A lifeline for the self-employed?
The significant number of self-employed and freelance workers in our region will have been relieved to finally hear some positive news from the Chancellor last night as he announced support with c.£9bn. However, for some, the announcement of funding which broadly matches the support announced for employees last week may come too late.
The government have been under increasing pressure to support the self-employed and freelance sector and last night announced detailed of the Self-employment Income Support Scheme (SEISS). This will provide a grant to self-employed individuals or members of partnerships up to 80% of their profits over the last 3 years up to a cap of £2,500 a month. It will operate for 3 months only covering the period to 31 May 2020 and may be extended if necessary. The scheme is only available to individuals who have trading profits of less than £50,000 a year.
The worrying news for those eligible for the scheme is that HMRC do not expect to start paying out under the scheme until the beginning of June. Whilst they can continue to access the enhanced Universal Credit or look for business continuity loans, many people may struggle in the intervening period. And there will be many who are not eligible – those who pay themselves a salary and dividends through their own personal company are not covered albeit they may be able to use the Job Retention Scheme if they are operating PAYE. Also worth noting is that property landlords are generally not considered as self employed for these purposes, so they cannot benefit from this scheme.
Interestingly, the Chancellor used the announcement last night to hint at future changes to the way the self-employed are taxed, saying “when we start to come out of this and right the ship, there will be questions about ensuring equivalence in the future”. We may well see this manifest itself as an alignment of National Insurance contributions for the employed and self-employed, perhaps as early as the Autumn Budget.
The eligibility criteria are below – all of the criteria must be met:
- You are self-employed or a member of a partnership;
- You have lost trading/partnership profits due to Covid-19;
- You filed a tax return for 2018/19 (as self-employed or a member of a trading partnership) or do so within 4 weeks;
- You traded in 2019/20 and are still trading (or are not only because of Covid-19) and you plan to trade in 2020/21;
- Your trading profits are <£50,000 and more than half of your income comes from self-employment (either based on 2018/19 or the average of the last 3 years);
- It is only available to people with trading profits of less than £50,000
HMRC have said they will use data from 2018/19 tax returns to identify those who are eligible for the scheme and will invite them to claim a grant online. Monies will be paid directly into an individual’s bank account in one instalment.
The scheme is not yet operational so HMRC have asked that individuals do not call them to ask about eligibility or for further details. More information will be added to HMRC’s dedicated web-page as it is available.
Tip: Anyone who is yet to file their 2018/19 tax return and wants to be eligible for the scheme must file their return by 23 April 2020 as HMRC are using data from that year’s tax return to assess eligibility.
For more information or if you have any queries regarding the scheme, please contact Richard Whitelock, Head of Employment Taxes at firstname.lastname@example.org.
As things unfold, Garbutt + Elliott want to support you through these unprecedented times. If you have any queries or concerns about any of the Government announcements and how they might affect you and your business please don’t hesitate to contact our teams.