The Government has provided much needed financial support for the self employed – but is there a sting in the tail?
Recap on the existing and future support
Existing #Grant – Eligible individuals can claim a taxable grant worth 80 per cent of their average monthly trading profits, paid out in a single instalment covering three months’ worth of profit, and capped at £7,500 in total.
Applications for the first grant opened on 13 May 2020. Applications for the first grant will close on 13 July 2020.
Second Grant – Eligible individuals can claim a taxable grant worth 70 per cent of their average monthly trading profits, paid out in a single instalment covering three months’ worth of profit, and capped at £6,570 in total.
Sting in the tail?
- The second grant is referred to as the ‘final’ grant so this appears to be where the support will end.
- The grants are taxable income which must not be forgotten!
- There are strict eligibility rules that need to be complied with, including:
- Submitted their Income Tax Self-Assessment tax return for the tax year 2018-19;
- Continued to trade in 2019-20 and intend to keep trading in 2020-21;
- Carry on a trade which has been adversely affected by #COVID19;
- Have average self-employed trading profits of no more than £50,000 and at least equal to their non-trading income
The major factor above is that individuals will need to confirm that their business has been adversely affected by #coronavirus when applying for the second and final grant. There has been much debate about what measures #HMRC will take to identify false claims and even claw-back the funding. Legislation will be put in place to allow this so watch this space!
Although the full information on the final grant will not be available until 12 June 2020 it does seem clear that an individual does not need to have claimed the first grant in order to be eligible for the second and final grant. Many people might assume that if they missed the first grant then they would not be eligible for the second one.
And dont forget the Chancellor’s thoughts about the advantages of self employment
Chancellor Sunak has already strongly hinted that he is not a fan of the perceived tax advantages for the self employed. Earlier in the year he commented that he was keen to equalise tax treatments for the employed and self-employed. “If we all want to benefit equally from state support, we must all pay in equally in future”. Scary stuff for the self employed ?
The strong rumours are that there will be a ‘mini #budget’ in July designed to stimulate the economy but there is a strong possibility that the inevitable tax increases will be also be announced and possibly changes to how the self employed are taxed.