All you need to know about the New Self Employed Grant
The Government has announced new legislation regarding the financial aid of self-employed workers during the coronavirus pandemic. They have confirmed that their will be relief provided to eligible self-employed workers, with a taxable grant to aid with financial losses due to the coronavirus (COVID-19) pandemic.
Many of our self employed clients have reported losing much, if not all, work due to Covid-19. As a firm, we are pulling together to support our clients in every which way we can. This article goes over the current information on the Covid-19 relief grant for self-employed professionals.
Our online accountants service is running as usual. Feel free to get in touch via phone or email and we can assist you on any of your tax matters.
Contents covered in tis article:
· What Can I Receive
· What is the difference between a grant and a loan
· Who is Eligible for this Grant
· How do I apply
· How will this change self-assessments in the future
I AM A SOLE TRADER THAT HAS LOST INCOME DUE TO COVID-19. WHAT CAN FINANCIAL AID AM ENTITLED TO?
Essentially, if you meet the criteria you can receive 80% of your monthly income via a taxable, government-backed grant. The amount any self-employed worker may receive is capped at £2,500 a month, matching the recent coronavirus job retention scheme that has been brought in for employed workers.
WHATS THE DIFFERENCE BETWEEN A GRANT AND A LOAN
The main difference between a grant and a loan is in the repayment.
A loan requires you to repay what you are given by the bank or loaner often with added interest.
A grant, on the other hand, does not require repayment. It is essentially a gift, or on the case of the recent government grant, a taxable gift.
AM I ELIGIBLE FOR THE COVID-19 SELF-EMPLOYED GRANT
Alongside the announcement of this grant, the government issued details of who will be eligible. The HMRC has published these details on their website regarding this matter:
· A self-employed worker must have submitted your Income Tax Self Assessment tax return for the tax year 2018-19
- Anyone who missed the filing deadline has four weeks from now to get it done and still qualify
· You must have traded in the tax year 2019-20
· You are continuing effort to trade at the time of application
· You intend to continue to trade in the tax year 2020-21
· You have lost trading/partnership trading profits due to COVID-19
Your self-employed trading profits must also be less than £50,000, and more than half of your income must be from your self-employment. This is determined by at least one of the following conditions being true:
Having trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute 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
This scheme will not apply to those who pay themselves a salary and dividends through their own company. They instead can have 80% of their salary reimbursed by the Coronavirus Job Retention Scheme if operating through PAYE.
The financial times also suggested that other gaps in the scheme “involve self-employed people’s companies which have had to shut but are not eligible for business rates relief and those with recent start-ups who do not have any tax returns to demonstrate proof of income.”
It is worth reiterating a few key points about this grant that could easily be overlooked. This scheme does not cover people who only became self-employed very recently, i.e. those having setup since April 2019. Also, this is a taxable grant, thus it will have to be accounted for on your self-assessment due for 2020-21.
HOW DO I APPLY
Thus far the HMRC does not wish you to contact them on the matter. The HMRC will use existing information to check potential eligibility and invite applications once the scheme is operational.
WHEN WILL I RECEIVE THE MONEY
This payment will initially be available for 3 months and will be given in One Lump-Sum Payment. These payments are said to be starting at the beginning of June. This still leaves many self-employed workers with the prospect of 2 - 3 months before financial respite will occur.
In the meantime, self-employed workers will still be entitled to get help via financial aid systems such as universal credit, and unlike the Coronavirus Job Retention Scheme for employed workers; self-employed individuals are still enabled to take any work given to them, whilst still receiving the maximum grant.
WHAT WILL THIS CHANGE IN THE FUTURE
The current changes to the financial climate are creating uncertainty over the future of the benefits self-employed workers are accustomed to receiving. Rishi Sunak (Chancellor on the Exchequer) has recently suggested ‘tax breaks for the self-employed, such as lower national insurance may end in the future’.
Although the future remains unclear, we remain committed to keeping you up-to-date on developments in the coming weeks and months.