31 Mar 2020 4:45 PM

Following the announcement of the Government’s assistance scheme for self-employed individuals, here we provide a working example of how it would be applied.

Read the details of the scheme here

Eligibility for the scheme.

You can apply if you’re a self-employed individual or a member of a partnership and if you can answer yes to the following question:

  1. You have submitted your Income Tax Self Assessment tax return for the tax year 2018-19
  2. You traded in the tax year 2019-20
  3. Are trading when you apply, or would be except for COVID-19
  4. intend to continue to trade in the tax year 2020-21
  5. have lost trading/partnership trading profits due to COVID-19

And

Your self-employed trading profits must also be less than £50,000 and more than half of your income come from self-employment.

This is determined by at least one of the following conditions being true:

  1. having trading profits/partnership trading profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income
  2. having average trading profits in 2016-17, 2017-18, and 2018-19 of less than £50,000 and these profits constitute more than half of your average taxable income in the same period

The example below demonstrates how this would be applied in a typical situation.

For more information relating to COVID-19, please view our COVID-19. Information Quick Find page

   

2018/19

2017/18

2016/17

 

Average

     

Self-employment

   20,185

   21,104

   89,809

 

43,699.33

Note 2 > half of average

Dividends

   14,000

   15,000

          -     

 

9,666.67

     

Property

 

     6,114

   14,157

          -

 

6,757.00

     
                   
   

   40,299

   50,261

   89,809

         
                   
   

Note 1

50.1%

 

42.0%

 

100.0%

         
   

over half (just)

           

Note 1

£20,185 is less than £50k and just over half the average of total income for 2018/19

Note 2

average is (40,299 + 50,261 + 89,809=180,369/3)=60,123

Half of average = 30,061

Profits of 43,699 is more than 30,061

If you have any questions about the scheme and how to work out if you are eligible please contact your usual Alliotts partner or contact us.

Keep up to date with assistance for businesses and individuals in our COVID-19 information hub