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

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.

The scope of SEISS was extended announced in the March 2021 Budget to help the newly self-employed  and the existing scheme has been extended to a fourth and fifth round.

The fourth SEISS grant is available to individuals who began self-employment in the 2019/20 tax year, which began on 6th April 2019, as well as those who have previously claimed.

Individuals who are eligible will be able to claim the fourth round of SEISS at 80% of average trading profits capped at £7,500 for three months. The fourth grants are available from now until 1st June 2021.

There will then be a fifth and final grant to cover May, to September, likely to be available in late July. The amount you receive will depend on how badly your business has been affected.

If your self-employed business turnover has fallen by 30% or more, you’ll receive 80% of 3 months’ average trading profits, capped at £7,500. Or for those with a turnover reduction of less than 30%, you’ll receive 30% of 3 months’ average trading profits, capped at £2,850.

To be eligible for the fourth grant, and for new entrants to the scheme, you must have filed a Self Assessment tax return for the 2019/20 tax year by midnight on 2nd March 2021. All other eligibility criteria will remain the same as the third grant.

While further details will be published by the government on eligibility in due course, HMRC has published the following about who can claim the fourth SEISS grant:

You must be a self-employed individual or a member of a partnership.

To work out your eligibility HMRC will first look at your Self Assessment tax return for the 2019/20 tax year. Your trading profits must be no more than £50,000 and at least equal to your non-trading income.

If you’re not eligible based on your 2019/20 Self Assessment tax return, HMRC will then look at the tax years 2016/17, 2017/18, 2018/19 and 2019/20.

You must also have traded in both the 2019/20 and 2020/21 tax years and submitted your 2019/20 tax return by 2nd March 2021.

You must either:

• be currently trading but are impacted by reduced demand due to coronavirus
• have been trading but are temporarily unable to do so due to coronavirus

You must also declare that:

• you intend to continue to trade
• you reasonably believe there will be a significant reduction in
• your trading profits due to reduced business activity, capacity, demand or inability to trade due to coronavirus

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. Applications for the third grant again covering 80% of your average monthly trading profits closed on 29th January 2021. Applications for the fourth grant are open from 21 April to 1st June 2021.

HMRC have provided an online tool to check if you’re eligible. If you received the first three 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 which will open shortly when the fourth grant is available. 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.

Background to the scheme

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). We have prepared a separate CJRS 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.

The updated Self-Employed Income Support Scheme announced on 3rd March 2021

In his Budget on 3rd March, the Chancellor announced further details about the fourth SEISS grant and also details of a fifth, and apparently final grant.

An important condition of the fourth grant is that the proportion of profits covered for the period 1st February to 30th April 2021 is 80% of the three months average monthly trading profits, paid out in a single instalment and capped at £7,500 in total.

The fourth grant will take into account the information included in your 2019/20 Self Assessment tax return and will be open to those who became self-employed in the tax year 2019/20 which began on 6th April 2019.

Other eligibility criteria remain unchanged from the previous three SEISS grants paid.

The SEISS operates as follows:

• The government will provide two further taxable SEISS grants from April 2021 to support those experiencing reduced demand due to COVID-19 but are continuing to trade, or temporarily cannot trade
• Grants will be available to anyone who was previously eligible for the SEISS grants, and continues to meet the current eligibility criteria
• Some recently self-employed people are now eligible. If you submitted a Self Assessment for the 2019/20 tax year (by 2nd March 2021) then you may now be eligible for grants four and five
• You do not have to have received a grant previously in order to be eligible, but you must meet all the current eligibility criteria
• Future grants will be paid in two lump sum instalments
• The fourth grant will cover a three-month period from 1st February 2021 until 30th April 2021. The Government will provide a taxable grant calculated at 80% of three months’ average monthly trading profits, paid out in a single instalment and capped at £7,500 in total. The online claims service is open from 21st April until 1st June 2021
• The fifth grant will cover the three-month period from the 1st May until September 2021.
• The grants are taxable income and also subject to National Insurance Contributions.

The first SEISS grant available up to 13th July 2020 – now closed

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 first grant has now passed.

The second SEISS grant available from 17th August until 19th October 2020 – now closed

The second grant 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. The deadline for the second grant has now passed.

The third SEISS grant available from 1st November 2020 until 31st January 2021 – now closed

The third grant on the SEISS scheme was available for those people whose trade continued to be adversely affected by Coronavirus, between November 2020 and January 2021.

The third grant was worth 80% of three months average monthly trading profits, paid out in a single amount up to a maximum of £7,500. The grant is taxable income and also subject to National Insurance Contributions.

The fourth SEISS grant available from late April 2021 until 1st June 2021

The fourth SEISS grant covers the period February to April 2021. It has been set at 80% of three months’ average trading profits and is capped at £7,500. Average trading profits is over the four years 2016/17 to 2019/20, where available.

HMRC contacted potentially eligible taxpayers in mid-April and applications will be open from 22nd April to the 1st June 2021.

The best news of all is that the fourth grant will be the first opportunity for over 600,000 recent self-starters to make a claim, as 2019/20 tax returns will now be included in the grant calculation. If you’re newly eligible, you may receive a letter from HMRC asking you to verify your ID.

Applications opened on the 22nd April. HMRC have already begun sending out texts, letters, and/or emails to some of those eligible for the fourth grant, but you shouldn’t worry if you’ve not received one yet. You have until 1st June 2021 to make your application using HMRC’s online portal. If you are expecting a message from HMRC, don’t forget to keep your eyes open for any scams or phishing emails.

The fifth SEISS grant available from 1st February 2021 until 30th April 2021

There will be a fifth and final grant for those people whose trade continues to be adversely affected by coronavirus. The grant will cover the period from May to September 2021. You’ll be able to claim from late July if you’re eligible.

The amount of the fifth grant will be determined by how much your turnover has been reduced in the year April 2020 to April 2021.

The fifth grant will be worth:

• 80% of 3 months’ average trading profits, capped at £7,500, for those with a turnover reduction of 30% or greater
• 30% of 3 months’ average trading profits, capped at £2,850, for those with a turnover reduction of less than 30%

Further details will be provided on the fifth grant in due course.

Eligibility for SEISS grants

The eligibility criteria for all the grants are similar, though the fourth and fifth grants are open to more recently self-employed people provided they submitted Self Assessment for the 2019/20 tax year. You do not need to have claimed the previous grants to claim the fourth or fifth grants: for example, your business may have been adversely affected by Coronavirus more recently.

Self-employed people who were eligible for the first three SEISS grants should be eligible for the fourth and fifth grants, so long as their business has been adversely affected by the coronavirus pandemic.

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.

Eligible parents

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.

Who can claim?

You must be a self-employed individual or a member of a partnership. You can only claim if your average trading profit for the 2019/20 tax year from your Self Assessment was less than £50,000. Also, the majority (over 50%) of your income over that period must come from self-employment. If you’re not eligible based on your 2019/20 Self Assessment the government will look at your three previous tax years as well.

You need to meet all the following criteria:

• you carry on a trade which has been adversely affected by coronavirus
• you traded in the 2019/20 tax year and submitted your Self Assessment tax return to HMRC on or before 2 March 2021 for that year
• you traded in the 2019/20 and 2020/21 tax years.

You must also either:

• be currently trading but are impacted by reduced demand due to coronavirus
• have been trading but are temporarily unable to do so due to coronavirus.

And, you must also declare that:

• you intend to continue to trade
• you reasonably believe there will be a significant reduction in your trading profits due to reduced business activity, capacity, demand or inability to trade due to coronavirus.

Check if you’re eligible to claim for SEISS

The online claim system should be available from late April 2021 until 31st May 2021 to check if you’re eligible and make a claim.

When the portal is open 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:

• Self Assessment Unique Taxpayer Reference (UTR) number – if you don’t have this, find out how to get your lost UTR number
• National Insurance number.

If you’re eligible to claim

If you want to claim under the fourth tranche of grant you must make your claim from the date the scheme opens in late April 2021 and before the closing date of 31st May 2021. 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.

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.

When the online portal opens in late April, you can start your SEISS claim using HMRC’s online system.

How the claim is calculated

Previously the claim amount was based on your average trading profits of the three tax years, 2016/17, 2017/18, and 2018/19  and you received a taxable grant based on your average trading profit over the three tax years. HMRC are now saying that your eligibility for the scheme will now be based on your submitted 2019/20 Self Assessment tax return. This may also affect the amount of the fourth grant which could be higher or lower than previous grants you may have received. We will give further details once they are available.

For the first three grants, HMRC calculated your average trading profit by adding together your total trading profits or losses for three tax years, then divided the total by three.

The third grant was calculated at 80% of your average monthly trading profits, paid out in a single instalment covering three months, and capped at £7,500 in total. The online service told you how the amount of grant was calculated.

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

What happens after you claim?

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.

How do you report receipt of the grant for tax purposes?

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.

What if I’m not eligible for the Self-Employment Income Support Scheme?

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.