Will they take both years into account when submitting my self employed claim?

NexusDave

I became self employed in January 2018, so I submitted my first self assessment in April 2018 which equated to about 3 months worth of self employment and my profits were only £38 for 2017-2018 (less than 50% of my income was from self employment for this period).
For the period of 2018-2019 my profits were roughly £17300. Will they take into account 2017-2018, baring in mind it was only a quarter of a trading year? If so this halves the amount I'll be eligible to claim.

Grumpy_chap

Yes, they will take both years into account.  The only thing is, if self-employed in 2017-18 was less than 50% or PAYE (or other) income, you may be deemed as not self-employed that year.

NexusDave

Thank you. Ive checked the eligibility and I am eligible so I can only hope that they dont class me as self employed for the first year. 

Jeremy535897

Grumpy_chap said:

Yes, they will take both years into account.  The only thing is, if self-employed in 2017-18 was less than 50% or PAYE (or other) income, you may be deemed as not self-employed that year.

I have seen this misconception before. The 50% test is an eligibility test. If at least 50% of your total taxable income was self employed trading income in 2018/19, you pass the 50% test. If you fail that test, you look to 2017/18 plus 2018/19. They won't need to do that for you as I assume from your post that you pass the test in 2018/19?

The next step is to compute the grant itself (assuming you meet all the other eligibility criteria). That has no regard to what percentage of total taxable income the self employed trading income is. Nor does it have any regard to whether your self employment commenced on 6 April 2017, 5 April 2018 or any date in between. It will be the average of the two years. In your case, if your figures were correct, your grant for 3 months would be £17,300 + £38 = £17,338/24 = £722.42 x 3 = £2,167.25 x 80% = £1,733.80.

NexusDave

Jeremy535897 said:

Grumpy_chap said:

Yes, they will take both years into account.  The only thing is, if self-employed in 2017-18 was less than 50% or PAYE (or other) income, you may be deemed as not self-employed that year.

I have seen this misconception before. The 50% test is an eligibility test. If at least 50% of your total taxable income was self employed trading income in 2018/19, you pass the 50% test. If you fail that test, you look to 2017/18 plus 2018/19. They won't need to do that for you as I assume from your post that you pass the test in 2018/19?

The next step is to compute the grant itself (assuming you meet all the other eligibility criteria). That has no regard to what percentage of total taxable income the self employed trading income is. Nor does it have any regard to whether your self employment commenced on 6 April 2017, 5 April 2018 or any date in between. It will be the average of the two years. In your case, if your figures were correct, your grant for 3 months would be £17,300 + £38 = £17,338/24 = £722.42 x 3 = £2,167.25 x 80% = £1,733.80.

Hi, thats what I'm worried about because if they just use 2018/2019 (as this is my only full tax year where self employment exceeds 50%) to work out my grant.
Then its £17,300/12 = £1441 x 3 = £4325 x 80% = £3460.
Which is double what it would be if they also took into account the 3 months in 2017/2018. Seems a shame to get half of what I would have got for £38 of profit. 

Jeremy535897

If you had started your self employment on 6 April 2017, made £20,038 profit before capital allowances, but just before the year end bought a van for £20,000, and claimed £20,000 capital allowances, the result would be the same.

NexusDave

Jeremy535897 said:

If you had started your self employment on 6 April 2017, made £20,038 profit before capital allowances, but just before the year end bought a van for £20,000, and claimed £20,000 capital allowances, the result would be the same.

I've just had a thought, how can they take both years and divide by 24 if i never did 24 months of self employment. At most they should divide by 15. That comes closer to my original figure. 

calcotti

NexusDave said:

Jeremy535897 said:

If you had started your self employment on 6 April 2017, made £20,038 profit before capital allowances, but just before the year end bought a van for £20,000, and claimed £20,000 capital allowances, the result would be the same.

I've just had a thought, how can they take both years and divide by 24 if i never did 24 months of self employment. At most they should divide by 15. That comes closer to my original figure. 

They will take the two years added together and then divide by 2 to get the annual average. They will then divide that’s by 12 to get monthly figure.

Jeremy535897

NexusDave said:

Jeremy535897 said:

If you had started your self employment on 6 April 2017, made £20,038 profit before capital allowances, but just before the year end bought a van for £20,000, and claimed £20,000 capital allowances, the result would be the same.

I've just had a thought, how can they take both years and divide by 24 if i never did 24 months of self employment. At most they should divide by 15. That comes closer to my original figure. 

Because that is what the law says. It doesn't matter whether you think it is fair or not, unfortunately.