Self-employment Income Support Scheme

Posted on November 9, 2020

Information and step-by-step breakdown

The government page is here: https://www.gov.uk/.../self-employment-income-support-scheme-grant-extension for reference.

In recognition for the continued impact that COVID-19 has had on the self-employed, two further rounds (grants 3 and 4) of Self-Employment Income Support Scheme (SEISS) have been announced. This is an extension to the scheme announced earlier in the year, covered here. Note: Deadline for applying for grant 2 is 19 October 2020, so don't miss this!

What does the grant cover?

The extension will provide two grants and will last for six months, from November 2020 to April 2021. Grants will be paid in two lump sum instalments each covering a three-month period. The first grant will cover a three-month period from the start of November until the end of January. The Government will provide a taxable grant covering 80 percent of average monthly trading profits, paid out in a single instalment covering 3 months’ worth of profits, and capped at £7,500 in total. In theory, this means that the Government are providing broadly the same level of support for the self-employed as is being provided for employees through the Job Support scheme.

The second grant will cover a three-month period from the start of February until the end of April. The Government will review the level of the second grant and set this in due course. The grants are subject to Income Tax and National Insurance Contributions. Note that there is a chance that this will be influenced by 2019/20 tax return, so make sure you get the split of employed versus self-employed income correct for this tax return. See our tax return guide and explanation about different income types.

Remember, you can still claim Universal Credit now and get access to this scheme.

Who can apply?

You can apply if you’re a self-employed individual (including being a member of a parnership) and you:

• Currently be eligible for the SEISS (although they do not have to have claimed the previous grants) - see below for a reminder of eligibility for this
• Declare that they are currently actively trading and intend to continue to trade
• Declare that they are impacted by reduced demand due to COVID-19 in the qualifying period. The qualifying period for the first grant is between 1 November and the date of claim

Just to remind you, to qualify for the grant (i.e. to be currently eligible), you must:

• have submitted your Income Tax Self Assessment tax return for the tax year 2018-19 (by 23rd April 2020);
• traded in the tax year 2019/20;
• are trading when you apply, or would be if it wasn't for COVID-19;
• intend to continue to trade in the tax year 2020/21; and
• have lost trading profits due to COVID-19.

Your self-employed annual trading profits must also be less than £50,000 and more than half of your income must come from self-employment. This is determined by at least one of the following conditions being true:

• having trading profits in 2018/19 of less than £50,000 and these profits are more than half of your total taxable income
• 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 and 2019, HMRC will only use those years for which you filed a Self-Assessment tax return.

HMRC will use data on 2018-19 returns already submitted to identify those eligible and will risk assess any late returns filed before the 23 April 2020 deadline in the usual way.

HMRC has an eligibility checker for rounds 1 and 2, which should still be suitbale for rounds 3 and 4. Follow the link below and then enter your UTR number and N.I. number. It will then tell you whether or not you are eligible and, if you are, how much you can claim.

Government Eligibility Checker here: https://www.tax.service.gov.uk/self-employment-support/enter-unique-taxpayer-reference

If you receive the grant, you can continue to work, start a new trade or take on other employment, including voluntary work.

How much you’ll get

You’ll get a taxable grant which will be 80% of the average profits from the tax years 2016/17, 2017/18 and 2018/19, capped at £7,500 in total for the first 3 months - if you have not worked in some of these years, then they simply won't be included, but you do need to have worked in 2018/19 and completed your tax return.

‘Taxable grant’: a) ‘taxable’ meaning it needs to be included in your taxable income for tax year 2020/21; and b) ‘grant’ meaning money you don’t have to pay back.

To work out the average HMRC will add together the total trading profit (this is your self-employed income minus your relevant allowable business expenses) for the relevant tax years then divide by however many tax years this is. This gives an annual amount, so it will use this number to calculate a monthly amount (20% of this divided by 12).

It will be up to a maximum of £1,875 total for the first 3 months, but so long as your trading profits average under £37,500 this limit won't impact you.

The grant will be paid directly into your bank account, in two instalments, the first will cover November, December and January, the second will cover February, March and April.

As you can see, this is based on a pre-tax figure, and so it will be included as taxable income on your 2020/21 tax return and you will be taxed on it if you earn more than the personal allowance (£12,500), as well as paying any relevant national insurance contributions if you earn more than the earnings threshold (£9,500). But we will cover this is the tax return guide next year.

How to apply

Unfortunately, we are hearing a lot of cases of criminals using phishing attack to get people's personal data off them by playing on people's fear around CV-19. The government page states clearly:

You will access this scheme only through the GOV.UK website. If someone texts, calls or emails claiming to be from HMRC, saying that you can claim financial help or are owed a tax refund, and asks you to click on a link or to give information such as your name, credit card or bank details, it is a scam.

Applications for the third grant will open on 30 November 2020.

After you’ve applied

Once HMRC has received your claim and you are eligible for the grant, they will contact you to tell you how much you will get and the payment details.

If you claim tax credits you’ll need to include the grant in your claim as income.

What other help is out there?

Check out our COVID-19 post to see the other ways you can support yourself at this time. The main alternative is Universal Credit, which we have a post for.

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