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.
What support is available to me as a sole trader?
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.
- Self-Employed Income Support Scheme (SEISS): This grant is available to sole traders and partnerships that meet the eligibility criteria. You can claim a taxable grant worth 80% of your trading profits up to a maximum of £2,500 per month for 3 months initially (March, April & May). This may be extended. You’ll be contacted by HMRC if you’re eligible.
- Coronavirus Business Interruption Loan Scheme: This loan scheme supports SMEs (sole traders, partnerships and limited companies) with access to loans, overdrafts, invoice finance and asset finance of up to £5 million, for up to 6 years, interest-free for 12 months.
- Universal Credit: This is a tax-free payment made monthly. You may be eligible for this if you are out of work or on low income.
I’ve only been self-employed since April 2019. What support am I entitled to?
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.
How do I apply for the SEISS and when will I be paid?
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.
What if I can’t wait until June?
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:
- Applying for Universal Credit (you can apply for this and still receive SEISS funds)
- Applying for a Coronavirus Business Interruption Loan with an approved lender
- Deferring your VAT payment until April 2021
- Deferring your next Self Assessment payment until 2021
- Use HMRC’s Time-To-Pay helpline
- Apply for mortgage and rental payment holidays
For more information around how all of these could support you, check out our blog.
Does the SEISS grant have to be paid back to HMRC?
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.
My self-employed income was under 50% of my total income for tax years 2016/17 and 2017/18, but over 50% for 2018/19. Where does that leave me?
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:
- Your trading profits (or partnership trading profits) in 2018/19 came to less than £50,000, and these profits constituted more than half of your total taxable income for that year.
- You’ve been self-employed for longer (back to tax year 2016/2017 and/or 2017/2018 as well as 2018/2019), and the majority of your taxable income came from self-employment, and your trading profits over those years average out at less than £50,000 a year. In other words: if you exceeded £50,000 one year but earned less in other years, and your average over 3 years is below this amount, then you may still qualify.
This is all the information that HMRC have provided so far. However, we are awaiting further information around some of the caveats of eligibility.
My trading profits were over £50,000 in tax year 2018/19, but lower in the years before that and in the most recent tax year (2019/20). Will I qualify for any government support?
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.
I work through a limited company of which I’m the director and sole employee. I take a small salary and dividends. Where does that leave me?
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.
Can a sole director of a limited company “furlough” themselves under the Coronavirus Job Retention Scheme?
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.
What does “furloughed” mean?
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.
I’m a sole director of a limited company with no PAYE. Can I set up payroll and a salary and apply for the Coronavirus Job Retention Scheme?
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.
Are dividends considered in any of the calculations for the Job Retention Scheme?
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.
I’m an agency worker that was recently let go. What support can I receive?
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.
How do I apply for a Business Interruption Loan?
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.
Got a question?
Let us know here and we'd be happy to help where we can.