One of the big announcements in Sunak’s Spring Budget was that the Self-Employment Income Support Scheme was to be extended until September 2021, helping to support many self-employed people who have experienced a loss of income during the pandemic. This will take the form of two separate grants, the fourth and fifth since the pandemic began.
While limited company directors are not eligible for the grant scheme, other self-employed people are, notably contractors and freelancers who operate as sole traders, so Kingsbridge has pulled together everything you need to know about SEISS in 2021.
The net has widened for the self-employed
Most of the details of the fourth SEISS grant remain unchanged from previous iterations (see the next section for more details on eligibility). It will cover February, March and April, and will be set at 80% of three months’ average trading profits and will be capped at £7,500. However, it is important to note two things:
- The grant will now take into account 2019/2020 tax returns as well.
- The scheme will now be open to those who became self-employed during the 2019/2020 tax year.
- The good news is this means that many people who were ineligible for SEISS in 2020 are now eligible to claim, provided they have submitted a 2019/2020 tax return by 2nd March 2021 at the latest.
So, who exactly can claim the SEISS grant?
First of all, to be eligible for SEISS you need to be self-employed or in a partnership and have traded in both 2019/2020 and 2020/2021.
HMRC will take a look at your 2019/2020 Self-Assessment to check your eligibility. Your trading profits should be no more than £50,000 and should make up at least 50% of your total income.
If your 2019/2020 tax return doesn’t show you to be eligible, HMRC will move on to previous tax years: 2016/2017, 2017/2018, and 2018/2019 to see if you fulfil the eligibility criteria.
Of course, because HMRC is basing their eligibility on past tax returns, they have no way of knowing how (or even if) your business has been affected by coronavirus. It’s, therefore, up to you to be honest with them about your situation and only make a claim if your business has suffered as a result of COVID-19. You will have to declare that either:
- You’re currently trading but are suffering reduced demand due to the pandemic; or
- You were trading but are now temporarily unable to because of the pandemic.
In addition to this, you must also declare that:
- You intend to continue to trade.
- You have a reasonable belief that your trading profits will be significantly reduced because of reduced business activity, capacity, demand, or inability to trade due to the pandemic.
If you are eligible, HMRC will work out the size of your SEISS grant based on your average trading profits.
How do I claim SEISS?
The claims service will open late-April 2021, this is to give HMRC time to process any late submissions of 2019/2020 tax returns. The claim window will remain open until 31 May 2021. If HMRC believe you are eligible, they will be in touch in mid-April and give you a personal claim date which is the date you can make your claim from.
If you believe you fulfil all the criteria, you should follow the instructions from HMRC on your claim date to make your claim. Although more information will be released by the government in due course, it’s worth noting that previous grants have been paid to recipients within about a week of a successful application.
Worth remembering…
It’s important to note that SEISS is a taxable grant, so you will need to declare it on the appropriate Self-Assessment when the time comes.
If you claim in error, or your situation changes and you no longer need the grant, you have the option of paying some or all of it back. And if, when you complete your Self-Assessment, HMRC believes you were paid in error (or fraudulently claimed it), they can demand that it is returned.
So, it’s definitely worth making sure you fulfil all of the eligibility criteria and don’t just take HMRC’s word for it, as you could end up in a sticky situation further down the line.
A note on the fifth SEISS grant
Chancellor Rishi Sunak also announced that there will be a fifth SEISS grant covering May to September 2021, bringing it in line with the continuation of the furlough scheme.
If you are eligible for the fifth grant, you will be able to claim from mid-July. Although further details on this grant are yet to be released, there has been some information announced that shows the eligibility will be different, reflecting the fact that normality is expected to return to the UK over the summer.
The changes mean that the fifth grant will be determined by how much your turnover has been reduced between April 2020 and April 2021. As such, the fifth grant will be worth:
- 80% of three months’ average trading profits capped at £7,500 for those whose turnover has been reduced by 30% or more.
- 30% of three months’ average trading profits capped at £2,850 for those whose turnover has been reduced by less than 30%.
Further details on the fifth grant will be released in due course, most likely once the claims period for the fourth grant has ended.
Getting back to business
The changes to SEISS reflect the economic changes as the effects of lockdown and a successful vaccination programme allow us to edge back towards normal life. Hopefully, this means that your self-employed work will begin to pick up again – if it hasn’t already – and you’ll be back to business over the summer.
You’re probably preparing for this already, getting in touch with clients and getting yourself organised, but it can’t hurt to have your business insurance lined up as well, particularly if you’ve allowed it to lapse during lockdown while work hasn’t been forthcoming.
Having your insurance ready to go will mean that you’re ready and raring to start work, putting you ahead of your competition, so give us a call on 01242 808740 so we can help you get set up.
