Self Employed

On Thursday 26 March the Chancellor announced support measures for self-employed individuals (including partnerships) whose income has been negatively impacted by the coronavirus.

The Self Employed Income Support Scheme (SEISS):-

The scheme (SEISS 1) was initially open to those in self-employment as an individual or member of a partnership in the UK for 3 months, but was extended on 29 May 2020 by a further 3 months (SEISS 2) until the scheme was planned to end in August 2020.  However, the Government will now provide a further three taxable SEISS grants (SEISS 3, SEISS 4 and SEISS 5) to support those experiencing reduced demand due to COVID-19 but who are continuing to trade, or temporarily cannot trade.

Who can apply - for SEISS 1, SEISS 2 and SEISS 3? 

Those who are already in self-employment (ie. have submitted an Income Tax Self-Assessment tax return for 2018- 2019), have traded in the tax year 2019-20, are trading when they apply or would be except for COVID-19, intend to continue to trade in the tax year 2020-21 and have lost trading profits due to COVID-19 will be eligible to apply. 

Those who pay themselves a salary and dividends through their own company are not covered by this scheme, but will be covered for their salary by the Coronavirus Job Retention Scheme if they are operating PAYE schemes.

In addition, your self-employed trading profits must be less than £50,000 and more than half of your income must come from self-employment. 

This is based on either: 

  1. Having trading profits/partnership profits in 2018-19 of less than £50,000 and these profits constitute more than half of your total taxable income 

  2. 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. 

When looking at your what your total income actually is, HMRC takes into account the following:

  • Income from earnings

  • Trading profits

  • Property income

  • Dividends

  • Savings income

  • Pension income

  • Miscellaneous income

What will be paid? 

SEISS 1

A taxable grant of 80% of average monthly trading profits based on the last 3 tax years (2016-17, 2017-18 and 2018-19) up to a maximum of £2,500 per month or £7,500 in total will be paid for 3 months. 

SEISS 2

A taxable grant of 70% of average monthly trading profits based on the last 3 tax years (2016-17, 2017-18 and 2018-19) up to a maximum of £2,190 per month or £6,570 in total will be paid for 3 months.

SEISS 3

This will grant will cover the period from the start of November 2020 until the end of January 2021.  A taxable grant calculated at 80% of 3 months average monthly trading profits, paid out in a single instalment, capped at £7,500 in total.

HMRC will add together the total trading profits for the 3 tax years (assuming you have traded during these tax years) then divide by 3 and use this to calculate a monthly amount, subject to the maximum caps set out under SEISS 1, SEISS 2 and SEISS 3.  Grants 1 and 2 will each be paid out in a single instalment in May 2020 and August 2020 respectively. Applications for Grant 3 must be made on or before 29th January 2021.

If you have not submitted your Income Tax Self-Assessment tax return for the tax year 2018-19, you must do this by 23 April 2020.  

How to Apply? 

HMRC will identify eligible taxpayers based on existing information and contact them directly with guidance on how to apply online - expect to be contacted in early May for SEISS 1, in August for SEISS 2 and from 30 November 2020 for SEISS 3.  Individuals are being advised not to contact HMRC now to avoid delays in introducing the scheme. You will access the online scheme through www.gov.uk from 13 May 2020.  

Initially the Government indicated that SEISS 1 would cover the 3 months of March, April and May 2020, however HMRC have now indicated that the SEISS grants don’t relate to specific 3 month time period, they are just grants which are based on 3 months of trading profits.  If your claim is approved, you will receive your payment within 6 working days.

The Chancellor confirmed on 3 April 2020 that self-assessments for the 2019-20 tax year will not be included in the calculation of average trading profits for SEISS 1, 2 and 3.

Eligibility Criteria

An individual does not need to have claimed the first grant in order to claim the following grants.  Applications for the first grant closed on 13th July 2020. Applications for SEISS 2 must be made on or before 19th October 2020. Applications for SEISS 3 must be made on or before 29th January 2021. Applications for SEISS 4 must be made on or before 1st June 2021 and applications for SEISS 5 must be made on or before 30th September 2021.

The first grant is for those whose business was impacted by Covid-19 before 13th July and the second grant is for those whose business was impacted by Covid-19 on or after 14th July.  The third grant is expected to be for those whose business was impacted by Covid-19 in the period from 1 November 2020 to the date of the claim. If impacted before and after these dates, you will be due all three grants.  You will have to confirm that your business has been ‘adversely affected’ by the coronavirus at these dates.

What does ‘adversely affected’ by Covid-19 mean?

It could be that:-

  • You or your staff have been unable to work due to Covid-19

  • You can’t access your normal place of work due to Covid-19

  • Your revenue has been negatively impacted by Covid-19

HMRC has provided further guidance here to help you decide if your business has been adversely affected by COVID-19.

SEISS 4 and SEISS 5 Grants

The eligibility criteria was revised for the 4th and 5th grants to take 2019/20 tax returns into account, but are otherwise unchanged from the third grant.

Self employed individuals and members of a partnership are eligible where the taxpayer:

  • Submitted their 2019/20 self assessment tax return by 2 March 2021,

  • Traded in the tax years 2019/20 and 2020/21,

  • Is currently trading but is impacted by reduced demand due to coronavirus, or has been trading but is temporarily unable to do so due to coronavirus,

  • Intends to continue to trade, and

  • Reasonably believes there will be a significant reduction in their trading profits.

The taxpayer’s trading profits must be no more than £50,00 and more than half of their total income for either:

  • the tax year 2019/20, or

  • the average of the tax years 2016/17, 2017/18, 2018/19 and 2019/20.

For the 4th and 5 the grants HMRC will base its calculations on the tax return data for 2016/17 to 2019/20 held in its systems on 2nd March 2021. All 2016/17 to 2019/20 tax returns filed by 2nd March 2021 will be taken into account, as will any amendments, assessments or contract settlements made by that date.

SEISS 4

This grant will cover the 3 month period from the start of February 2021 until the end of April 2021. 

Before you make a SEISS 4 claim, you must hold a reasonable belief that your trading profits are going to be significantly lowered due to reduced business activity, capacity, demand or an inability to trade, due to COVID-19 between 1st February and 30th April 2021.

The SEISS 4 grant will be 80% of your 3 months’ average trading profits.  It will be paid out in a single instalment and capped at £7,500 in total. 

SEISS 5

This grant will cover the 5 month calendar period from 1st May 2021 to the end of September 2021, however it is only worth 3 months of average trading profits.

The HMRC portal to apply for the 5th grant opened on 29th July 2021.  HMRC has contacted every self-employed taxpayer by email or letter who it believes is eligible for the 5th and last SEISS grant and given them a personal start date from which they can apply.  Taxpayers do not have to apply on their personal start date, but have until 30th September 2021 to apply.

The fifth grant has been set at 80% of three months’ average trading profits capped at £7,500 for those whose turnover has reduced by 30% or more.  Those with a turnover reduction of less than 30% will receive a grant based on 30% of three month’s average trading profits, capped at £2,850.

New traders, who started trading in 2019/20 and didn’t have a (different) self employed trade in any of the years 2016/17 to 2018/19, don’t need to provide a turnover figure, as HMRC already has a figure for 2019/20 from their tax return.  These new traders will get the 80% level of the grant.

Further details of the ‘Turnover Test’ can be found at Work out your turnover so you can claim the fifth SEISS grant - GOV.UK (www.gov.uk)

Average Trading Profits

Average trading profits for SEISS 4 and SEISS 5 is based on your submitted tax returns from the last 4 financial years – 2016/17, 2017/18, 2018/19 and 2019/20, whilst average trading profits for SEISS 1, SEISS 2 and SEISS 3 were based on 2016/17, 2017/18 and 2018/19.

Check if your eligible to make a claim

HMRC will not allow your tax agent or adviser to make the claim for you.  You must make the claim yourself.  However, as advisers we can be contacted for any support or queries with making the claim.

You can use an online tool to find out if you’re eligible to make a claim. Check here.

You will need your:

  • Self-Assessment Unique Taxpayer Reference (UTR) number, and

  • National Insurance Number

If you’re eligible, you will be told the date that you can make your claim.

  • You will also need your Government Gateway user ID and password.

If you’ve been told that you’re not eligible, you can ask HMRC to review your claim after you have used the online tool.