The Self-Employed Income Support Scheme – latest guidance and making an application

Further measures have been announced by the Chancellor of the Exchequer to support Self-Employed persons to ensure that they are on a level footing compared to employed persons. This included the introduction of the Self-Employed Income Support Scheme (SEISS).

How the scheme works

This scheme will allow you to claim a taxable grant worth 80% of your trading profits up to a maximum of £2,500 a month. It will be available for 3 months but may be extended.

As a taxable grant, it will form part of a self-employed person's taxable profits as the Government aims to cover costs and income that would be otherwise taxed accordingly. However, after-tax, it does not need to be repaid.

Self Employed persons can make a claim for Universal Credit while waiting for the grant, but any grant will be treated as part of their self-employment income and may affect the amount of Universal Credit received, so a decision will need to be made beforehand. Prior to making a claim you may also want to check if credit terms can be extended for business/personal loans such as a mortgage payment holiday. Any Universal Credit claims for earlier periods will not be affected.

If you receive the grant you can continue to work or take on other employment including voluntary work such as volunteering for the NHS during the crisis.

Self-employed through a limited company (sole director companies)

The scheme is only open to individuals who declare income from self-employment or with profits from a trading partnership (subject to Class 4 National Insurance). If you operate a business through a limited company then the scheme for Self Employed individuals will not be available and alternatives will have to be sought from other measures introduced.

The guidance states that a director can be furloughed if they are not involved in the day to day activities of the business. However, they are allowed to undertake their statutory legal duties per the Companies Act 2006 as a director, such as approving accounts and attending directors’ meetings. In practice, this may be difficult for some businesses for a sole director to furlough themselves. Also, with most sole director companies, the plain vanilla advice for many years was to take a small salary up to the National Insurance Secondary Rates Threshold which is £8,788 for 2020/21. This means that legally a director is entitled to a furloughed amount at 80% of £585.66 per month, as dividends are not included.

Who can claim for the Self Employment Scheme?

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

• have submitted your Self-Assessment tax return for the tax year 2018 to 2019
• have traded in the tax year 2019 to 2020 (subject to confirmation, this needs to be a trade and not land and property income which is not a trade)
• are trading when you apply or would be except for coronavirus
• intend to continue to trade in the tax year 2020 to 2021
• have lost trading profits due to coronavirus

You will need to confirm to HMRC that your business has been adversely affected by coronavirus.

Your trading profits must also be no more than £50,000 and more than half of your total income for either:

• the tax year 2018 to 2019  
• the average of the tax years 2016 to 2017, 2017 to 2018, and 2018 to 2019

If you are a farmer claiming farmers’ averaging relief

If you are a self-employed farmer claiming farmers’ averaging relief then HMRC will use the amount of profit before the impact of the averaging claims to work out:

• if you can claim the grant
• how much grant you will receive

How much you’ll get

You’ll get a taxable grant based on your average trading profit over the 3 tax years:

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

To work out the average trading profit you will need to add together your total trading profits or losses for the 3 tax years then divide by 3.

If you have not submitted Self-Assessment tax returns for all 3 years

HMRC will work out your average trading profit based on continuous periods of self-employment, which will be either:

• the tax years 2017 to 2018 and 2018 to 2019
• the tax year 2018 to 2019 only, even if you were self-employed in the tax year 2016 to 2017

The grant will be 80% of your average trading profit, divided by 12 which will give a monthly amount. They will pay this or up to a maximum of £2,500 a month, whichever is lower, directly into your bank account in one instalment.

How to claim

You cannot make a claim yet.

HMRC will aim to contact you by mid-May 2020 if you’re eligible for the scheme and invite you to claim using the GOV.UK online service. If you’re unable to claim online an alternative way to claim will be available but there is no detailed advice as yet.

Set up a Self-Assessment and or Business account

To make sure you are applicable and can apply, you will need to set up a Self-Assessment and/or Business account with HMRC if you have not already done so.

To set up an account you will need to visit https://www.gov.uk/log-in-register-hmrc-online-services/register to set up your Government Gateway ID and provide the following information:

• Full Name
• Date of birth
• Unique Tax 10 Digit reference number
• Address
• Email Address
• Telephone Number
• National Insurance number