Final Coronavirus Self-Employment Grant Opens Soon
With the vaccination programme rolling out at pace and restrictions hopefully easing further next month, the end of the COVID crisis in the UK seems almost within touching distance. The pandemic, however, has left its mark on millions of self-employed workers whose incomes have been badly hit, due to forced closures and reduced workloads.
Since the start of the pandemic, the government’s Self Employment Income Support Scheme (SEISS) has provided up to four grants for self-employed people whose businesses have been affected by coronavirus. A fifth and final one, announced by the Chancellor in the Budget, is due to open at the end of July.
Eligibility for the SEISS scheme
The fifth SEISS grant will cover the period from 1st May to 30th September this year. If you are eligible, HMRC will contact you in July, with the claim portal opening at the end of the month.
How much SEISS can I claim?
That depends on how much your self-employed income has been affected.
If your turnover in the year to 5th April 2021 has fallen by 30% or more compared to the previous year, you will be eligible for the full SEISS grant. This is 80% x 3 months average trading profits, up to a maximum of £7500.
If your turnover has dropped by less than 30%, you will be eligible for 30% x 3 months average trading profits, up to a maximum of £2850.
To claim, you must be self employed (not a director of your own Limited Company – a common misconception) and you must have filed your 2020 Tax Return by the extended deadline of 2nd March 2021. You must have traded in both the 2019/20 and 2020/21 tax years. Your business must be continuing, although it can be temporarily unable to do so because of coronavirus. You must also believe there will be a significant drop in your business profits. As with previous claims, you must earn at least 50% of your total income from self-employment and your average self-employed profits must be £50,000 or less.
Do I have to pay tax on the SEISS grant?
All SEISS grants are taxable income and must be shown on your Tax Return in the tax year that they are received. This means that if you have received grants one, two and three (or any of them) they will have to be shown on your 2021 Tax Return, while grants four and five will be shown on your 2022 Tax Return.
This may mean that if your accounting year end is after 5 April, you may have your normal accounting profits taxed in 2020/21 plus the grants received.
An example is where you have a 30th June year end. You will be taxed on the profits to 30th June 2020 (your normal basis for self-employment) plus grants received in the year to 5th April 2021. This could mean you have the reduced year because of lockdown, but a further 3 grants taxed on your 2021 Tax Return.
HMRC Checks
We have been assured by HMRC that the SEISS grant is not “money for nothing” and they will be checking the eligibility of grants claimed. They will also be checking that they are shown on your Tax Returns.
Our Taxwise fee protection does cover you for any Coronavirus HMRC enquiries. This is an annual policy that can help with the cost of a tax investigation and we would strongly advise that you take it out.
If you would like further advice on these grants, your eligibility for other coronavirus support or to sign up for Taxwise, please get in touch with our team.