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Some new and positive updates were shared by Chancellor Rishi Sunak in his update on 25th March 2020 specifically for the self-employed who until this point had been not included in the Government help. To better understand this, Sam Rollins from Trinity Accountants has taken a look at what this means for your business.
80% of self-employed income up to £2,500
The big news was that sole traders and partnerships will be entitled to a taxable grant of 80% of their monthly net profit (averaged over the last three years) of up to £2,500. This will be paid ‘no later than the end of June’, according to Chancellor Rishi Sunak.
What this means to you
You must still be self-employed.
This grant is based on your profits and the Government will use an average of the last three years tax returns (or less if you have been self-employed for less time). This is fine if you’ve submitted healthy profits. This is not so helpful if you’ve been building a business over the past few years and have had a lot of start-up expenditure, leading to your taxable profits being low or even non-existent.
So, if you’re self-employed you’ll get 80% of your averaged out taxable profit for up to the three previous years. For example, if your average taxable profit per year was £24,000 then that would be £2,000 per month, and 80% of that would be £1,600 per month. This will be a taxable grant and will appear on your tax return for the relative year.
In order to be eligible for this grant, your average annual tax able profit must not exceed £50,000.
You must have filed a 2019 tax return.
You will also now have an extra four weeks to file this, if you haven’t already done so. Of course, this doesn’t help the newly self-employed at all. Our concern here is that some early year businesses will have made little or no profit in the previous year, but more in this year, which isn’t being included.
Access to the online application form mentioned by the Chancellor is likely to be released in June. Until then the only real option for the self-employed looks like Universal Credit or a Business Interruption Loan.
Deferral of Self-Assessment
One measure that’s not hitting the social media headline right now is news of the self-assessment deferment. If you have a July payment on account due on 31.07.2020, this can be deferred until 31.01.2021.
Please be careful with this as you’ll obviously still have to pay the next year’s tax at that point also!
Job retention scheme
One of the key messages throughout the Governments updates has been that they want to retain jobs by keeping viable businesses afloat and try and prevent them having to be made redundancies.
Here’s what the job retention scheme looks like for your employees:
80% of any furloughed employees’ wages (up to £2,500) will be covered.
A furloughed worker must not undertake any work, so no emails, phone calls, digital marketing or suggestions of income generating activities.
We’re still waiting the new HMRC portal and reimbursement system to be set up and this will give us more detail and clarity on all this. This is expected to be released before the end of April, ready for payroll run April.
If you have a VAT payment due from 20.03.2020 to 30.06.2020 this can be deferred until 31.03.2021.
This will be automatic, so there’s no need to apply, but do not forget to submit your VAT Return by the due date as normal. Clearly, you will need to work with your accountant to ensure that you build up your reserves for the extra payment next year.
SSP Employers rebate
One clear issue for companies is Statutory Sick Pay (SSP) and covering this cost for the businesses. Companies will be reimbursed for any SSP paid from day one. They must be a small employer with less than 250 employees.
Again, the system for allowing this reclaim is still in development, so more details to come soon.
Ensure you keep up-to-date with the support for the Self-employed
Clearly these are complicated and fast-moving times so you’re wise to keep checking on the Government updates https://www.businesssupport.gov.uk/coronavirus-business-support/ and https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19/covid-19-support-for-businesses