made some unannounced, ‘back door’ tax increases in the detail of the Budget documents. Otherwise, it feels as though in the face of storm warnings, the rainy day fund is being spent. And not on umbrellas.

Detail will be added into my BUDGET NEWS page (above) as I go. I certainly see the freezing of the VAT registration threshold for a further two years as a revenue raiser, because this will mean that more traders will need to register for VAT in the coming years.