Self-employment Income Support Scheme (SEISS)
The Self-employment Income Support Scheme (SEISS) was introduced to support self-employed individuals (including sole traders and members of partnerships) who have lost income due to coronavirus (COVID-19).
The first phase of the scheme allowed self-employed contractors to claim a taxable grant, calculated at of 80% of average profits up to a maximum of £7,500 to cover three months profits. The first phase closed on 13th July 2020.
At the end of May, Chancellor Rishi Sunak confirmed that the scheme would be extended, meaning that eligible self-employed workers will be invited to make a claim for the second and final taxable grant from 17th August. If you were eligible for the first grant and can confirm to HMRC that your business has been adversely affected on or after 14 July 2020, then you will be able to access these funds.
Who can claim this?
Sole traders and self-employed workers in partnerships can make a claim for the second grant if they are eligible, even if they did not make a claim for the first grant.
This scheme is available to self-employed workers who:
- Have annual taxable profits of less than £50,000
- Make most of their income from self-employment
- Have filed a 2018/19 tax return and submitted this prior to 23rd April 2020
- Have traded in the 2019/20 tax year
- Plan to continue trade in the tax year 2020/21
- Have seen their trade adversely affected by coronavirus
How do you know if trade has been affected?
Your business could have been adversely affected by coronavirus due to a variety of reasons, these include:
- Taking sick leave as a result of coronavirus
- Interruption of your supply chain
- Decrease in the number of customers/clients
- Lower staff levels
- Cancellation of contracts
- The requirement to purchase PPE to adhere to social distancing advice
How much can you claim?
The second and final taxable grant is worth 70% of your average monthly trading profits, paid out in a single instalment covering 3 months’ worth of profits, and capped at £6,570 in total.
To calculate your average monthly trading profits, HMRC will look at your last three tax returns. If you have not traded for three years, then HMRC will take the average of the tax returns you have submitted.
How do you claim this?
As with the first grant, HMRC will contact you directly if you’re eligible and invite you to make a claim online. You must make the claim yourself. Your accountant or registered agent will not be able to do this for you.
It is important to remember that this grant is taxable in the same way that your trading profits will be at the end of the year. This means that when you come to submit your self-assessment tax return at the end of the year, you will need to pay tax and national insurance on the total amount of the grant that you have received.
If you qualify for and decide to take the full grant you would receive a maximum of £14,070. Assuming you are a basic rate taxpayer, the total owing to HMRC would be around £3,450. If you do receive the taxable grant, we would suggest keeping 30% to one side, so you have the funds available when the tax man comes knocking.