Self employed and part employed

fireswish

I have watched Martins great videos but can’t see an answer for my situation. 

I started my self employed business in 2016/17 whilst Working full time for an employer (PAYE). I made a loss in my first year and small profit in my second year. I left my PAYE job in 18-19 to go fully self employed so have a better profit. 

My question is, will HMRC average my profits over the 3 years, or will they only base it on the third year, as the first year the majority of my earnings were from an employer as opposed to self employed?

thank you! 

fireswish

I should have said, in both my first and second year my earnings were largely from my employer (PAYE), as I was working full time for them and just doing small amounts of my own (self enployed) business on weekends. 

Hermann

Here's the current criteria....

You can apply if you’re a self-employed individual or a member of a partnership and you:

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

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:

• 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
• 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

If you started trading between 2016-19, HMRC will only use those years for which you filed a Self-Assessment tax return.

fireswish

Thanks Hermann for taking the time to reply :-)

I do meet the criteria for this: 

• 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

However in the 16-17 and 17-18 years, it was not more than half of my taxable income. Are they therefore still likely to average it over the three years even though only one of them was ‘fully’ self employed? I noticed it says if you only have one year of accounts, they will take that. I’m wishing at the moment I only had my third year of accounts as it is the difference between getting something, and getting nothing! 

Hermann

Not good news i'm afraid...

How much you’ll get

You’ll get a taxable grant which will be 80% of the average profits from the tax years (where applicable):

• 2016 to 2017
• 2017 to 2018
• 2018 to 2019

To work out the average HMRC will add together the total trading profit for the 3 tax years (where applicable) then divide by 3 (where applicable), and use this to calculate a monthly amount.

It will be up to a maximum of £2,500 per month for 3 months.

We’ll pay the grant directly into your bank account, in one instalment.

Hermann

Sorry should have said you could be eligible but the amount will be averaged.

fireswish

Thank you!