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.)
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.