Yesterday evening Chancellor Rushi Sunak outlined the government’s plans to support self employed.
The scheme will cover 80 per cent of self-employed people’s average monthly profits over the past three years, up to a cap of £2,500 per month. It will be open to most of the self-employed, and will not depend on proving that their businesses were hit by the coronavirus crisis. The money will come in the form of a taxable cash grant, paid by the end of June after a self-employed person has responded to contact from HM Revenue & Customs.
To qualify you must have filed a tax return for the year ended 5th April 2019. This who have not done so will have 4 weeks to comply. The majority of your income must come from self employment and your profits must not exceed £50,000.
No application is necessary as HMRC will contact you and request some more information to verify the claim.
And now to the bad news. Mr Sunak’s opening remarks gave a flavour of what was to come as he suggested that the tax system will need to be amended to equalise the way that the employed and self employed are taxed. Philip Hammond tried to address this perceived inequality in 2016 and was forced to retreat. In the light of the increased risks that the self employed willingly embrace Sunak may face the same fate.
If you commenced self employment after 5th April 2019 then you do not qualify and will be pushed towards universal credit. Links are placed at the end of this newsletter.
The glaring gap, not addressed during his speech, is that the scheme does not cover people who are owner-managers of their companies and pay themselves mostly though dividends. They are left out for no logical reason and almost, it seems, as punishment for utilising the most tax efficient way to remunerate themselves.
Treasury officials said that if these people employed themselves through their companies they can furlough themselves and apply for the governments job retention scheme for employees – based on their salaries only.
We will issue more detailed guidance for those of you that are owner managers later today. If you have any questions please get in touch and if you think any of you contacts could benefit from the information provided here please feel free to pass this message on.
The government has introduced the following 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
- Increased amounts of Universal Credit
- Business Interruption Loan Scheme
- Directors of their own company paid through PAYE, may be able to get support using the Job Retention Scheme.