It was confirmed on Friday that the government intends to support sole traders through the COVID-19 pandemic via a grant scheme that will become available from 1st of June 2020. For sole traders this does mean some relief will be available akin to the support provided for people who are employed.
HMRC have stated that the grant will be deposited directly into the bank accounts of sole traders, and they will be contacted by HMRC if they are eligible for the scheme. Whether this contact will come via post or email has not yet been confirmed, though we believe it is likely HMRC will send a letter as this is their preferred form of communication.
The support will be available to sole traders and members of partnerships who have had to stop trading due to COVID-19. In order to be eligible, you must have submitted a 2018/19 Tax Return, have traded through the 2019-20 tax year and intend to continue trading into 2020/21.
Your self-employment profits must also be no more than £50,000 and must make up more than 50% of your total taxable income in order to qualify. HMRC will contact you as above if they believe you qualify.
How much can I get?
HMRC will calculate the size of grant available to sole traders and members of partnerships by basing it on their previous tax returns. The amount will be based on an average net profits of the sole trader as per HMRC’s records over a period of up to 3 years, depending on the length of the self-employment. HMRC will then pay sole traders 80% of these profits calculated over a 3-month period. For example:
80% of Profit
From the calculation above, we can see that this sole trader would be eligible for a grant of £3,260 based on their previous 3 years returns. If you do not have this many years of self-employment, HMRC will take an average of what is available to them in order to reach the grant figure. While the scheme will arrive later than anticipated, it will still be a valuable resource for those sole traders and partnerships who are suffering a loss of earnings due to COVID-19.
The Chancellor mentioned in his speech that it may arrive earlier if possible, but at this stage the 1st of June seems like the most realistic target for those looking to arrange their finances in the meantime.
If you have any queries at all, please get in touch with us and we will do what we can to assist. Please also see HMRC’s guidance here.