The Self Employed Income Support Scheme

26 March 2020

*Updated 1 June*

The Government has put in place the Self Employed Income Support Scheme to provide support to self employed individuals in the same way it has to employees via the Job Retention Scheme.

What Support is Provided?

The funding will be given by way of a taxable grant but the cash available has been separated into two tranches as follows:

  • The grant covering the first three months is calculated as 80% of average monthly trading profits, capped at £2,500 per month. The maximum grant for this period is therefore £7,500.
  • The second grant covering the next three months is calculated as 70% of average monthly trading profits, capped at £2,190 per month. The maximum grant for this period is therefore £6,570.

 

Who is Eligible?

The eligibility criteria is the same for both grants. Where more than more than 50% of an individual’s income comes from self employment and their profits are either:

  • Less that £50,000 in the 2018/19 tax year; or
  • Average less than £50,000 between 2016/17 and 2018/19 tax years

then the grant should be payable. HMRC have confirmed that this profit figure will be calculated as turnover less tax deductible expenses including capital allowances and the annual trading allowance of £1,000. Losses brought forward will not be deducted and neither will the personal allowance.

Any trading losses will be deducted from the profits when calculating the average profits over three tax years. Similarly, if an individual has more than one self employed business then profits and/or losses from each tax year will be added together to establish total profits for that year. 

Farmers making averaging claims will need to use profits before averaging to establish their entitlement to support. 

Those who have recently become self employed and did not report self employed income in their 2018/19 tax return will not qualify and the UK Government has said they will need to look to the other more generous benefits available such as Universal Credit, support for renters or the 3 month mortgage holiday for financial support. However, the Scottish Government is administering grants of £2,000 for recently self employed individuals to plug this gap. Applications are now open on the relevant local authority website.

Unlike the Job Retention Scheme, the self employed can continue to trade or take up paid employment and still qualify for the grant. 

Those who operate in partnership will also qualify.

 

How is a Claim for Support Made?

The portal for the first grant is already open but applications must be made by 13 July to access the first tranche of cash. From completion of the application, funds should be paid directly to an individual’s bank account within 6 working days. Unfortunately, HMRC will not interact with agents when dealing with the grant and individuals will need to make claims themselves. 

Taxpayers need to be aware that the deadline for filing of the 2018/19 tax return has now passed.  Failure to file by this date means that the grant will not be paid, even where the other conditions of the scheme are met. There are exceptions for those individuals covered by the loan charge, who have until the end of September to file their 2018/19 tax returns. 

Applications for the second grant are expected to open in August. There is no requirement to claim the first grant to be eligible for the second; both are being treated as standalone grant payments for this purpose. 

 

This blog will be continually updated but for further information please contact Jill Walker, Private Client Director, or your usual AAB contact.

If you are unsure about what Government support package is available to your business, we are here to help. We have created a simple toolkit that cuts through the noise and makes you aware of exactly what help is available to you. It takes a few minutes to fill out and you can find it on our COVID-19 Information hub

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