A Government grant has been announced that will be available to the self-employed who are unable to work due to the Covid-19 pandemic.
This grant will only be available to the self-employed with reported profits of £50,000 or less and there are many professional partnerships that will not qualify.
This income protection will be paid as a grant which means that it will not need paying back. HMRC will issue calculations for the grant which will be based on the submitted tax returns of the self-employed. The grant will be paid monthly, initially for three months, but this could be extended if necessary.
Payments under the scheme are set so that the net monthly earnings of an individual do not fall below the lower of: 80% of their monthly earnings (this will be averaged over the last 3 years based upon your tax returns) or £2,500.
If you are a new sole trader and you did not submit a 2019 tax return, you will not qualify for this scheme.
From looking at the guidance the grant you receive via HMRC will need to be detailed as “income” on your tax return and you will, therefore, pay tax on this income. If you are a subcontractor in the construction industry and ordinarily have tax deducted at source, you should keep some of this money aside for a potential future tax bill.
This grant will not be paid until June.