What does ‘Self Employed’ mean?

This is a very broad term which can be used to describe people who:

  • Run sole trades (businesses that are simply reported on an individuals tax returns) 
  • Operate a partnership or LLP 
  • Run their own small businesses 

In tax law, ‘self employed’ usually excludes owners of small limited companies.  Today’s announcement appeared to match this way of using the term so the items below are applicable to people who basically operate a business that is not a limited company.

Reliefs available for the self employed

1. Self Employment Income Support Scheme grant

In the Budget on March 3rd, a fourth, fifth and final grant was made available to the Self-Employed until September 2021. Here’s what you need to know:

  • The fourth grant, which offers 80% of three months’ average trading profits, paid out in a single taxable instalment capped at £7,500, will be available covering the period February, March and April
  • The fifth grant will be worth 80% of average trading profits for people who have seen their turnover decrease by 30% or above.
  • For people whose turnover hasn’t decreased by 30% or above, they may be eligible for a fifth grant worth 30% of average trading profits
  • Those who filed their tax return within the deadline will eligible for the fifth and final grant

For details on how to submit your claim, check if you are eligible and how much you can claim, see our detailed article here.

Are you eligible for the third self-employment grant?

2. Pay your Self-Assessment Tax bill in instalments 

On 5 October, HMRC announced further details surrounding their new ‘Enhanced Payment Plan’ instalment scheme.

The scheme was introduced to allow the 31 January 2021 Self-Assessment tax payments to be spread the cost into monthly payments. This is the tax due on completion of your personal tax return. It doesn’t cover any other taxes like Corporation Tax, VAT or PAYE for employers.

Find out if you are eligible and how to apply here.

3. VAT ‘holiday’

This is an automatic offer with no applications required. You will not need to make a VAT payment during the period 20 March to 30 June. You will need to submit your VAT returns as normal though.

VAT registered businesses will be given until the 31 December 2020 to pay any liabilities that have accumulated during the deferral period. VAT refunds and reclaims will be paid by the government as normal.

Customers who normally pay by direct debit should use their online banking systems to suspend or pause their direct debit with their bank if they are unable to pay. We don’t recommend cancelling entirely as this could cause complications trying to get it set up again later. Make sure you change the direct debit settings immediately so that HMRC do not attempt to automatically collect on receipt of your next VAT return.

4. Time to pay for previous VAT, PAYE or CIS due

A dedicated helpline has been set up to help businesses and self-employed individuals in financial distress and with outstanding tax liabilities. Through this, businesses may be able to agree a bespoke Time to Pay arrangement. 

This number was getting so many calls that it couldn’t cope so HMRC have today announced a new number to call which is: 0800 024 1222. The opening hours for the helpline have also changed to between 8am to 4pm Monday to Friday only.

5. Business rates exemptions

If you have business premises that the council detail business rates for (even if you have nothing to pay) then you might have access to a further grant.

If your business qualifies for small business rate relief, you are eligible for a grant of £10,000. Please contact us if you are unsure if you are eligible for this.

6. Universal credit and sick pay

Universal credit is a benefit supplied by the government to help pay for living costs if you are on a low income or out of work.

Last week they increased the number of people who could apply by increasing the upper income at which an individual can apply. Essentially for most self-employed people this will give them access to £94.25 a week (equivalent to sick pay). On the whole, it won’t help much. And now the grant has been announced specific to the coronavirus that would be more useful in most cases.

See our article here for more details on Universal Credit.

7. (If you have employees) Consider your options

If you have employees then you will need to make some decisions about what you’re going to do, especially with the Job Retention Scheme replaced with the Job Support Scheme next month.

See our understanding your options employer factsheet for full details of the options available to you.

What this doesn’t cover

Ultimately a scheme as wide-ranging and complicated as this was never going to cover everything. 

1. Small limited companies

The biggest gap in the Chancellor’s announcements was no mention of small limited companies. There are hundreds of thousands of people who trade this way and they don’t all earn over £50,000. Most take the majority of their earnings as tax-efficient dividends which is not covered.

Unless the definition of “self-employed” is widened to include those individuals then there is no help available for those people. 

Astonishingly none of the journalists asking questions queried this point even though I suspect that some of them fall into that category!

2. Business expenses

The grant is based on profit not turnover which effectively assumes that you are putting your business into hibernation. 

But of course, you may still have costs for rent, insurance etc which will continue.

3. Those who have started recently 

Anyone who has commenced self-employment since 6th April 2019 will not qualify for the scheme.

4. Those with average earnings of £50,000

Anyone in this category is not covered. Whilst £50,000 seems a lot of money, people often live to their means and undoubtedly there will be individuals in this category who have no savings. This seems a very harsh dividing line and could cause considerable hardship if the crisis goes on for a long time.

How A4G can help

We will of course provide our clients with whatever help is required to make this claim. Call us on 01474 853856.

For those who do not qualify, please consider what savings you can make in your living costs.