My initial thoughts on the support for the self-employed:
1. You are eligible only if your self-assessment profits were below £50k and there is monthly limit of £2,500 – many will fall into this bracket which is good news.
2. If you have not been declaring your full income in your self-assessments, basically avoiding tax then you have a problem. I can see a large number falling victim to this.
3. HMRC will use your past three year self-assessment, being 2016-17, 2017-18 and 2018-19 to work out the average monthly income based on your average taxable profits. This will be done by HMRC.
4. HMRC will then pay 80% of this average monthly income as a grant directly to the self-employed bank account – this is not a loan and nobody will be required to pay this back.
5. People do not need to contact HMRC now, if they are eligible HMRC will contact them directly. I can see issues with many being missed due to wrong contact details. Please update your HMRC contact details.
6. The HMRC grant is taxable and you will be paying tax on this in your future self-assessments. This income should be treated same as sales in substance.
7. I don’t think there will be any VAT implications – many will not be VAT registered due to being below the threshold.
8. HMRC is sorting its house out so needs time to process this all, therefore they will make the payment in June 2020 for the past three months – the self-employed will have to survive from their own funds until then – this can create significant issues for many in the short term.
9. Those that played clever and set up companies to pay themselves dividends to save National Insurance, will now lose out as dividends are not covered by this scheme. They can only apply 80% of the minimum salary they were taking, which for many was equal to their personal allowance.
All in all those that declared all their income during the past 3 years will get something, be it three months late. The Government has also delayed tax payments to help cashflow.
Will this support be enough, time will tell – I am not sure.
If anybody needs to pick my mind, send me a message.