Martin Lewis explains self-employed support: The government cash you can get now
Martin Lewis shared the guide to his Twitter account, and explained what self-employed people are entitled to if they cannot work due to coronavirus. Starting the guide, Martin said: “Hello I’m Martin Lewis, Money Saving Expert, and this is my video on the new coronavirus self-employed income support scheme.
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“Clearly the state has been struggling to set this one up, both defining what is income for the self-employed.
“Is it turnover, is it profit, do we count dividends? And also, how do you this when, unlike employees who are either working or not, for self-employed people, what counts as work?
“So they have come up with a scheme that is arbitrary. They’ve had to do so, but that means there are holes in it, and there are some people who won’t get support and will feel it is very unfair. It’s quite a tough one, but let me run you through it anyway.”
Martin started with the amount the government will pay, and said: “OK, the first thing is, it will pay you up to 80 percent of profits to a maximum of £2500 a month. Now, this is a grant, not a loan, so it is not repayable. It is taxable income though.
“So, for example, if this pushed you into that higher-rate tax band, they would claw back the 40 percent of it and the national insurance on top. You can understand why the state has done that.
“What are we talking about when we say ‘profit’? It’s a three year mean average profit of your earnings up to the 2018/2019 tax year – the tax year that ended on 5th April 2019.
“So just to be absolutely clear, that’s the 2016/2017 tax year, the 2017/2018 tax year, and the 2018/2019 tax year. And it’s an average of those years.
“If you have two years, they will do it on an average of two years. One year – they will do an average of one year.
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“Where it gets tricker is, say you set up your business in the last six months of April of the 2018/2019 tax year, and you earned £10,000, they won’t pro rata that – they’re doing this by the year. You’ve got £10,000 of earnings in that year.
“They will count that – even if you only worked for six months – as your earnings for the entire year, and it would be profit based on that £10,000, not on £20,000, which you would have got pro rata.
“You are only eligible for this scheme if 50 percent or more of your earnings come from self-employment. If it’s less, you don’t count.”
Martin then highlighted a difference from this scheme to the one for PAYE employees, and said: “However, interestingly, unlike the employer scheme, with the self-employed scheme, you are eligible for this money, for this grant, even if you are still working. They want to keep your business going.
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“So that means effectively, they are helping people who have no work, and whose work has been reduced on the back of coronavirus.
“They are also, technically, making money available for those people whose business has not been hit on the back of this.
“I’ll leave the moral decision up to you as to whether you will take the money in that case.
“But there is quite an interesting difference here which is probably why they have got more strict cut-offs here than on the employee scheme.
“The lump sum will be paid in June – that’s very late. They might push that earlier.
“And as for the amount, as it’s based on a previous average, on your average of previous years, simply you are going to get a quarter of that average.
“So we could say it pays you for March, April and May – it doesn’t work like that.
“You’re going to get a lump sum payout in one quarter of the average over the three tax years.”
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