This week, Chancellor Rishi Sunak announced a new wave of measures in the mini-budget to help get the UK economy back on track as we come out of lock-down. Key
HMRC has issued guidance on how to work out total income and trading profits under the Self-employment Income Support Scheme.
Will you qualify? Who can get the grant?
Self-employed individuals are eligible for a taxable grant representing up to 80% of average profits if their 2018/19 trading profits were less than £50,000 and account for more than half of their taxable income.
If 2018/19 profits don’t meet the requirements, then individuals can still qualify by using the average of 2016/17, 2017/18 and 2018/19 trading profits.
Calculating trading profits
HMRC has confirmed that it will use the figures on personal tax returns for total trading income (turnover), then deduct any allowable business expenses and capital expenditure. This is the trading profit after all expenses, including flat-rate expenses, the trading allowance and capital allowance claims, but before taking off the personal allowance.
If trading losses from previous years were used to reduce the trading profit, HMRC will ignore the loss relief claim. This means that an individual can still get the grant even if they didn’t pay tax on profits due to loss relief.
However, if a trading loss was made during 2016/17, 2017/18 or 2018/19, then it will reduce the average trading profits and the grant.
How do you apply?
HMRC will contact you if you are eligible and invite you to apply online.
The maximum amount is £2,500 per month for three months, so to get the full amount you would need to have average profits of at least £37,500 per annum.
The payments are expected to be made in June 2020.
Find out more via the HMRC website.