Self-employment Income Support Scheme
If you are self-employed or a member of a partnership and you have lost income due to coronavirus then this scheme is the best one for you to look at.
Please note that this scheme does not cover people who operate through a limited company as they are not viewed to be self employed. You would need to refer to the Coronavirus Job Retention Scheme.
Who is able to apply
You can apply if you are a self-employed individual (a “sole trader”) or you are a member of a partnership and you:
- Reported self-employment income in your Income Tax Self Assessment tax return for the 2018-19 tax year (this was the tax return that was due to be filed by 31 January 2020)
- Have continued to trade during the 2019-20 tax year
- Are still trading as self-employed when you apply for the support (or would be if COVID-19 hadn’t stopped you from trading)
- Intend to continue trading in the 2020-21 tax year
- Have lost trading profits due to COVID-19
This is quite different to being a furloughed employee where you are not allowed to work. You have to be able to demonstrate that you have lost trading profits, but you do not have to cease trading.
This is only available to you if your trading profits are low enough, so you also need to meet one or other of these two conditions:
- Your trading profits / partnership profits in 2018-19 were less than £50,000, and these profits made up more than half of your total taxable income; OR
- Your average trading profits in 2016-17, 2017-18 and 2018-19 were less than £50,000, and these profits made up more than have of your average taxable income in the same period.
If you started trading between 6 April 2016 and 5 April 2019 then HMRC will just look at the years where you filed a Self-Assessment tax return.
What counts as trading profits
HMRC have used your taxable profit as reported on your SA302.
I haven’t filed my 2018-19 tax return yet – am I too late
HMRC gave an extension and included any late returns filed before 23 April 2020, if you didn’t file your tax return by then you won’t be eligible.
I only started trading as self-employed during the 2019-20 tax year, am I eligible
Unfortunately there is no help available from this scheme if you only started as self-employed during the last 12 months. The Chancellor has made it clear that this will not change.
I have moved my business into a limited company recently, am I eligible
One of the requirements is that you are still trading as self-employed, so unfortunately this means you would not qualify.
How much will I get
There are now going to be two grant payments. The first one is now being paid out, and is a taxable grant of 80% of the average profits from the tax years where you were trading from 2016-17, 2017-18 and 2018-19. This is calculated by adding up the trading profit for the 3 years (or less if applicable) and then dividing by 3 (or less) and then working out a monthly amount.
The maximum grant is £7,500, and effectively covered a 3 month period from March to May.
The second grant will be paid in August, and will cover a further 3 months. The taxable grant will be 70% of your average profits instead of 80%, and is limited to a maximum of £6,570.
If your self-employed trading profits were £25,000 in 2016-17, £30,000 in 2017-18, and £32,000 in 2018-19, then the resulting monthly figure would be (£25,000 + £30,000 + £32,000) / 3 / 12 = £2,417 x 80% = £1,933.
Using the same income levels would result in a second grant payment in August of £1,691.
Is this grant taxable
Yes! This will have to be included as taxable income in your tax return. If you claim tax credits you will also need to include the grant in your claim as income.
How do I apply
You should already have applied for the first grant using the same Government Gateway ID and password that you use for your online tax account. We anticipate that the August grant will be applied for in the same way.
When will I be paid
Payments for the first grant have already been paid out to many applicants in late May. The next grant payment will be made in August. If you are struggling financially then take a look at whether you are eligible for Universal Credit.
If helpful you can access the full guidance from HMRC.