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Self-Employment Income Support Scheme – guide for the self-employed

Posted by Jake Smith on Oct 20th, 2020 | Get paid

Self-Employment Income Support Scheme - guide for the self-employed | Crunch - image of coronavirus spelt on a calculator

The government’s support scheme for the self-employed – the Coronavirus Self-Employed Income Support Scheme (SEISS) offers taxable grants for many sole traders and partnerships.

Applications for the first grant of up to 80% of your average monthly trading profits capped at £7,500 closed on 13th July 2020. Applications for the second grant covering up to 70% of your average monthly trading profits, capped at £6,750 closed on 19th October 2020.

There will be a third SEISS grant covering the period November 2020 to January 2021 of up to 40% of average monthly trading profits capped at £3,750  (this was previously going to be set at a lower amount but was increased by the Chancellor on the 20th October). There is a fourth and final grant planned to cover the period February 2021 to April 2021. The amount of the fourth grant has not yet been announced by the government.

HMRC have provided an online tool to check if you’re eligible,  if you received the first two grants you are likely to be eligible for the following grants if your business continues to be affected. The government has an online portal for making a claim though you cannot claim for the third grant yet. We’ve put together this guide to help you make a claim when it is available.

You must make a claim yourself – Tax Agents or advisers such as Crunch cannot make a claim on your behalf.

This article contains:

The SEISS is designed to support self-employed individuals. For Crunch clients, this usually means you operated as a sole trader during your period of eligibility for the scheme. If you were employed by your business, or you’re a director employed by your limited company, you may be eligible for the Coronavirus Job Retention Scheme (CJRS) or from 1st November for the Job Support Scheme (JSS). We have prepared a separate CRJS guide for employers to assist you.

HMRC will contact people it believes are eligible to use the SEISS. The grants are paid in a lump sum and do not cover any income from non-trading sources.

Please note, tax agents or advisors such as Crunch cannot make a claim on your behalf. We have prepared this guide to help you understand whether you may be eligible for a payment from the scheme and to help you through the application process based on guidance published by HMRC.

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On 22nd October 2020, the Chancellor announced a further expansion of the Self-Employed Income Support Scheme (SEISS).

The Self-Employed Income Support Scheme (SEISS) has been updated and the proportion of profits covered by the forthcoming self-employed grant in for the period 1st November 2020 to 31st January 2021 increases from 20% to 40% of average monthly trading profits, meaning the maximum grant will increase from £1,875 to £3,750.

The SEISS operates as follows:

  • The government will provide two further taxable SEISS grants to support those experiencing reduced demand due to COVID-19 but are continuing to trade, or temporarily cannot trade
  • It will be available to anyone who was previously eligible for the SEISS grant one and grant two, and continues to meet the current eligibility criteria
  • You do not have to have received a grant in tranche 1 or tranche 2 in order to be eligible, but you must meet all the current eligibility criteria
  • Future grants will be paid in two lump sum instalments each covering 3 months. The third grant will cover a three-month period from the start of November 2020 until the end of January 2021. The government will pay a taxable grant which is calculated based on 40% of three months’ average trading profits, paid out in a single instalment and capped at £3,750
  • The fourth grant will cover a three-month period from the start of February until the end of April 2021. The government will review the level of the fourth grant and set this in due course.

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The first tranche of SEISS allowed you to claim a taxable grant worth 80% of your average monthly trading profits over the three tax years to 2018/19, paid in a single amount up to a maximum of £7,500.

If you were eligible and your business was adversely affected by COVID-19, you needed to make your claim for the first grant on or before 13th July 2020. The deadline for claiming the second grant has now passed.

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The second tranche of SEISS was an extension of the first but only allowed you to claim a taxable grant worth 70% of your average monthly trading profits over the three tax years if your business had been adversely affected on or after 14th July 2020. So you could only claim a maximum of £6,570 between 17th August and 19th October 2020.

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The SEISS scheme has been extended for those people whose trade continues to be, or is now, adversely affected by coronavirus. If you’re eligible for the third tranche of grant, and your business is being adversely affected, you’ll be able to make a claim soon after 1st November 2020 using HMRC’s online system. The third grant is also taxable and worth 40% of your average monthly trading profits, paid out in a single amount up to a maximum of £3,750.

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There will be a fourth grant for those people whose trade continues to be adversely affected by coronavirus after 1st February 2021. The government is yet to announce the percentage of the average monthly trading profits it will be paying. The grant will be paid in a lump sum just like all the previous payments.

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The eligibility criteria for all the grants are the same. You do not need to have claimed the first grant to claim the second, third or fourth grants: for example, your business may have been adversely affected by Coronavirus more recently.

Self-employed people who were eligible for the first or second SEISS grant  should be eligible for the thrid and fourth grants, so long as their business had been adversely affected by coronavirus (COVID-19).

There is no minimum threshold over which a business’s income, costs or activity need to be changed by, but you must keep appropriate records as evidence of how your business has been adversely affected. For instance, you should keep records of how your income has reduced compared to the previous year, an increase in bad debts or a reduction in the number of clients your business can serve.

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Self-employed parents whose income may have been affected if they took time out to have children will also now be able to claim if they meet the eligibility criteria. There’s more information for new parents, including an online form on GOV‌.UK.

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You can only claim if your average trading profit over the three tax years to 2018/19 was less than £50,000. Also, the majority (over 50%) of your income over that period must come from self-employment and you need to meet all the following criteria:

  • you carry on a trade which has been adversely affected by coronavirus
  • you traded in the 2018/19 tax year and submitted your Self-Assessment tax return to HMRC on or before 23rd April 2020 for that year
  • you traded in the 2019/20 tax year
  • you intend to continue to trade in the 2020/21 tax year.

For the third and fourth grants HMRC has said:

To be eligible for the grant extension self-employed individuals, including members of partnerships, must:

  • currently be eligible for the the Self-Employment Income Support Scheme (although they do not have to have claimed the previous grants)
  • declare that they are currently actively trading and intend to continue to trade
  • declare that they are impacted by reduced demand due to coronavirus in the qualifying period (the qualifying period for the grant extension is between 1st November and the date of claim).

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You can check online to find out if you’re eligible to make a claim for the grants. Your tax agent or adviser cannot make a claim on your behalf. You’ll need your:

You can use HMRC’s online tool to check your eligibility for SEISS.

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If you’re eligible to claim

If you want to claim under the third tranche of grant you must make your claim in November. To claim you’ll need your:

  • Government Gateway user ID and password – if you do not have a user ID, you can create one when you check your eligibility or make your claim
  • UK bank details (only provide bank account details where a BACS payment can be accepted) including:
    • bank account number
    • sort code
    • name on the account
    • your address linked to your bank account.

You’ll have to confirm to HMRC that your business has been adversely affected by coronavirus. HMRC has confirmed it will check claims and take appropriate action to withhold or recover payments found to be dishonest or inaccurate.

We will update our article once the scheme is reopened for the third tranche; this is likely to be in November 2020.

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How to claim for SEISS

You must make the claim yourself. Your tax agent or adviser must not claim on your behalf as this will trigger a fraud alert, and you will have to contact HMRC. This will cause a significant delay in receiving your payment.

You can start your SEISS claim using HMRC’s online system.

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You’ll get a taxable grant based on your average trading profit over the three tax years:

  • 2016/17
  • 2017/18
  • 2018/19.

HMRC will work out your average trading profit by adding together your total trading profits or losses for the three tax years, then divide the total by three.

The third grant will be calculated at 40% of your average monthly trading profits, paid out in a single instalment covering three months, and capped at £3,750 in total. The online service will tell you how the amount of grant is calculated.

HMRC has provided various examples showing how it will calculate your average trading profits including if you have not traded for all three years.

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Once you’ve submitted your claim, you will be told immediately if your grant is approved. HMRC has said it will pay the grant into your bank account within six working days. You must keep a copy of all records in line with normal self-employment record keeping requirements, including:

  • the amount claimed
  • the claim reference number
  • evidence that your business has been adversely affected by coronavirus.

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The grant is taxable, so you will need to report it:

  • on your Self Assessment tax return
  • as self-employed income for any Universal Credit claims
  • as self-employed income and that you’re working 16 hours a week for any tax credits claims.

Contacting HMRC

You can contact HMRC though its lines are understandably extremely busy at this time.

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If you’re not eligible for support under SEISS, there may still be other support available to you such as Universal Credit or the Coronavirus Bounce Back Loan Scheme – you can use the government’s Business Support Finder to check.

We will keep this article and our COVID-19 Hub up to date with all the latest updates as they happen.

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