Our answers to the big questions we've had about the Self-Employed Income Support Scheme from our customers and the wider self-employed community.
We’ve had lots of questions from our customers and the wider community about the Self-Employed Income Support Scheme (SEISS) announced by the Chancellor on the 26th March. So we wanted to share some of our answers in case they help others too.
Firstly, if you’re looking for a full overview of the support the Government has introduced so far to help self-employed people weather the storm of Covid-19, head over to our live blog. We keep this up to date with all of the latest information.
Any guidance we share is always from a Government/HMRC approved source, but we recommend speaking with an accountant if you’re unsure about what to do.
There are a few options. They’re all based on eligibility and there are various restrictions you'll need to be aware of. For all the details and criteria, please see our blog.
So currently, if you started trading in the 2019/20 tax year, you won’t be eligible for SEISS. We are actively lobbying the government on this point, urging them to allow 2019/20 Self Assessments in the calculation. There is no guarantee this will happen but we will do our best. In the meantime, Universal Credit is an option worth looking into if you’re in financial difficulty as a result of COVID-19.
You don’t need to do anything to apply. As things stand at the moment, HMRC will get in touch with you if you’re eligible. You’ll need to make sure you’ve completed your 2018/19 tax return though - if you haven’t done yours yet, you have until 23rd April 2020 to do so.
Payments will go out in early June (no clearer date or timeline has been provided as of yet). First HMRC need to build a portal for people to use so they can claim the grant if they’re eligible.
This is another key aspect of the scheme we're pushing the Government to improve. The Government have announced some measures to support cash flow, such as:
For more information around how all of these could support you, check out our blog.
The SEISS grant that will be paid if eligible is a taxable grant. So you will be due to pay tax on this and declare this on your Self Assessment Tax return. As this will fall in the 20/21 tax year then you will declare this as income for that year.
Here’s the situation as we understand it from HMRC:
To be eligible for Self-Employed Income Support, your trading profits from self-employment (i.e. turnover minus allowable expenses) must be less than £50,000 a year, and this amount must also be more than what you earn from employment (if anything). The government’s aim is to identify people who rely most on being self-employed for their income and are most likely to struggle.
The way they will determine this is if one of the following statements is true for you:
This is all the information that HMRC have provided so far. However, we are awaiting further information around some of the caveats of eligibility.
Again we’re waiting for clarification from HMRC on this.
But in the scenario described in the question, based on the information we’ve dug out to answer the previous question, you could still be eligible for SEISS support. That’s because even though you don’t meet the first condition, you may still meet the second condition (if your trading profits over 3 years average out as less than £50,000 a year).
HMRC will communicate more about eligibility in due course. We’re thinking that they won’t reach out until the extended deadline for late Self Assessments for 2018/19 has passed, meaning they have all the information they’ve asked for.
At the moment, as a sole director and sole employee of a limited company you aren't eligible for the SEISS.
Instead, the Government has advised limited companies to look into either the Coronavirus Business Interruption Loans, the Coronavirus Job Retention Scheme, or Universal Credit.
There has been a lot of speculation around whether a sole director can “furlough” themselves and apply for the Coronavirus Job Retention Scheme.
We spoke with HMRC, and they confirmed that this is indeed possible - as long as you meet the eligibility criteria they’ve set out, such as having an active PAYE in place since February.
A furloughed worker is an employee who’s been asked to stop working as their employer can’t afford to cover staff costs due to coronavirus - but hasn’t been made redundant.
Employers can now access support through the Coronavirus Job Retention Scheme, where the government will pay part of their employees’ wages (up to 80% or £2,500, whichever is lower). The Government is encouraging employers to make up the last 20% themselves, though this isn’t a requirement.
The hope here is to prevent people from losing their jobs who would otherwise have been made redundant in these unprecedented times.
The short answer is no. To be eligible for the Coronavirus Job Retention Scheme, you need to have been paid a salary for the month of February.
There’s nothing to stop you from setting up PAYE and payroll now, but based on the guidance so far, it looks like you still wouldn’t be able to apply. We know this is a frustrating situation for many limited company owners and it’s one of the issues we’re trying to engage with the Government about.
In the meantime Universal Credit or a Business Interruption Loan might go some way to help.
Unfortunately, for company directors who take their earnings in the form of both salary and dividends, the dividend element is not considered in any forms of support. The Job Retention Scheme will only factor in your PAYE salary for consideration.
If you were employed at the end of February, you could still get financial help via the Job Retention Scheme.
Employers can apply for Job Retention Scheme support for everyone who was on their PAYE payroll on 28 February 2020. This includes agency workers, as all types of employees and employment contracts are included in the scheme.
It also includes employees who were made redundant after 28 February 2020 - as long as they are re-hired by their employer.
So if you were recently let go, do reach out to your agency and see if they’re willing to bring you back on board for a while and let the government do their bit.
If they say no, we’re really sorry but you won’t be able to access support via this particular scheme.
You will need to apply directly with one of the approved lenders listed on the British Business Bank website. You’ll also need to put together a borrowing plan to support your loan proposal.
As the questions keep coming we will update the common themed questions here.
Let us know here and we'd be happy to help where we can.
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As part of HMRC’s Making Tax Digital, sole traders will soon be required to complete 4 tax submissions per year instead of 1.
Take a look at the latest sole trader tax rates for the 2021/22 as well as our advice on how to prepare for the new tax year.