HMRC will pay a taxable grant to self-employed individuals and partners equivalent to 80% their average trading profits for three months, capped at £2,500 per month.
However, the grant will not be payable to anyone who:
has average profits of £50,000 or more per year – they will get nothing;
has not submitted a tax return for 2018/19, taxpayers have until 23 April 2020 to submit this return in order to qualify;
receive less than half of their annual taxable income from self-employed profits.
It is difficult to determine the income of self-employed individuals in real time, so the Government has chosen to base the amount of grant available on the average of reported profits in the last three tax returns: 2015/16 to 2018/19. If the taxpayer started trading in this period the monthly average of profits will be drawn from the periods in which they were trading.
Those who started trading on or after 6 April 2019 are not eligible for this grant. It is also likely, but not confirmed, that people who earn the majority of their income from furnished holiday lettings will not qualify for this grant.
HMRC will contact those taxpayers who are eligible for this grant and will invite them to apply for the payment online. It is not clear not how this contact will be made, possibly by letter, but certainly not by email or text message. Warn your clients to be aware of scams offering money from HMRC and asking for bank details to be confirmed by clicking a link in an email or replying to a text.
To obtain the grant taxpayer will probably have to pass through the normal two step security process used to access their online personal or business tax account on gov.uk. If your clients haven’t yet used this online account to view their personal tax details, encourage them to do so.
The taxpayer may also have to confirm that they were trading in 2019/20 and expect to continue to trade in 2020/21 once the shutdown has been lifted.
The grant for three months will be payable in one lump sum into the taxpayer’s bank account, but the money will not be available until June.