For millions of self-employed people in the UK, there was relief that the Government’s support scheme is set to continue following announcements in the 2021 Spring Budget. The Self-Employment Income Support Scheme (SEISS) was set to close at the end of February 2021, but has been extended to cover two further phases that will run until the end of September this year.
The Chancellor also announced that the scheme has been extended to more people who have recently become self-employed but missed out on payments during the early phases of the scheme.
This is good news if you are self-employed and are continuing to struggle during the pandemic. To make sure you can get the right level of support, our brief guide explains how SEISS works and how you can make claims for the next two phases if you are eligible.
SEIIS was introduced to support self-employed people or members of a partnership whose profits had been ‘adversely affected’ as a result of the pandemic and the series of lockdowns that followed. While many saw a reduction in income because of a slowdown in the economy, some self-employed people were unable to work at all because lockdown regulations meant their premises had to close.
The general scope of the scheme was a grant that covered a proportion of the profits that you would expect to earn over a defined period.
HMRC applied a number of rules for eligibility:
You must have submitted a Self-Assessment tax return for the 2018/19 tax year by 23rd April 2020. The return must have included any profits from self-employment, as well as any other income.
You must have been self-employed during the 2019/20 tax year and working in a self-employed capacity for all or part of that period.
You intended to continue trading as a self-employed person during the 2020/21 tax year for all or part of the remainder of the tax year.
Your business had been adversely affected by coronavirus.
More than 50 percent of your income in the 2018/19 tax year had to come from profits of self-employment (not turnover) and those profits had to be less than £50,000.
If you didn’t meet the ‘profit test’ in the 2018/19 tax year, HMRC would make the calculations based on your accounts for earlier tax years.
If HMRC calculated that a person was eligible for a grant, they contacted them inviting them to make a claim if they felt their business had been adversely affected by coronavirus.
HMRC provided guidance on what they considered the ‘adverse impact’ of coronavirus on a self-employed person. For example, you may not have been able to work for periods of time due to self-isolating, shielding or because of caring responsibilities caused by coronavirus.
You could also claim the grant if your business had to temporarily close or scale down due to lockdown, making your workplace ‘COVID secure’, staff shortages, or a lack of customers.
HMRC calculated average monthly profits based on actual profits for the 2016/17, 2017/18 and 2018/19 tax years. The initial grant was 80 percent of the average monthly profit with a monthly limit of £2500. This dropped to 70 percent for the second grant with a monthly limit of £2190. The third grant returned to 80 percent with a monthly limit of £2500.
Although the grants do not have to be repaid, they count as income and will be subject to income tax and National Insurance contributions.
SEISS is set to continue until September 2021 in two further stages.
Stage 4 covers the period from the end of February to the end of April and will provide 80 percent of three months’ average trading profits up to a total of £7500. You can claim that as a single grant from the end of April.
In Stage 5, which runs from May to September, HMRC will provide two levels of support, determined by how badly the pandemic has affected your turnover.
If your turnover has fallen by more than 30 percent, you will continue to qualify for 80 percent of three months’ average trading profits up to a total of £7500.
If turnover has fallen by less than 30 percent, you will be eligible for a payment of 30 percent of three months’ average trading profits up to a total of £2850.
You can claim the stage 5 grant from the end of July.
When you make a claim, you may need to provide some evidence that your self-employed business has been adversely affected. Examples include a lower number of invoices issued, monthly accounts showing lower turnover or confirmation that your premises have closed due to lockdown.
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Provided you meet the eligibility criteria, you can claim grants through the government’s website. You will need to have certain information to hand when you apply online. You will need:
Your self-assessment Unique Taxpayer Reference (UTR)
Your National Insurance number
Your Government Gateway user ID and password
Your UK bank details including account number, sort code, name on the account and address linked to the account
If your self-employed business is still struggling, or if you could just use some help understanding the SEISS process, we have experienced and knowledgeable accountants who can help.