UK: Coronavirus (COVID-19) Guidance for Self-Employed

Please note that the content of this article shares guidance for self-employed individuals provided by the UK Government.

Support for self-employed through the Self-employment Income Support Scheme

The Self-employment Income Support Scheme (SEISS) will support self-employed individuals (including members of partnerships) who have lost income due to coronavirus (COVID-19).

This scheme will allow self-employed individuals to claim a taxable grant worth 80% of their trading profits up to a maximum of £2,500 per month for the next 3 months. This may be extended if needed.

Claim a grant through the Self-employment Income Support Scheme.

Who can apply

You can apply if you’re a self-employed individual or a member of a partnership and you:

• have submitted your Income Tax Self-Assessment tax return for the tax year 2018-19
• traded in the tax year 2019-20
• are trading when you apply, or would be except for COVID-19
• intend to continue to trade in the tax year 2020-21
• 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 come from 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

If you started trading between 2016-19, HMRC will only use those years for which you filed a Self-Assessment tax return.

If you have not submitted your Income Tax Self-Assessment tax return for the tax year 2018-19, you must do this by 23 April 2020.

HMRC will use data on 2018-19 returns already submitted to identify those eligible and will risk assess any late returns filed before the 23 April 2020 deadline in the usual way.

How much you’ll get

You’ll get a taxable grant which will be 80% of the average profits from the tax years (where applicable):

• 2016 to 2017
• 2017 to 2018
• 2018 to 2019

To work out the average HMRC will add together the total trading profit for the 3 tax years (where applicable) then divide by 3 (where applicable), and use this to calculate a monthly amount.

It will be up to a maximum of £2,500 per month for 3 months. The Government will pay the grant directly into your bank account, in one instalment.

How to apply

You cannot apply for this scheme yet. HMRC will contact you if you are eligible for the scheme and invite you to apply online.

Individuals do not need to contact HMRC now and doing so will only delay the urgent work being undertaken to introduce the scheme.

You will access this scheme only through GOV.UK. If someone texts, calls or emails claiming to be from HMRC, saying that you can claim financial help or are owed a tax refund, and asks you to click on a link or to give information such as your name, credit card or bank details, it is a scam.

After you’ve applied

Once HMRC has received your claim and you are eligible for the grant, you will be contacted and told how much you will get and the payment details.

If you claim tax credits you’ll need to include the grant in your claim as income.

Other help you can get

The government is also providing the following additional help for the self-employed:

• deferral of Self Assessment income tax payments due in July 2020 and VAT payments due from 20 March 2020 until 30 June 2020
• grants for businesses that pay little or no business rates
• increased amounts of Universal Credit
• Business Interruption Loan Scheme

If you’re a director of your own company and paid through PAYE you may be able to get support using the Job Retention Scheme.

It is possible that the money won’t start to reach the self-employed until June, but it must be remembered that there is no system in place at the moment to make payments to the self-employed. This is having to be developed from scratch, so it will take some time.

In the short term, the deferral of Income Tax payments due in July made help, as many self-employed individuals would be due to make a payment of tax in July. As this money will not now have to be paid until January 2021, any money set aside to pay this July liability can be used in the short term until any payments reach the individuals. As a reminder, the current guidance says:

Income Tax

For Income Tax Self-Assessment, payments due on the 31 July 2020 may be deferred until 31 January 2021.

Eligibility

You are eligible if you are due to pay your second self-assessment payment on account on 31 July. You do not need to be self-employed to be eligible for the deferment. The deferment is optional. If you are still able to pay your second payment on account on 31 July you should do so.

How to access the scheme

This is an automatic offer with no applications required. No penalties or interest for late payment will be charged if you defer payment until January 2021.

HMRC have also scaled up their Time to Pay offer to all firms and individuals who are in temporary financial distress as a result of COVID-19 and have outstanding tax liabilities.

Some information has made its way online about the Coronavirus Job Retention Scheme (CJRS). Although this has not been published by the government, there is obviously some additional information being drip fed to various sources.

An announcement in parliament confirmed the following:

• Furloughing of any individual who has been subject to PAYE will be possible. This means that directors and casual workers will be able to be furloughed.
• There will be no provision to partially furlough staff. Employees will need to be entirely non-active to qualify.
• CJRS relief will potentially be backdated to the 1 March, but will be limited to being backdated to the day the employee completely stopped undertaking duties of the employment post 1 March. Employees need to be completely in-active, so CJRS cannot apply to employees who have been placed on reduced hours. So, for example, if an employee had a reduced workload because of Coronavirus from 1 March, and then became completely in-active from 8 March, the CJRS grant could only be backdated to the 8 March.
• Employees with Zero-Hour contracts – employers will be required to use an average of their hours worked to calculate the amount available under the CJRS. There has still not been any clarification on what period of earnings will be used in this calculation.

For directors who take a low or no salary from the business, but who use dividends to top up their income, the dividend amounts are unlikely to form part of the CJRS calculation for the director. This is because these dividends are not subject to PAYE. Directors in this position will potentially find that if they qualify for a CJRS grant, the amount paid would likely be 80% of a low salary. A further complication is that a director must be non-active to be furloughed, but given they will continue to need to manage the business in some way, they are unlikely to be completely in-active and therefore may fail the CJRS requirements.

The following information isn’t official guidance as yet, but makes up informed speculation online. Additional guidance will follow.