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Self-Employed Income Support Scheme (SEISS)
Update as at January 2021 - the third SEISS GRANT
Clarity on eligibility criteria for the third SEISS grant is different from the first two grants, and outlines in more detail how you can evidence a significant reduction in trading and/or profits in your business to apply for the grant, as laid out below:
Your business must be facing an ongoing hit from coronavirus from 1 November 2020 until the end of January 2021, or be newly affected in this period.
Even if your business took a massive hit earlier this year, you won't qualify UNLESS you can prove it's seen an impact during this specific period.
Before you claim, you must decide if the impact on your business will cause a "significant reduction" in your trading profits.
Only you can decide what is a "significant reduction" in your trading profits – it very much depends on your business. HMRC says it "cannot make this decision for you because your individual and wider business circumstances will need to be considered when deciding whether the reduction is significant".
You must keep evidence that shows how your business has been affected by coronavirus resulting in less business activity than usual.
While increased costs hit your profits, you CANNOT make a claim if you've only had increased costs and no other impact, eg, if you have had to buy face masks and cleaning supplies, but your demand has been unaffected.
This 'significant reduction' must be due to 'reduced demand, activity or capacity' OR being temporarily unable to trade
To show you've been hit by "reduced demand, activity or capacity" you need to be able to prove:
You have fewer customers or clients than normal, resulting in reduced activity due to social distancing or Government restrictions.
You have one or more contracts that have been cancelled and not replaced.
You have carried out less work due to supply chain disruptions.
More details on eligibility criteria for the fourth SEISS grant will be released on 3rd March, Spring Budget day.
Update as at November 2020
In light of new lockdown measures announced on 31st October 2020, the Government has increased the level of Self-Employment Income Support Scheme (SEISS) grant available to self-employed workers and partners in trading partnerships.
The SEISS was originally introduced to provide 80% of a self-employed individual’s average monthly trading profits up to a maximum of £7,500, for March through to May, as the coronavirus lockdown took hold.
A second cash lump sum was then made available for June through to August, equating to 70% of average monthly trading profits up to a maximum of £6,570.
The scheme was later extended for a further six months to cover the period from November 2020 to April 2021, with the first grant covering the period November to January.
The November to January grant was originally planned to be worth 40% of average monthly trading profits, and capped at £3,750 in total. However, it has now been announced that this grant will increase to 55% of average profits and be capped at £5,160.
HMRC has also confirmed that it will pay this more generous grant sooner than planned. The window for claiming will open on 30th November.
As with the previous grants under the same scheme, the payments will be subject to tax and national insurance contributions and need to be declared on your 2020/21 tax returns.
Self-employment Income Support Scheme – at a glance
HMRC will use the average trading profits from tax returns in 2016/17, 2017/18 and 2018/19 to determine the size of the grant, deducting any trading losses arising in those years from any profits.
In order to be eligible, you must have trading profits of no more than £50,000 and more than half of your total income come from self-employment for either the tax year 2018/19 or the average of the tax years 2016/17, 2017/18, and 2018/19.
You must have completed and submitted a self-assessment tax return for the 2018/19 tax year.
You must intend to continue to trade and either:
* are currently actively trading but are impacted by reduced demand due to coronavirus; or
* were previously trading but are temporarily unable to do so due to coronavirus
Update as at october 2020
The Chancellor confirmed that two further tranches of the Self Employment Income Support Scheme (SEISS) would take place in the winter months of 2020 and into Spring 2021.
The first of these grants will be worth 40% of average monthly profits and will be for the period of November 2020 to January 2021 inclusive, capped at £3,750, and will be provided to those who are currently eligible for SEISS and are continuing to actively trade, but face reduced demand due to coronavirus.
There will be a further grant available to cover February 2021 till April 2021, however the level of funding has yet to be released.
Who qualifies?
HMRC has yet to publish legislation, but we expect the following conditions to apply:
The trader must have been eligible for the previous SEISS grants (even if he didn’t apply for them).
The business has not ceased permanently at the date of the claim.
If the business is not actively trading there is an intention to resume trading before April 2021.
The business has been adversely affected by the covid-19 pandemic in the period from 1 November 2020 to the date of the claim.
The third SEISS grant will be based on the trader’s reported self-employed profits in the three years to 2018/19, or parts of that period when he was in business as a self-employed individual or partner.
Fourth grant - February to April 2021
The government has promised a fourth SEISS grant payable for three months from February to April 2021. We have no information about the level of this grant, or the capped amount as of yet.
In September 2020, HMRC indicated that this fourth grant would be based on the trader’s average annual self-employed profits for the tax years: 2016/17 to 2018/19. By the time the fourth SEISS grant is paid in early 2021, almost two years of recent trading results will have been left out of that profit calculation.
It is quite possible that the Chancellor will change his mind again by February 2021 to allow profits from 2019/20 to be included in the averaging calculation.
AM i eligible for the scheme?
You will be eligible for the SEISS if all of the following apply:
You are registered as self-employed or in a Partnership, with a UTR number and have traded in tax year 19/20 and intend to continue trading in the next tax year, 2020/21.
You have submitted a self Assessment tax return for the 2018/19 tax year. See below about what to do if you have not submitted a return yet.
Unfortunately anyone who has registered as self employed from April 2019 is not eligible.
Your self-employment income as a direct consequence of the coronavirus
Your self-employment profits make up 50% or more of your income. So if you are self-employed and an employee and your tax returns show you earn more from your employment, you will not be eligible.
Your self-employment profits are less than £50,000.
Note: HMRC will average profits over the last three tax years in question - 2016/17, 2017/18 and 2018/19 - and if the average self-employment profits for these three tax years were below £50,000 and these profits were more than 50% of your average taxable income over the period, then you are eligible.
Individuals that claim Tax Credits would need to include the grant as part of their income when they complete their tax return for 2020/2021.
If you think you are eligible, HMRC will contact you directly to apply online. You do not need to contact HMRC directly.
An overview of what is included is laid out in the slide show and a link to the guidance from the government can be found here, which is updated with latest developments.
Who is not eligible?
Unfortunately anyone who has registered as self employed from April 2019 is not eligible.
Anyone earning £50,000 or more of trading profit as a self-employed person.
If you are a new business and have not filed any data, you will not qualify and will have to fall back on Universal credit and the welfare state. This is anyone who started self-employment after April 2019 and has not filed a tax return yet, or even before that if they had a higher proportion of employment income in 2018-19.
Owner managers of limited companies and contractors outside of IR35 (personal service companies) that pay themselves in salary and dividends. Instead you may qualify for the Coronavirus Job Retention Scheme
Switchers – if you have incorporated your business - switched from self-employed to limited company since your 2018-19 tax return - you are probably ruled out; the Chancellor said that there will be a SEISS disclosure form to say that you are still trading.
How much do I get?
HMRC will directly contact you if they consider you are eligible for the scheme and if eligible you will receive a taxable grant of 80% of your average profits from self-employment for the 2016/17, 2017/18 and 2018/19 tax years.
There is a monthly maximum limit of £2,500 and this scheme will initially cover three months, from 1st March to 31 May 2020 inclusive.
How will HMRC calculate how much I can get under the SEISS?
HMRC will assess your eligibility for the Scheme based on your total income and trading profits.
HMRC will use the figures on your tax returns for your total trading income (turnover) and then deduct any allowable business expenses and capital expenditure.
Also, any business expenses deducted through the trading allowance and capital allowances, used to buy assets used in your business will be taken off your trading income before calculating how much you can get.
If you have losses from previous tax year, this will not be deducted.
Your personal allowance will not be deducted.
If I have the last three years of tax returns?
Example
Mark has self-employment profits for the last three tax years and has submitted tax returns for 2016/17, 2017/18 and 2018/19.
Mark has no other income but he is now unable to work because of coronavirus but is planning to get back to work as soon as feasible.
His income over the three years was:
2016/17 tax year £20,000
2017/18 tax year £26,000
2018/19 tax year £29,000
HMRC will contact Mark to invite him to make a claim and calculates his grant as £5,000, which will be paid directly into his bank account.
The calculation is as follows:
Three years income totalled: £20,000 + £26,000 + £29,000 = £75,000
Averages at £25,000 per year (£75,000/3 years)
Mark can receive 80% of his average profits of £25,000 for three months so £25,000 x 80% x 3/12, which is £5,000.
This will be treated as taxable income.
If I have been self-employed throughout the 2016/17, 2017/18 and 2018/19 tax years but i have changed by trade, does this matter?
No, so long as the periods of self-employment are continuous, the same rules apply above.
If I have less than three years of self employment income and tax returns?
If you have been partially self-employed for the previous three tax years i.e. tax years 2016/17, 2017/18 and 2018/19, then HMRC will only use the information based on the submitted tax returns they have received.
So, in the case of Mark (see the example above), if he had only been self-employed from 2018/19 then HMRC will only look at his 2018/19 tax return only.
His grant would be calculated as follows:
£29,000 income declared for 2018/19 at 80% for 3/12 months, which comes to £5,800.
If Mark was only employed for 2 of the 3 tax years, then only those 2 tax years are taken into consideration when calculating his grant.
His grant would be calculated as follows:
Two years income totalled: £26,000 + £29,000 = £55,000
Averages at £27,500 per year (£75,000/2 years)
Mark can receive 80% of his average profits of £27,500 for three months so £25,000 x 80% x 3/12, which is £5,500.
What if I am receiving tax credits?
If you claim tax credits you will need to include this grant as part of your income when completing your tax return for 2020/2021.
What if I am receiving universal credit?
The grant will be treated as earnings for universal credit (UC), and should be reported in your online journal, your log of income which needs to be completed to receive UC payments.
Your UC payment will be adjusted in response to changes in earnings as usual, in other words it is a means tested benefit.
What if I haven’t submitted my 2018/19 tax return yet?
Your 2018/19 tax return should have been submitted by 31 January 2020.
If you have yet to submit your tax return and you want to be considered for this scheme then you need to submit your tax return by 23 April 2020.
It is not yet clear whether any late filing penalties will still be charged in connection with the late submission of these returns.
What if my self-employment began after 5 April 2019?
Unfortunately, if you were not self-employed in the 2018/19 tax year and therefore did not submit a 2018/19 tax return showing any self-employed income then you are not eligible for this scheme.
What if i have a property lettings businesses? Do I qualify for the SEISS?
Property lettings businesses are not regarded as a trade so landlords will not qualify for the SEISS.
What if i have a furnished holiday letting businesses? Will I qualify for the SEISS?
Furnished holiday lettings are only considered a trade for certain purposes. At the moment, it does not appear that they will qualify for the SEISS.
How will I receive the grant?
HMRC will contact taxpayers who are eligible and will invite them to apply for the payment online.
It is not clear if this contact will be made by letter, but it definitely won't be by email or text message.
Note: Beware of fraudsters pretending to be HMRC via email or text message.
When will the money arrive?
The grant for three months will be payable in one lump sum into the taxpayer’s bank account.
HMRC will provide further guidance on payment process around mid May 2020, and plan to make payments by early June 2020.
The grant will be treated as taxable income, and will have to be reported on tax returns for 2020/21.
Those in receipt of working tax credits or universal credit will have to treat the grant as part of their self-employed income for 2020/21.
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