It’s no secret that 2020 was a difficult year for business, but it seemed to hit self-employed workers where it hurts the most.
The UK government continues to recognise how drastically COVID-19 has affected businesses and self-employed workers in particular. Self-employed workers have been able to apply for taxable grants worth up to 80% of their average monthly profits to combat loss of income due to the coronavirus pandemic. The grants are capped at £2,500 p/m (gross), but not everyone will be able to claim them — the full details are below on who’s eligible when you’ll get the money and what to try in the meantime if you’re struggling.
Financial Help For Self-Employed Workers
When the chancellor initially confirmed that self-employed people across the UK would be able to get an amount equivalent to 80% of their income, the taxable lump sum grant was just to cover March-May 2020 but has now been extended…for the fourth time.
At the 2021 Budget, it was confirmed that the fourth Self Employment Income Support Scheme (SEISS) grant would be set at 80% of 3 months’ average trading profits for a self-employed worker. It will be paid out in a single instalment and capped at £7,500. The fourth grant will take into account 2019 to 2020 tax returns and will be open to those who became self-employed in the tax year 2019 to 2020. The rest of the eligibility criteria remain unchanged.
Your eligibility for the scheme will now be based on your submitted 2019 to 2020 tax return. This may also affect the amount of the fourth grant, which could be higher or lower than previous grants you may have received.
These measures are expected to apply to about 95% of those who earn the majority of their income from self-employment. But a significant number won’t be able to apply for any support at all from the scheme. This includes those with average annual trading profits (loosely your taxable profits) of £50,000 or more and those who have become self-employed since April 2019 and so haven’t filed a tax return yet.
Who Is Eligible for SEISS?
To apply to the new Self-Employment Income Support Scheme, the following must apply:
- You must have traded in both 2019/2020 and 2020/2021.
- To work out your eligibility, HMRC will look at your 2019 to 2020 Self Assessment tax return. Your trading profits must be no more than £50,000 and at least equal to your non-trading income.
- If you are not eligible based on your 2019-2020 tax return, HMRC will look back as far as 2016-2017.
- You must be currently trading but can prove that your business has been negatively affected by COVID-19 or have been trading but temporarily unable to do so because of COVID-19.
If you’re a company director and pay yourself a salary or dividends, you won’t be covered by this scheme, but you could get support through the Coronavirus Job Retention Scheme for employees if you operate pay-as-you-earn schemes.
How Much Could the SEISS Grants Be Worth?
The grants would be worth 80% of your profits, capped at £2,500 a month, based on your tax returns for 2016/17, 2017/18 and 2018/19 if you were self-employed over that period.
If you became self-employed after April 2018, your 2018/19 tax return would be used instead. But it’s worth noting that if you only have a few months’ self-employment on your 2018/19 return, this will be counted as your total profit for the year – the Government won’t pro-rata it based on your monthly profits.
How Do I Apply to the Scheme?
Once HMRC has processed the recently submitted self-assessment tax returns, they will open the online claims service in late April 2021. If you are eligible for SEISS, HMRC will contact you in mid-April 2021. There’s no need to contact HMRC now as there’s nothing you can do to apply at this stage.
I’m Not Eligible for a SEISS Grant – What Other Support Is Available?
The UK Government has announced a temporary Coronavirus Business Interruption Loan Scheme administered by the British Business Bank, providing support for businesses to access loans and overdrafts from over 40 accredited lenders.
Additional support for businesses include:
- 12-month business rates relief for all retail, hospitality and leisure businesses.
- Grants up to £10,000 for companies in receipt of Small Business Rate Relief or Rural Rate Relief.
- Grants up to £25,000 for retail, hospitality and leisure business with rateable values between £15,000 and £51,000.
Other Support from HMRC
- HMRC has launched a helpline for self-employed people and businesses concerned with paying taxes during this crisis. Companies may be eligible to receive financial support on a case by case basis. You can contact HMRC Time to Pay Support helpline on 0800 0159 559.
- HMRC has stated they will waive any penalties related to late payments and interest in cases where self-employed or businesses have administrative problems in contacting HMRC or paying taxes as a result of COVID-19.
- HMRC has proposed a delay to IR35 Tax Reforms. This is likely to affect freelancers as it will now be delayed until April 2021.
I’m Self-Employed and Getting in Debt. What Can I Do?
If you have found that you are not eligible for help under the SEISS or it just isn’t enough to cover everything and pay back your outstanding debts, Debt Movement can help. Our friendly and professional team can help you to understand what your options are and give expert guidance.