Since May 2020, the UK government introduced a temporary financial support system to help self-employed individuals, also known as sole traders, called SEISS. SEISS grants and tax returns aim to help support individuals who have been financially impacted by the pandemic and lockdowns.
There has been a total of three SEISS grants available to individuals since the first lockdown last year. The fourth will launch in late April 2021 and it will cover 80% of earnings lost between February and April 2021, up to the value of £7,500 per individual.
The final SEISS grant will cover lost earnings from May onwards, and an individual can claim it from late July 2021. The final grant will cover an 80% average of the self-employed individual’s profits if a turnover has fallen by 30%, if you haven’t lost 30% in turnover you are still eligible to get a partial 30% SEISS grant.
Who is and isn’t eligible for a SEISS grant?
The SEISS grant is available to the following:
- Individuals who have completed the self-employment or partnership trading pages of the Self-Assessment tax return.
- Trading profits must be less than £50,000 a year.
- Most of your income comes from self-employment.
- You have suffered a significant loss or reduction in profits because of reduced demand or because you ceased trading because of Covid.
- Members of business partnerships, their eligibility is based on their share of the partnership’s trading profits.
SEISS grants and tax returns are unavailable to the following:
- If you earn an income from property (e.g. holiday home).
- If you have not suffered a significant loss of earnings.
What is different about the fourth and fifth grant?
With the previous SEISS grants, a large number of self-employed individuals were unable to claim due to strict rules on eligibility – this impacted individuals who had not been self-employed for a full tax year.
However, the fourth and fifth grants are different, if an individual has filed a 2019-20 Self-Assessment tax return by midnight on 2 March 2021 you are eligible.
SEISS will now take into account 2019/2020 tax returns, so those who became self-employed in the 2019/2020 tax year may be able to apply (between late April 2021 and 31 May 2021).
It is predicted that around 600,000 self-employed individuals will be eligible for the last two SEISS grants.
Do I need to report a SEISS grant on my tax-return?
The SEISS grants do not need to be repaid, they are not a loan. However, they are subject to Income Tax and Class 4 National Insurance contributions.
The SEISS grants are taxable in the tax year in which they are received. So, the grants are taxable on the following:
- The first three SEISS grants are in the 2020/21 tax year and they should be reported in the 2020/21 Self-Assessment tax return.
- The fourth or fifth grant is taxable in the 2021/22 tax year and should be reported in the 2021/22 Self-Assessment return.
To make it easier for self-employed people to enter money received from SEISS grants, HMRC will include a box on the 2020/21 and 2021/22 Self-Assessment tax return forms.
If you have any questions about SEISS grants and if you are eligible then please get in touch. Give us a call on 01484 441431, or email our team on hello@itsrelative.co.uk. We are here to help.