Tax implications of the SEISS- Getting To Grips With Grants and your Self Assessment

*Please note the information in this article may be out of date

How will the Self-Employed Income Support Scheme impact your next Self Assessment return?

The Self-Employed Income Support Scheme (SEISS) has been a lifeline to many sole traders during the coronavirus pandemic. Provided they’ve met the necessary criteria, these individuals have been supplemented with up to 80% of their average trading profits

However, these grants are taxable – meaning that they’re subject to Income Tax and National Insurance contributions in the tax year in which they’re received. As a result, they need to be included in your Self Assessment tax return

So, to make that as easy as possible for you, we’ve asked tax return guru and Technical Director of GoSimpleTax, Mike Parkes, to set the record straight on SEISS grants and how to record them for HMRC.

Grant 4 now open

If you have reason to believe that you’ve suffered (or will suffer) a significant reduction in trading profits between 1st February 2021 and 30th April 2021 due to the coronavirus pandemic, and you’re eligible, you can now claim support.

To apply, you’ll need your:

●     National Insurance number

●     Government Gateway user ID and password

●     Unique Taxpayer Reference (UTR) number

●     UK bank details, including account number, sort code, and name and address linked to the account

This fourth instalment of SEISS closes on 1st June 2021. To determine your eligibility, HMRC first reviews your 2019/20 tax return. Your trading profits must be no more than £50,000 and account for more than 50% of your taxable income.

Changes to grant 5

The eligibility criteria for the fifth grant will be different. As it stands, the amount you receive will be dependent on your turnover between April 2020 and April 2021.

In effect, this means you may receive support if your sales have fallen by:

●     30% or more – In which case, the fifth grant will be 80% of three months’ average profits (up to a maximum claim of £7,500)

●     Less than 30% – In which case, the fifth grant will be 30% of three months’ average profits (up to a maximum claim of £2,850)

This fifth and final instalment of self-employed support is expected to ‘cover’ the period from May 2021 to September 2021. 

Declaring grants 1, 2 and 3 on your tax return

You won’t need to repay your SEISS grant, but they are subject to Income Tax and Class 4 National Insurance contributions. This means that, if you claimed grants 1, 2 or 3, they will need to be reported, in full, in your 2020/21 Self Assessment tax return.

HMRC is making this easier for users by including a box on the 2020/21 and 2021/22 tax return forms. You’ll need to include a 4th or 5th grant on the latter tax return should you claim them in 2021. 

Alternatively, you can easily declare that you’ve received support through tax return software. Platforms like GoSimpleTax include this as a simple drop-down field.

If you discover that you received a SEISS grant that you were not entitled to, or were paid more than you should have been, notify HMRC within 90 days to arrange repayment. Fail to do so, and you may be charged a penalty.

Provided you have claimed the correct amount and include all grants within your Self Assessment tax return, you should stay on the right side of the taxman.

About GoSimpleTax

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The software submits directly to HMRC and is the solution for the self-employed, sole traders and anyone with income outside of PAYE to file their self-assessment giving hints and tips on savings along the way. GoSimpleTax does all the calculations for you so there is no need for an accountant. Available on desktop or mobile application.

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