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The Chancellor announced the Government support for the self- employed on 26 March 2020. You can find the fine detail here.

The support is directed at the self-employed on lower incomes, with no support for those with average self-employed earnings in excess of £ 50,000. It allows a maximum sum of £2,500 per month or 80% of average earnings whichever is the lower.

The scheme will not give access to funds now but as a lump sum once the facility is open in early June at the very earliest.

You do not apply to HMRC for the support but will be contacted by HMRC once the facility is open and running and invited to apply on line.

The scheme may be extended if necessary.

Who is eligible?

You can apply if you are a self-employed individual or a member of a partnership and:

  • you have submitted your Income Tax Self-Assessment tax return for the tax year 2018-19 (if for whatever reason you have not yet submitted that return you have until 23 April to do so)
  • traded in the tax year 2019-20
  • are trading when you apply, or would be had it not been for COVID-19
  • intend to continue to trade in the tax year 2020-21
  • have lost trading/partnership trading profits due to COVID-19

This would exclude anyone who commenced self-employment during the 2019/20 tax year and would also exclude those who have incorporated their business since 6 April 2019.

Income qualification

Your self-employed trading profits must be less than £50,000 and more than half of your income must come from self-employment. In calculating whether you meet the income criteria, self-employed income declared on your 2017 to 2019 Self-Assessment tax returns will be averaged to allow for fluctuations in income.

If you started trading between 2016 and 2019, HMRC will only use those years for which you filed a Self-Assessment tax return. To be absolutely clear, if you have 3 year’s returns, the average will be over 3 years, only 2 returns, averaged over 2 years etc.

For clients who have income from other sources e.g. employment, dividends etc. the criteria used will require at least one of the following conditions to be true:

  • in 2018/19 profits from self-employment are less than £50,000 and this constitutes more than half your income, or
  • your averaged profits from self-employment averaged over the years 2017 to 2019 are less than £50,000 and this constitutes more than half of your average taxable income in the same period

How much will you receive?

You will receive a taxable grant which will be 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 but may be extended. This is equivalent to current self-employed earnings of £37,500 per annum. This may be less than your actual average.

The grant is taxable and will be included on your 2020/21 Self-Assessment tax return.