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Coronavirus Self-Employed & Small Limited Company Help

Full info on the self-employed grants, small business help and more

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While the fourth Self-Employment Income Support Scheme grant has now closed for applications, the fifth and final grant will open at the end of next month to self-employed people whose businesses have been affected by coronavirus. This guide runs you through the help available for the self-employed, including for limited company directors, and what to try if you're excluded from support.

Important: The info below is the best we have currently, but as this is a fast-changing situation we're updating this guide all the time. If you've a question that isn't covered below or in the other coronavirus guides, please email it to us (we can't respond with personal advice but we'll try to add answers in these guides).

Looking for other help? This guide focuses on the self-employed, but also see:

Plus we've specific info on: Wedding cancellation rights | WFH tax reclaiming | Payment holidays

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New. Fifth self employed income support scheme (SEISS) grant opening in July  

A fifth and final self-employed grant, worth up to £7,500, and covering 1 May to 30 September, will be open to claims from "late July" with more details announced at the end of this month.  If you’re eligible based on your tax returns, HMRC will contact you in "mid-July" to give you the earliest date from when you can make your claim. Here's what we know so far:

How much is it worth? 

  • The value of the fifth grant will be determined by two things: a turnover test comparing the year April 2020 to April 2021 with the pre-pandemic period, and your average monthly profits:

    If your turnover's fallen by 30% or more... you'll be able to claim the full grant worth 80% of three months’ average trading profits, capped at £7,500.
    If your turnover's fallen by less than 30%... you'll be able to claim a grant worth 30% of three months' average trading profits, capped at £2,850.

    More information on the "turnover test" will be provided by HMRC by the end of June. We will update this guide as soon as we have the details.  

  • We don't yet know exactly how average profits will be calculated. The previous fourth grant was based on your tax returns from FOUR tax years – 2016/17, 2017/18, 2018/19 AND 2019/20 - if you submitted them. If you didn’t submit tax returns for all four years (and many won't have, especially the newly self-employed), the grant will be based on your most recent consecutive returns. It's worth noting that the "turnover test" will be on 2020/21 and it's likely that average monthly profits will be calculated on earlier tax years. We are confirming with HMRC if the same tax years used to determine the fourth grant apply to the fifth grant. 

  • For previous grants, if you made a loss, this affected your grant amount. If you made a loss in one or more years this can affect the amount you might be able to claim. Any years with a loss will reduce your overall average. We are confirming with HMRC if this also applies in the same way to the fifth grant. 

  • The period the grant covers is five calendar months but is worth three months of average trading profits. This means the self employed seem to be two months' short of help compared to those on the furlough scheme (the same thing happened in 2020 too). 

Am I eligible? 

The eligibility criteria is the same as for SEISS 4, and crucially this means that some 600,000 recent self-employed starters who were newly eligible for SEISS 4, could also be eligible for SEISS 5. Saying that, while 100,000s were newly eligible, there are millions who are STILL excluded, namely those who fall foul of the strict profit thresholds or those who are directors of limited companies and take dividends. 

  • You must have filed a 2019/20 tax return. This is the same as the fourth grant but not the previous three. The deadline to file this with HMRC was originally 31 January, but the Chancellor specifically said in his 2021 Budget announcement that the scheme will be open to you as long as you filed by 11.59pm on 2 March. 

  • You must have traded in both tax years 2019/20 and 2020/21 AND intend to continue to trade. You must be currently trading or temporarily unable to do so because of coronavirus - you cannot make a claim if you have plans to close your business.

  • You must reasonably believe there will be a significant reduction in your trading profits. This must be due to reduced business activity, capacity, demand or inability to trade due to coronavirus from May to September. You'll need to be able to make a declaration to this effect. In practice, to be able to make the declaration:

    1)
     Your business must continue to be affected by Covid in the claim period, or be newly affected in this time. Your business must have been facing an ongoing hit from coronavirus from beginning of May to 30 September, or have been newly affected in this period. So you cannot apply if your business was struggling in, say, February, March and April but was no longer affected from May onwards. You also cannot apply if the only impact was increased costs. 

    2) You need to believe the impact during this period WILL cause a 'significant reduction' in trading profits. For many this will be straightforward, but others might not yet be sure. 
    If this is you, you might need to wait until you have a "reasonable belief" that your trading profits are going to be significantly reduced before you know if you can make a claim. 

    3) This 'significant reduction' must be due to 'reduced demand, activity or capacity' OR being temporarily unable to trade. 
    For example:

    - Lower demand, activity or capacity could be fewer customers, cancelled contracts or supply chain issues.- Being temporarily unable to trade could be because of a local lockdown, being officially told to shield/self-isolate or parental or caring responsibilities.

  • You must keep evidence that shows how your business has been impacted. HMRC expects you to make an honest assessment about whether you reasonably believe your business will have a significant reduction in profits. See our 'I'm confused whether I can claim the fifth grant' guide for more information about the declaration and examples of where you will and won't be able to claim the fifth grant.

  • You must earn at least 50% of your total income from self-employment. If you’re not eligible based on your 2019/2020 self assessment tax return, HMRC will then look at the tax years 2016/17, 2017/18, 2018/19 and 2019/20 to see if the average of your trading profits across the four years made up more than 50% of your total income. 

  • This means that non-trading income must not exceed 50% of your total income. Income from other jobs, property, dividends, savings, pensions and taxable benefits all count as "non-trading income" and, to qualify for the SEISS, the total of these combined must NOT exceed 50% of your total income. Confused about what counts as "taxable income"? Here's our full list.

  • Your average trading profit must be £50,000 a year or less. This is essentially a 'cliff-edge' requirement – so those whose average annual trading profit is more than £50,000 (to be specific, £50,000.01 and above) won't be able to get any support from this scheme.

    HMRC will first check your 2019/20 tax return – if you meet the requirements for this year, you will be eligible. If you’re not eligible based on your 2019/20 tax return, ie, you earned more than £50,000, it will then look at the tax years 2016 to 2017, 2017 to 2018, 2018 to 2019 and 2019 to 2020. If on average, you earned less than £50,000 over those four years, you will be eligible. 

  • You CAN keep working if you claim the grant. Though you need to declare your business has been impacted by coronavirus for the period you're claiming for. HMRC will check for fraudulent claims.

The Self-employed Income Support Scheme still has 'missing months'...

When the Government first announced the SEISS grant, its own press release from 26 March 2020 stated: "The income support scheme... will cover the three months to May," ie, March, April and May.

Then it announced a second grant covering another three months' worth of trading profits. Logic (and basic counting) would suggest that this second three-month grant would cover June, July and August – but to get this you strangely had to declare your work was impacted only after mid July.

But after initially setting out that the three-month grants corresponded to actual specific months of business disruption, HMRC then said that the grants don't relate to specific months after all. They are just grants, it said, though each is based on three months of trading profits. Then when the third grant kicked in, it was there to cover the period from 1 November 2020 until 31 January 2021

So do the maths...

That's nine months' worth of grants in total to cover 1 March 2020 to 31 January 2021, a total of 11 calendar months. That leaves two months missing, which in our view are September and October 2020.

A further missing two months...

The fifth and final grant covers May to September. But crucially it is still worth three months' worth of average trading profits. So it's three months' worth of support stretched over five months. So the self-employed "lose" a further two months of support.

We've asked the Treasury about the missing months, and its answer was that SEISS is not designed to be a month-by-month replacement of self-employed income.

Quick questions

  • Grants one, two, three and four are now closed and HMRC has confirmed they will not accept any late claims, but this is how they worked:

    - Grant one. It was available from 13 May to 13 July 2020 and was worth up to £7,500 in total. This was made up of 80% of three months' worth of average monthly trading profits, capped at £2,500/mth.

    - Grant two. It was available from 14 July to 19 October 2020 and was worth up to £6,570 in total. It was made up of a single payment of 70% of three months' worth of average monthly trading profits, capped at £2,190/mth.

    - Grant three. It was available from 29 November 2020 to 29 January 2021 and was worth up to £7,500 in total. This was made up of 80% of three months' worth of average monthly trading profits, capped at £2,500/mth.

    - Grant four. It was available from 22 April 2021 to 1 June 2021 and was worth up to £7,500 in total. This was made up of 80% of three months' worth of average monthly trading profits, capped at £2,500/mth.

  • Yes. Special dispensation was made for parents who took their leave in 2018/19 for the first three grants and the same now applies for 2019/20. If you took parental leave away from your business and didn't need to submit a self-assessment tax return in 2019/20 because your earnings fell below £1,000 – you can disregard 2019/20 and use earlier self-assessment returns as the basis for eligibility.

    You might have also earned more than £1,000 from your business, but still failed to be eligible if you had income from other sources (such as a part-time job) which meant your self-employed income was below 50% of your total income.

    IMPORTANT: You can only disregard your 2019/20 trading year if it meant you were ineligible altogether. Unfortunately, if you were eligible, you must still count your 2019/20 tax year when calculating your grant amount, which is based on average trading profits.

    This means many parents will see their grant amounts reduce as a result of taking parental leave away from their business. For example, if you traded in 2016/17, 2017/18, 2018/19 and your yearly profits were £30,000, but took six months' parental leave in 2019 to care for your child and your profits were halved to £15,000, this year would still count as part of your trading average, you can't disregard it. 

  • Yes, but some benefits could have an impact on your eligibility.

    To qualify for SEISS, your non-trading income has to be less than the trading profits, and some benefits count as "non-trading income".

    Generally speaking, a "taxable benefit" will count as non-trading income, while a "non-taxable benefit" won't count.

    Key benefits that are taxable – and count as income – are:

    • Employment and support allowance
    • Carer's allowance
    • Bereavement allowance

    Key benefits that are non-taxable – and don't count – are:

    • Universal credit
    • Child tax credit

    If you're unsure whether a benefit you get is taxable or non-taxable, click the drop down menus below for the full list.

    • These benefits are ignored when you apply for SEISS
      • Attendance allowance
      • Lump sum bereavement payments
      • Bereavement support payment
      • Best start grant
      • Child benefit
      • Child dependency additions paid with carer's allowance, incapacity benefit, state retirement pension and widowed parent's allowance
      • Child tax credit
      • Christmas bonus for pensioners
      • Cold weather payments
      • Council tax reduction
      • Disability living allowance
      • Employment and support allowance (income-related)
      • Funeral support payment
      • Guardian's allowance
      • Health costs, including eye tests, prescriptions and travel under the Hospital Travel Costs Scheme
      • Housing benefit
      • Income support, unless you are on strike when you claim
      • Industrial injuries benefits, including constant attendance allowance, disablement benefit, exceptionally severe disablement allowance and reduced earnings allowance
      • Maternity allowance
      • One-parent benefit, only available if your claim was made before April 1997
      • Pension credit
      • Personal independence payment
      • Return to work credit
      • Severe disablement allowance
      • Social fund payments, including budgeting loans, funeral expenses payments and sure start maternity grants
      • Universal credit
      • War disablement pension, including allowances
      • War widow's/widower's pension
      • Winter fuel payments
      • Young carer grant
    • These benefits are considered "non-trading income" when you apply for SEISS
      • Bereavement allowance
      • Carer's allowance
      • Employment and support allowance – contributory and youth
      • Incapacity benefit – except for the first 28 weeks (higher rate) and those who were receiving the former invalidity benefit at 12 April 1995 for the same incapacity (long-term)
      • Income support paid to people who are on strike
      • Industrial death benefit pensions
      • Jobseeker's allowance – both contribution-based and income-based up to a taxable maximum
      • State pension
      • Widowed mother's allowance
      • Widowed parent's allowance
      • Widow's pension

        Additions for dependent children paid with any of the above benefits are not taxable. An addition for a spouse or civil partner is taxable.
  • No, unfortunately not. If you weren't able to file a tax return for self-employed earnings in 2019/20, you won't be able to apply.

  • The grant you'll get is based on your average monthly profits – so if you have only made losses, then unfortunately you won't be able to get anything. However, do check what other support is available, including whether you can apply for a business interruption loan or universal credit.

  • The Government says individuals must "do the right thing" and only make a claim through the scheme if you've genuinely been adversely affected by coronavirus and need financial support.

    However, if you are struggling now and claim the grant, but later in the year your profits increase, the Government has confirmed the grant WON'T be "clawed back" by HMRC.

    It's worth noting that the grants are taxable – so claiming the grant will mean you have a higher taxable income when you come to do your 2020/21 tax return.

  • Yes. The Scottish Government announced on a further £220 million in grants to help businesses, including the recently self-employed. About £100 million of that support is designed for self-employed people and viable micro and SME businesses in distress due to coronavirus. Wales and Northern Ireland have also announced targeted support and lockdown support payments. See below for more.

  • Yes. You must keep any evidence that your business has had reduced activity, capacity or demand due to coronavirus at the time you made your claim, such as:

    • Business accounts showing reduction in activity compared to previous years.
    • Records of reduced or cancelled contracts or appointments.
    • Fewer invoices.
    • A record of dates where you had reduced demand or capacity due to Government restrictions.

    You must keep evidence if your business has been unable to trade due to coronavirus, such as:

    • A record of dates where you had to close due to Government restrictions.
    • NHS Test and Trace communications – if you've been instructed to self-isolate in line with NHS guidelines and are unable to work from home (if you've been abroad and have to self-isolate, this does not count).
    • A letter or email from the NHS asking you to shield.
    • Test results if you've been diagnosed with coronavirus.
    • Letters or emails from your child's school.
  • To qualify for the Self-Employment Income Support Scheme, more than 50% of your total taxable income must come from self-employment.

    When looking at what your total income actually is, HMRC takes into account the following: 

    • Income from earnings
    • Trading profits
    • Property income
    • Dividends
    • Savings income (this includes interest from PPI payouts)
    • Pension income
    • Miscellaneous income
  • Possibly. Being a landlord doesn't preclude you from being a part of the scheme – if you can meet the other criteria. Income from property does count towards your 'total income', but it doesn't count towards trading profits and the scheme looks at trading profits.

    Private landlords are also now eligible for a three-month buy-to-let mortgage payment holiday if their tenants are experiencing financial difficulties.

  • Yes, provided you fulfil the other eligibility criteria. The Government has said that any reservists who currently cannot access the scheme as a direct result of their service in 2019/20 will be able to make a claim for both grants. 

    All of the following must apply:

    • You carried out specified reservist activities for at least 90 days in the period for which your trading profits or total income for the 2019/20 tax year are determined.
    • These reservist activities affected your trading profits or total income for that year.
    • You were self-employed in the 2018/19 tax year and have submitted your self-assessment tax return for that year.

    Specified reservist activities are:

    • Full-time service commitment
    • Additional duties commitment
    • Call-out

    The Government website says that you will be contacted with more information if it thinks you may be eligible.

  • If you think you were underpaid

    If you believe you have not received enough money, there is now an official review process. But first HMRC says you should double-check your calculations using the information on its website, then contact your tax agent adviser if you have one. Then if you still think it's incorrect, you can ask for a review of your claim. HMRC has confirmed there is no specific deadline for people to do this, but it encourages people to do so as soon as possible.

    To do this, you will need to login into your Government Gateway account and have the following information:

    • Your grant claim reference
    • Your national insurance number
    • The unique taxpayer reference you used on your claim
    • Details about why you think the grant amount is too low

    If you think you were overpaid

    If you think you got grants one and two but were not eligible, or received more than HMRC said you were entitled to, you MUST tell HMRC. You can do this by logging into your Government Gateway account.

    You can also tell HMRC if you want to voluntarily pay back some or all of the grant you received. You can do this at any time.

  • Yes, if you received any or all of the first, second or third SEISS grants, you will need to include them in your self-assessment return for the tax year 2020/21, which you'll have to submit by 31 January 2022.

    The grants WILL be included when calculating the profits or loss of your business, and therefore may impact your tax implication.

    If you receive the fourth and fifth grants, these should be included in your 2021/22 self-assessment return, which will need to be submitted by 31 January 2023.

Applying for universal credit won't make you ineligible for SEISS

You can apply for and get universal credit - SEISS doesn't make you ineligible. 

But once you start receiving self-employed income support too then this will be classed as income, meaning the amount of universal credit you receive will decrease. You will NOT have to pay back previous months of universal credit because of your SEISS payment. 

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What if I'm not eligible for the Self-Employment Income Support Scheme?

Not all self-employed people can get the SEISS grant – for example, if you earn more than £50,000 a year, or if less than half of your income is from self-employment. If you don't meet the eligibility requirements, unfortunately you won't be able to claim.

Until recently, one option was to apply for a business interruption loan, but the temporary Coronavirus Business Interruption Loan Scheme, which was open to self-employed people and offered access to loans, overdrafts, invoice finance and asset finance of up to £5 million for up to six years, has now closed to new applications. See more below though on what other grants are available for affected businesses.

You may qualify for benefits if you're sick or self-isolating

If you've been in close contact with someone who tests positive, you may be told to self-isolate for 10 days by any of the various contact tracing schemes. If so, and you can't operate your business from home and it's disrupted, you can apply for universal credit, though what (if anything) you get depends on your costs, savings and income.

If you're sick, you can apply for new-style employment support allowance (ESA) and claim from the first day of sickness. You can also apply at present if you're caring for a child who is ill with coronavirus, or self-isolating according to Government advice - though these provisions may change at short notice. 

However, it's still worth checking that you're claiming all the other benefits and support you're entitled to, or checking if you can take a mortgage payment holiday or delay energy bills.

IR35 tax reforms are now in place

Controversial reforms of 'off payroll working' rules, which will lead to tax bills going up for many self-employed people that had been delayed by a year as a result of coronavirus are now in place. 

The changes mean every medium and large private sector business in the UK is now responsible for setting the tax status of any contracted worker. Previously the rules only applied to the public sector.

In simple terms, this means self-employed people working for a company must pay more tax. The fear is that businesses will find the changes too complicated and use fewer self-employed people as a result. 

Gig worker, zero hours, freelance or agency? Check what you're entitled to

If you work in the 'gig' economy – for example, you freelance, work through an agency or are on a 'zero-hours' contract – it's important to check what you're entitled to.

The best way to tell this is to see how you're taxed. If you're taxed through PAYE, then you're considered as an employee, so you should have the same rights as an employee. These include being furloughed as part of the furlough scheme, which has now been extended until the end of September 2021.

If you are self-employed (therefore taxed through self-assessment and not PAYE), you won't be eligible for furlough, but you may be eligible for the Self-Employment Income Support Scheme grants, or be able to claim benefits.

For more info, see Martin's video below on zero-hours workers.

Embedded YouTube Video

Help for limited company directors whose small firms are struggling

Those who work via small limited companies that they're directors of (as many firms ask them to) have very limited state support available. Yet there is a small amount of wriggle room, which Martin works through in his 10-minute video guide below. 

The video, which was recorded towards the beginning of the pandemic, includes the following:

  • No official scheme exists for limited company directors. There's no cover for lost dividends, although many are lobbying for it.
  • Limited company directors, even if they're the only employee, can furlough the PAYE element of their income, ie, get 80% of their salary up to £2,500/month. This isn't likely to be huge, as more income is dividends (and there's no help there), but it's something.
  • If you do furlough yourself you can't then work for the firm, but you can continue to perform your statutory obligations as directors, eg, official legal filings (in the video Martin discusses how far this reaches).
  • When furloughed, it's acceptable that you can work for other people, so you could freelance yourself and work outside of your limited company.
  • Those struggling for income are likely eligible for, and so should also claim, universal credit.

It's worth noting that Bounce Back Loans, which offered help for small businesses and in some cases income support for limited company directors, have now closed to applications - see our Bounce Back Loans guide.

Embedded YouTube Video

Door 'firmly shut' on more financial support for limited company directors

Following the announcement of the 2021 Budget, the Chancellor, Rishi Sunak, told MoneySavingExpert.com founder Martin Lewis that limited company directors wouldn't be getting any additional financial support during the pandemic, admitting that when it comes to extra help, the door is "firmly shut".

See exactly what the Chancellor said below in this clip from his interview with Martin Lewis, courtesy of ITV's The Martin Lewis Money Show.

Embedded YouTube Video

Self-assessment tax deadline has now passed. Here's the help you can get

Eligible taxpayers needed to have filed an online self-assessment tax return to HMRC for the 2019/20 tax year, which ended on 5 April 2020, by 31 January 2021. An estimated 1.8 million people are estimated to have missed this deadline, and had therefore been given an extension until 28 February to file their return.

If you didn't file your return by 28 February, you face a £100 late-filing fee. If you've not paid any outstanding tax, it’s best to pay ASAP as interest of 2.6% is still charged on a daily basis from 1 February on anything outstanding until the bill is repaid in full. 

If you're struggling to pay, there's help available:

  • The 1 April deadline has passed to avoid paying a late payment penalty. Normally a 5% late payment penalty is levied from 3 March, but this was pushed back to 1 April. The 5% penalty will be charged again at six months and 12 months after 31 January - so from 31 July 2021 and from 31 January 2022 - if you still haven't repaid. More info on setting up a repayment plan in the bullet below.

  • You can spread your tax repayments up to 22 January 2022. If you owed tax of between £32 and £30,000 in January 2021, you can use HMRC's 'Enhanced Time to Pay' mechanism to agree a repayment plan to spread that tax bill and repay it by direct debit in monthly instalments. If you use this system, you'll pay simple interest (meaning it doesn't compound) of 2.6% a year from 1 February 2021 until your bill has been repaid in full.

    How to apply:   

    - To use this service you need to have filed a 2019/20 tax return.         
    - You need to have set-up the repayment plan no later than 60 days after the due date of a debt.
    - You need to have no outstanding tax returns, other tax debts or other payment plans set up.
    - You can set up a Time to Pay plan online through your tax account, or you can call HMRC on 0300 200 3822     (open Monday to Friday, 8am to 4pm).

  • More time to pay VAT too. If your business is VAT registered and you deferred March to June 2020's VAT payment, you will now have the option to spread your payment over the 2021/22 financial year (6 April 2021 to 5 April 2022). You'll need to opt in to the scheme though. We will update this guide as soon as the scheme is up and running. 

Other grants for affected businesses 

Business finance isn't our bag. Yet there has been different routes of help available throughout the pandemic for businesses that need it, including: one-off top up grants for retail, hospitality and leisure businesses up to £9,000 per property, a £594m discretionary fund for other businesses,  more funding for local authority discretionary grants.

In the 2021 Budget the Chancellor announced a new "recovery loan" scheme. Businesses of any size can apply for loans from £25,000 to £10m through to the end of this year. The Government will provide a guarantee to lenders of 80%. The Fed for small biz has all the info along with how the Government's re-opening "roadmap" will affect businesses. 

In Wales, Scotland or Northern Ireland?

Business support is fully devolved, so it is up to the devolved nations to decide how to support businesses in their areas.

Scotland: The Scottish Government has given one-off "restart grants" for business in the retail, hospitality and leisure sector specifically to support them in meeting the costs associated with the costs of reopening. 

Wales: The Welsh Government has a package of support, to see what's available at Gov.wales.

Northern Ireland: For businesses in Northern Ireland, there is a range of business support available.

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