Hi all.
I have a quick question that I'm still very confused about regarding the scheme helping the self employed with their loss of work due to the virus. I hope this makes sense.
I've lost most of my work but if I manage to still be able to do a couple of weeks work in a month, thereby earning a wage, does that then mean I won't be able to claim for all the other work I've lost? Are the HMRC in June going to look at earnings and say this is 80% of what you averaged in the last three years, if you've earnt that this month in bits and bobs, then you can't claim for anything regardless of how much work you've lost.
I'm presuming the treasury isn't literally going to find out what 80% of your usual monthly profit is then just give it to you without taking into account how much you've actually been able to work during the lock down?
I'm sure it's pretty obvious but having real trouble getting my head round it.
Thanks for any help.
Details are still to be revealed; no-one knows yet. To start with they suggested that it was 80% of average earnings no matter what, but then they backtracked later to suggest earnings during lockdown would be taken into account. I'm working on the assumption that I never get free money and this time will be no different.
It is going to be very difficult to work this one out as many people earn money on seasonal cycles, not regular monthly cycles (ie, a Christmas Tree seller will have no income in March-July, but 95% of their income in December). As said above though, the full details are still not known.
I'm in a similar position - have been self-employed for years, but did a 15 month stint as a PAYE employee from autumn of 2017 to end of 2018, and then back to a self employment. I'm working on the assumption that I won't get anything.
From what I understand you'll get 80% of 3 months profit based on last year's tax return.
So if you had an profit of £40k last year you'll get £8k from HMRC.
Edit - it's limited to £2,500 per month, so you'd get £7,500.
then they backtracked later to suggest earnings during lockdown would be taken into account.
I can't see how they'd do that and the admin overhead would be huge. I'm sure it will just be 3/12 of your average self employed 'profit' for the last 3 years. It's going to be taxable like any other income.
Whatever they do will have some edge cases that lose out (or do well) but that's the fairest thing for the majority.
I thought the fact that it was taxable income was to do with the ability to still work even if you claimed it?
I’ll maybe get 1-2 weeks of work in, if the clients that the work is booked for don’t cancel. So the amount I get from the Govt will be counted alongside the earnings from actual work for self assessment purposes at next tax return point.
Means if I’d carried on earning full whack the government payout would be ‘extra’ and I’d be taxed on that as well. I know that the temptation for some who work during the period and still claim will be to lose the invoices for the paid work but I can’t see any other way of dealing with it?
It's my understanding that you won't lose anything because of work you do during this period.
I'm gutted to find I don't think I'll get anything. I left a job in August 2018 and became self employed. The earnings for that tax year from employment came to more than self employment, and so....nada. Tough times. 😒
From
Who can apply
You can apply if you’re 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
traded in the tax year 2019-20
are trading when you apply, or would be except for COVID-19
intend to continue to trade in the tax year 2020-21
have lost trading/partnership trading profits due to COVID-19
Your self-employed trading profits must also be less than £50,000 and more than half of your income come from self-employment. This is determined by at least one of the following conditions being true:
having trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income
having average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period
If you started trading between 2016-19, HMRC will only use those years for which you filed a Self-Assessment tax return.
I've 'bolded' the point that makes me think it'll be means tested.
Well that’s easy enough for me if they will take invoices and/or bank records as proof.
Steady income for the last few years in the same sort of pattern them BOOM, 24th March and all stopped. I’d normally be non stop right now and the last 7 years of returns etc prove that.
But I suspect that may be a hell of a lot of work for them to investigate/require proof from everyone? The m expecting that it will be more of an increase in their normal ‘compliance’ checks next year.
I agree, I think it'll be means tested and possibly contain some form of caveat about savings.
I’m paid 1-2 months after the work is generally complete – large clients, long payment terms. My income in Mar/Apr/May will artificially look okay. My income in June/July/Aug… etc. will be non-existent because work has fallen off a cliff and it’ll take a while to recover, if at all.
I expect I’ll not get a bean and just have to ride it out.
I’m exactly the same MTT.
I agree, I think it’ll be means tested and possibly contain some form of caveat about savings.
The means testing is the 50k earnings limit. I think the point is to make it as near as possible matched to the position for 'furloughed' employees, who are paid 80% of their salary (up to the same monthly cap as self-employed). There's no savings restriction for employees so shouldn't be for self-employed either.
Yes, there will likely be some people who manage to keep working and claim but in the bigger scheme of the $40bn the schemes are costing it's going to be lost in the rounding and theres going to be such a massive economic shock I'm guessing we're all going to end up poorer.
I was speaking to a mate yesterday who is a spray painter/panel beater in his own 1 man staffed car bodyshop, His accountant called him last week and set him up on the self employed payment scheme which will start paying out 80% in june (£1800/month) but as he's considered essential services he's continuing to work as folk need their cars back.
I don't know. I'm SURE that part wasn't in the initial announcement (although I could be mistaken!) I think it was added just to weed out people who work in an industry that hasn't had their profits negatively affected at all. Everyone else can still claim (even if they are still working/earning, as long as they're earning less than they normally would due to C-19)I’ve ‘bolded’ the point that makes me think it’ll be means tested.
Just to point out for any non self employed folk reading this and thinking that sounds ok: It's 80% of your profit so all your regular bills like workshop rent, insurance, vehicle running costs (fuel less now obviously) etc, rates will still need paid. For me it's about a 70% hit in my money coming in.
Please please please, some of you put in your claims for Universal Credit.
Worst case scenario you're not entitled, and it's cost you nothing more than the time of filling in some info on a website, but many of you may be and not realise it. You can still report any earnings you may make in the meantime (through your online account) and you don't even need to call up now for a telephone appointment - if it's needed, UC will call you.
If you subsequently receive money through the Self employed income support scheme, it will just be taken into account as normal earnings.
https://www.understandinguniversalcredit.gov.uk/coronavirus/
@zilog6128 no, the initial announcement made no reference to earning during the eligible period:
https://www.gov.uk/government/news/chancellor-gives-support-to-millions-of-self-employed-individuals
It looks like they qualified their offer afterwards.
I had a weird tax year ending March 2019 - year before great (but one contract was paid PAYE so more than 50% not SE), year after great but that particular year invoices fell just outside it, so it’s a bit pants on paper. On that basis, I reckon the government will pay me the equivalent of about a month’s overheads in June - if I’m lucky.
I’d expected longer term consequences rather than immediate, but just to prove me wrong I’ve had a couple of contracts ended/suspended and it also looks like another couple of jobs done are using this as an excuse not to pay me. So earnings are down immediately. It’s the first month since self employment I’ve not taken a wage out of my business account.
However, there’s one possible glimmer - the building manager of the offices I share was very diligent in making sure all tenants were registered for business rates (although the offices are too small to attract actual rates). He’s talked us all into making sure that we are in the queue for the small business grant despite us all being deeply sceptical. And now some tenants have already been paid. My application is a bit less straight forward so remain ‘trying not to hope too much’ - I share the office and am not the lead tenant but he’s confident that other sharers have been paid.
So any of you freelancers who rent premises, check whether you might be eligible. It’s a one off payment of £10k which is really not to be disparaged.
Thanks for all the replies.
It seems that no one is really going to be sure how much they'll be entitled to until June when we can start applying. I'll keep doing any small jobs I can (none of them will be cash so the employed amongst you won't getting up in arms about it) and see how it goes? Good luck to all you self employed and I hope things go back to normal for you after this is over. In fact to everyone... I hope you all manage through this.