The self-employment income support aims to provide relief and financial assistance to those self-employed individuals whose earnings are most likely to be negatively affected by the coronavirus.
You also need to know that any payment received through this scheme will be subject to Income Tax and National Insurance (NI) as they are a substitute for the income that comes with the routine practice for benefits. Also, this grant is considered as an income for Universal credit and Tax credits purposes, so it may impact the amount individuals are entitled to claim.
What is the Self-employment Income Support Scheme?
Taxable grants of 80% of historical income, up to £2,500 a month, will be offered to the self-employed where they’re already in the self-assessment tax system.
Who the scheme applies to
If you’re a self-employed individual or a member of a partnership, you can apply for the support if you fit the following criteria:
You’ve submitted your self-assessment tax return for the year 2018/19
You’re trading in the 2019/20 tax year
You’re trading when you apply or would have been but for the coronavirus outbreak
You’ll likely continue to trade in the 2020/21 tax year
You’re suffering with lost trading profits as a result of UK coronavirus
The income used to calculate your grant is based on the average income you have declared in the last 3 tax years. If you don’t have 3 years of tax returns, then it’s based on what you do have. If your average income over that time-frame is higher than £50,000, you won’t be eligible.
Finally, a key qualifying criteria is half your income must come from self-employment activities.
Who is likely to miss out
At present the grant leaves out the newly self-employed. Data from the current 2019/20 tax year doesn’t count. This means if you haven’t got a historical tax return declaring your income then you won’t get paid. You’d then have apply for Universal Credit as your only alternative option.
Of note, the scheme is not designed to owner-managers who, while self-employed, pay themselves via dividends through a limited company. Instead they’d have to go down the route of:
- Applying for a Coronavirus Business Interruption Loan
- Making use of the Coronavirus Job Retention Scheme where they employ staff they might otherwise have to make redundant
- Deferring Income Tax and VAT payments
This means it also won’t help small businesses who use limited companies to work off payroll. The reason being the Treasury have deemed it impossible to decipher if dividends, where they’re less than £50,000, have been generated from productive activities through work, or simply from the proceeds of shares in a listed business. The argument is that makes it impossible for HMRC to implement.
Alternatively, if as an owner manager, you pay yourself all or part of your salary through PAYE, you could furlough yourself in the job retention scheme. You’d then receive 80% pay support up to £2,500 per month. This might help to tide things over a bit as you strive to keep your business going.
When will the scheme be implemented
Unfortunately such is the complication in formulating these policies from scratch, and then getting HMRC to implement it, means you’ll have to wait till June 2020 to receive your grant.
We will update this page with further information once this is provided by the government in the coming weeks
