COVID-19: How to claim a grant through the coronavirus Self-employment Income Support Scheme

Background

The Self-employment Income Support Scheme is for the self-employed or members of a partnership who have lost income due to coronavirus.

This scheme will provide a taxable grant worth 80% of your trading profits (up to a maximum of £2,500 per month) for the next 3 months. This may be extended if needed.

The grant will be subject to Income Tax and National Insurance contributions but will not need to be repaid.

You can make a claim for Universal Credit while you wait for the grant. You should record the grant as part of your self-employment income, and it may affect the amount of Universal Credit you get. This will not affect Universal Credit claims for before this period.

If you receive the grant you can continue to work or take on other employment including voluntary work.

If you have other employment as a director or employee paid through PAYE your employer may be able to get support using the Job Retention Scheme.

PLEASE NOTE: The scheme has now been extended. A second and final grant will be available when the scheme opens again in August 2020. If you’re eligible and want to claim the first grant you must make your claim on or before 13 July 2020.

Please find an audio version of the guidance here:

Who can apply

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

• have done your Income Tax Self Assessment tax return for the tax year 2018-19;
• traded in the tax year 2019-20;
• are trading when you apply, or would be trading if it wasn’t for coronavirus;
• want to continue to trade in the tax year 2020-21;
• have lost profits because of coronavirus

You will need to confirm to HMRC that your business has been negatively affected by coronavirus. HMRC will as usual use a risk based approach to compliance.

You can use this scheme if your self-employed profits are less than £50,000 and more than half of your income is from self-employment. This applies to you if one of the following conditions is true:

• you have profits of less than £50,000 in 2018-19 and these profits make up more than half of your total taxable income;
• your average trading profits in 2016-17, 2017-18 and 2018-19 were less than £50,000 and these profits are more than half of your average taxable income for the same period.

If you have not submitted your Self Assessment tax return for the tax year 2018 to 2019, you must do this by 23 April 2020 or you will not be able to claim. HMRC will review any late returns in the usual way.

HMRC will use data on the 2018 to 2019 tax returns already submitted to identify those eligible.

Any changes made to submitted returns after 26 March 2020, will not be takien into account when working out your eligibility or amount of the grant.

Find out how HMRC works out your total income and trading profits for the Self-employment Income Support Scheme.

 If you have loans covered by the loan charge

If you’re self-employed and have received payment for work or services in the form of a loan or other form of credit covered by the loan charge, you may be able to claim the grant, however your eligibility and average trading profits will be based on either:

the average of the tax years 2016 to 2017 and 2017 to 2018

the tax year 2017 to 2018 if you were not self-employed in the tax year 2016 to 2017

You also do not have to file your 2018 to 2019 Self Assessment tax return by 23 April 2020. You should file by the 30 September 2020.

How much you’ll get

You’ll get a taxable grant of 80% of the average profits from the tax years (where applicable):

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

To work out the average, HMRC will add together the total trading profit for the 3 tax years (where applicable) then divide by 3 (where applicable), and use this to calculate a monthly amount.

It will be up to a maximum of £2,500 per month for 3 months.

The money will go directly into your bank account, in one instalment.

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. We will pay this or up to a maximum of £2,500 a month, whichever is lower.

The grant will be paid directly into your bank account, in one instalment.

How to apply

You cannot apply for this scheme yet.

HMRC will 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. The GOV.UK page will be updated with more information soon. The Government website will also be updated with steps you can take to make it easier to claim using the GOV.UK online service.

You do not need to contact HMRC at this moment. If you do, you could delay the urgent work being done to introduce the scheme.

This scheme will be only through GOV.UK. If you get a text, call or email claiming to be from HMRC, saying that you can get financial help or a tax refund, and asks you to click on a link or to give information such as your name, credit card or bank details, it is a scam. 

After you have applied

Once HMRC gets your claim and you qualify for the grant, HMRC will contact you to tell you how much you will get and the payment details.

Other help you can get

The government is also providing other help for the self-employed:

• deferral of Self Assessment income tax payments due in July 2020 and VAT payments due from 20 March 2020 until 30 June 2020
• grants for businesses that pay little or no business rates
• Business Interruption Loan Scheme

Self -employment and Universal Credit

Universal Credit is a monthly payment to help with your living costs. You may be able to get it if you’re on a low income or out of work.

If you live in Northern Ireland, go to Universal Credit in Northern Ireland.

Find out if you’re eligible for Universal Credit.

If you’ve lost income because of coronavirus, you may be able to claim a grant through the coronavirus (COVID-19) Self-employment Income Support Scheme when it launches. HMRC will contact you if you’re eligible.

Providing information about your earnings

Everyone claiming Universal Credit needs to report their self-employed earnings at the end of each monthly assessment period. This includes company directors, even those paying themselves by PAYE.

You’ll need to report payments into and out of your business in the assessment period. This includes:

• total amount your business received
• how much your business spent on different types of expenses, such as travel costs, stock, equipment and tools, clothing and office costs
• how much tax and National Insurance you paid
• any money you paid into a pension

How your Universal Credit payment is worked out

Your Universal Credit payment will be based on the earnings you report at the end of each monthly assessment period.

If you’re already getting Universal Credit

Since 30 March 2020, the way your Universal Credit payment is worked out has changed because of coronavirus (COVID-19).

Payments are no longer calculated using an assumed level of earnings, called a Minimum Income Floor. They are now based on your actual earnings.

If your payments were calculated using the Minimum Income Floor, they may change.

If you’re both self-employed and employed

Your Universal Credit payment will be calculated based on your combined earnings from self-employment and employment.

Reporting changes in your circumstances

You’ll need to report any change in circumstances, for example if you:

• close your business
• start a different kind of business
• take a permanent job
• are no longer able to work

For more information on financial support available for businesses and self employed people, see the Government website here.