Income support scheme for the Self-employed has now Ended.
We are currently living through unprecedented times. If you are self-employed, it is more than likely you are wondering where you stand. Previously announced on the 25th of March by Chancellor Rishi Sunak the self-employed income support scheme known as SEISS was put into motion due to the Convid-19 situation. From the 13th of May, The UK Government released the financial support scheme for the affected self-employed workers.
Permitted workers of the scheme will be advised by the Government how far they can backdate their claim, with the high possibility that it will be from the start of March onwards. Once approved, you will have to wait 6 working days before you receive payment.
The grant covers up to an 80% threshold of self-employers' average monthly profit before tax, which is calculated from the last 3 years. The payment is then taxed and capped to £2,500 before it is received.
Scottish self-employed workers who aren't covered by SEISS have the option to apply for the self-employed hardship fund as of the 21st of April, which is managed by the Scottish Government. This scheme is discussed further below.
Calculating how much support you will receive
As stated, if you are accepted into the scheme, you will receive up to 80% of your average monthly profits that are calculated from the last 3 years.
For example, propose your net profit was the following:
- £24,000 for the tax year 2016-2017
- £22,000 for the tax year 2017-2018
- £26,000 for the tax year 2018-2019
The Government would add all 3 years to gain a total figure and then divide by 3.
£24,000 + £22,000 + £26,000 = £72,000
72,000 / 3 = £24,000
As you will only be receiving a maximum of 80% of the profits made, this is then adjusted.
80% of £24,000 = £19,200
Finally, the sum is broken down per month; therefore the total you could gain would be £19,200 / 12 = £1,600 before tax. If the figure was higher than £2,500, it would be capped.
As it stands, the scheme will be active for 3 months starting from March, and you will get one payment, paid directly into your account.
Net profits annually are calculated once expenses and capital allowances have been deducted, however, include pension contributions and charitable donations. Therefore, if you reinvest high amounts of your profit into the company, the amount you will receive will be reduced.
Who Qualifies For The SEISS?
There are approximately 5 million self-employed workers in the UK. With the lockdown being introduced and safety concerns nationwide, many of these workers have been impacted significantly.
Although SEISS was created to support the majority of self-employed workers, Chancellor Rishi Sunak stated that the scheme would help around 95% of them but not all.
You must meet the following criteria to apply:
- A certified self-employed person or member of a partnership
- Was operational in the 2019-2020 tax year
- Will be looking to keep trading for the next tax year
- Receive more than 50% of your income through self-employment
- Provided HMRC with your tax return for the 2018-2019 tax year. (If this was not completed before the 31st of January deadline, an extension has been put in place and you will now have 4 additional weeks from the 26th of March to file and be covered by the scheme).
If you require any support filing your tax return, click here to find out more about our Self-assessment Tax Return service
When can I apply?
The application process is now live and can be accessed through the official gov.uk website. HMRC will then contact self-employed workers who have been approved to gain bank information. You will then receive a payment directly into your bank account.
What if I am unable to supply 3 years worth of tax returns?
If you're unable to obtain the complete set of tax returns for the 3 previous years, your average will be calculated from the available information. Whether this is 1 year or 2 1/2, the total is generated with the same method.
However, if you cannot provide at least a year's worth of tax returns, you will not be applicable for the scheme. This barrier was set to prevent fraudulent claims. Therefore, self-employed workers that started in the 2019-2020 tax year, will only be covered if they have provided their 2018-2019 tax year information.
Scotland's Self-Employed Hardship Fund Alternative
For any applicant that does not meet the requirements for the SEISS, The Scottish Government has launched a new scheme called Scotland's self-employed hardship fund.
If an individual has been greatly impacted by the current events and has only just started as a self-employed worker, they may be eligible for a grant up to £2,000.
Will I Be Required To Pay The Money back?
Any payments received through the scheme are not required to be paid back. Although, as a result, a comment by the Government was made that self-employers' tax or national insurance may be changed.
Can You Claim And Work At The Same Time?
Yes, however, you must be looking to continue operating your self-employed status from the tax year 2020-2021. You have the option of either trading per usual or finding another position.
Are Benefits Impacted?
The SEISS payment received will count as earned income for that month; therefore if you had previously applied for Universal Credit (UC) or tax credits, the amount will be adjusted and probably stopped.
You will be required to apply again for Universal Credit once you've received the payment. Keep in mind the application process will be a shorter version of originally applying for UC, and you should receive your next payment quicker than the average 5 weeks waiting time.
Is It Possible to be Furloughed And Still Be Eligible For The Scheme
As long as you make more than 50% of your earnings from being self-employed, and have an additional job where you have been furloughed, you should still be accepted for the SEISS.
Staying Safe From Scams
There has been a huge increase in fraudsters pretending to work for HMRC due to the Convid-19 situation. Here are a few tips to prevent you from becoming a victim:
- If accepted into the program, The Government will contact you and will provide a link to an official government website where you must add your bank details. Do not provide this information over the phone.
- Be sure to double-check any email information received, if there are any grammar or spelling mistakes, it is most likely fraudulent.
- Check all information that you have seen on the Government's website if you receive a call asking you to do something different.
Workers that are Self-employed or part of the gig economy and are under the state pension age can apply for Universal Credit or a new scheme called new-style employment and support alliance (ESA). However, if older than the state pension age, workers have the option to apply for pension credit. This extra support is to combat the lack of statutory sick pay for these workers.
If accepted for universal credit, you can receive cash advances straight away due to the process usually taking 5 weeks to set up.
Both universal credit and the tax credit standard rate have been put up by £1,000 for 12 months.
Do Savings Impact Universal Credit Payments?
Both income and savings are taken into consideration when calculating the amount you will receive from Universal Credit. Any savings that amount over £6,000 will decrease your universal credit payment, if you have more than £16,000, you will not be accepted.
Tax Bills For The Self-Employed Extended
Self-employed workers will not need to submit tax bill payments until January 2021. Workers that pay tax by payment on account will be greatly impacted by this, which will defer their next payment until the 31st of July 2021.