Note: There is an update to the guidance available for the self-employed at - LINK HERE
I have pulled together a more succinct view of the government’s announcement regarding help for the self-employed.
The official announcement can be viewed at: https://www.gov.uk/government/news/chancellor-gives-support-to-millions-of-self-employed-individuals
There still appears to be a lot of ambiguity about this grant so we thought it would be useful to share our understanding of the proposals that have been set out.
Please note: If you are a director of a limited company, you are not self-employed so the following information will not apply to you.
(the devil is always in the detail)
Take care – lookout for scams from people who may take this opportunity to send emails, texts or direct phone calls asking you to provide bank and credit card detail to get the grant. The grant will only be accessible via the gov.uk website.
By excluding a number of groups, particularly those who earn through a limited company and those who started trade after 5th April 2019, there will be hardship; if you are in that group all you can do under the current guidelines is look to the benefits system and universal credit… This is being challenged as referenced earlier.
What if I don’t have 3 years trading?
If you do not have three years to 05 April 2019, your income will be averaged over the period you actually traded.
What if I started trading halfway through 2017/18?
The strong implication is that they will take the average of the two years where you have submitted tax returns. (i.e. your declared profits for the two years divided by 2). The whole of the year you started will be taken regardless of the exact date you started.
What if I have two self-employments?
The rules do not specifically say, but we would assume it is the average of the two combined.
What if I bought a van in during the period?
If you bought a significant item, such as a van, in one of the relevant tax years, your taxable profits will be lower in that year. This will mean you get less, but since HMRC are taking a three-year average, one significant capital purchase will be diluted over the three year period.
What if my profits average £48,000pa and I also have a £10,000pa employment?
You qualify because your self-employment taxable profit is less than £50,000.
Husband and wife partnerships where you each have taxable profits of £40,000.
You both qualify, although your joint income is over £50,000 this is calculated on an individual basis, not as a couple.
What if I’ve found a job?
The intention is to compensate you for loss of earnings, if you have not lost earnings it is unlikely you can claim in full. This is not specifically addressed in the briefing.
Is the grant taxable?
Will all of these changes affect the amount of tax that I will have to pay?
There are no changes planned to the tax rates for 2020/21. It is very likely Class 4 National Insurance for the self-employed will increase from 9% to 12% in the following year.
The self-employed grant will be released in June. If your finances will not stretch if you can’t last until then government advice is:-
The full government rules on the self-employed are set out here:-
If you would like any further support and advice with the announcements made by the government, please get in touch with us.
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