By Tommy McNally, founder of TommysTax.com
At the end of September, the government announced a new grant in their ‘Winter Economy Plan’. However, research we carried out with our users found that nearly three quarters (73%) of people found the support ‘confusing’. This explains the grant and also how to quickly get a tax refund as, if you are eligible for the grant, you’re also probably also owed a tax refund of around £3k.
Winter Economy Plan
If you’re self-employed, were eligible for the previous schemes (see below), and are still in business, but struggling due to Covid, the good news is that you’re probably eligible for the third and fourth round of grants.
The third round covers the period from the beginning of November 2020 until the end of January 2021. The grant will be for up to 20% of your ‘average monthly trading profits’ for a period of three months, but will be capped at £1,875.
The fourth round covers the beginning of February until the end of April 2021. The government has made it clear that they will review the fourth round nearer the time, so the amount and calculations are not decided. Presumably, the amount will depend on the impact of the virus at the time.
HMRC will check how much you should receive (you don’t need to do the calculations yourself). However, you do need to proactively claim the grand to receive it.
The grant does not need to be repaid, but will be subject to Income Tax and self-employed National Insurance.
HMRC will decide eligibility based on the following:
- Your work has been adversely affected by COVID-19 (e.g. You’re not able to work at all or your profits have dropped due to pandemic)
- You were in business during the tax years 2018-19 and 2019-20
- You submitted a self-assessment return for the tax year 2018-19 on or before 23 April 2020
- You intend to continue trading
- Your trading profits are no more than £50,000
Almost half our users (45%) have told me that the government ‘could have done more’ and I agree. It’s a tough situation but the self-employed have suffered more than most. Fortunately, there is another way to increase the money available to you, tax refunds.
Are you due a tax refund?
If your income has plummeted this year (and you’re eligible for the grants) the chances are you’re also due a tax refund. That’s because HMRC would have calculated your tax based on previous years’ profits.
Most people have also had additional business expenses this year, as a direct result of Covid. Think about yours and start writing them down so you don’t forget any. It could be PPE equipment, safe-guarding measures or even working from home. In my experience, of doing tax every day, no-one claims all the allowable expenses, and this can make a huge difference to your tax bill. On average we’re currently getting refunds for clients of £3k.
How to claim a tax refund
HMRC will usually give you a tax refund the following year unprompted, but they won’t know about your expenses unless you tell them.
If you want the tax refund now, then you need to claim it back. You have two options: you can either employ an accountant or tax specialist, like Tommys Tax, to do the calculations and claim it back for you, or you can get in contact with HMRC yourself.
To claim it yourself, go onto https://www.gov.uk/claim-tax-refund. The site will take you through a series of questions. The form covers all tax refunds so some of the questions may seem irrelevant. You should do your calculations before you go onto the site as you will be asked for the details. Make sure you have everything you need in front of you (tax codes and your tax returns, plus the total figures for the expenses you’re claiming and what they’re for). Don’t be tempted to exaggerate or lie. There are huge penalties (fines or even imprisonment), if you give false information. And be warned, the phone lines at HMRC can be very busy so you should expect to wait around an hour on hold before you get to speak to someone.
If you decide to engage professional help (to speed up the process or ensure you don’t make mistakes) you’ll find that an accountant will charge you a flat fee. Specialist services, like ours, will do all the calculations for you at no cost and only charge you when you get the money into your account (usually around 72 hours later). The specialist will talk you through it and we usually identify expenses that you’ve overlooked, as we’re incentivised to get the best deal possible for you.
I know that the money you’ll get is probably not enough, but hopefully it helps.