Coronavirus: Self-Employment Income Support Scheme
The coronavirus (COVID-19) outbreak is having far-reaching financial impacts on individuals and businesses across the UK, and indeed across the world. The government has announced support for the self-employed, this grant is called the Self-Employment Income Support Scheme.
What is the Self-Employment Income Support Scheme (SEISS) and can I use it?
This new scheme has been set up by the government to provide support for those who are self-employed, either as a sole trader or a partner in a partnership and who have been trading during the 2018/19 tax year. You have been trading if you have been running a business selling goods or services and you complete self-employed or partnership pages as part of your Self Assessment tax return.
Who is eligible for SEISS?
⚠️ Note: It is not available for people who work through their own companies and so receive wages through the PAYE system and/or dividends, see our guidance for employees.
You will be eligible for SEISS if all of the following apply (please note that when we refer to self-employed this includes a partner in a partnership and when we refer to self-employment income/profits this includes partnership trading income/profits):
a) you were self-employed in the 2019/20 tax year and trading in that year (this includes if you have had to temporarily stop trading because of the coronavirus) and intend to continue trading in this tax year (2020/21)
b) you have submitted a Self Assessment tax return for the 2018/19 tax year which included self-employment profits (see below about what to do if you have not submitted a return yet)
c) your self-employment profits have been adversely affected by the coronavirus. You will be asked to confirm this is the case when you apply for the grant. Some examples of this are if you have not been able to work for periods of time due to self-isolating, shielding or as a consequence of caring responsibilities, or if your business has had to temporarily close or scale down due to lockdown, staff shortages, or a lack of customers. You will be expected to keep business records to show how your business has been affected and that you are eligible to claim the grant.
d) your self-employment profits were equal to or more than your non-trading income. So if, for example, you are self-employed and an employee and your tax returns show you earn more from your employment will not be eligible for SEISS. (We explain what is available for employees on our page: Coronavirus: Employees: work changes).
e) and your self-employment profits were £50,000 or less.
If either condition (d) or (e) does not apply then HMRC will allow you to average profits over the 2016/17, 2017/18 and 2018/19 tax years so that if the average self-employment profits for these three tax years were £50,000 or less and these profits were more than 50% of your average taxable income over the period, then these conditions will be treated as met. There is an Example of how this works in HMRC’s guidance.
If conditions (a) to (c) above are met but you are not sure whether you meet the profits requirements for either 2018/19 or the three years 2016/17-2018/19 you can use HMRC’s eligibility checker to find out. You need your UTR self-assessment reference number and National Insurance number to use this tool. See the section Check you can make a SEISS claim in our news article How to claim a grant under the Self-employment Income Support Scheme for more information about this.
If you have a work visa, you are eligible to claim SEISS. A grant under SEISS does not count as ‘access to public funds’ for immigration purposes.
Will I still be eligible if I have taken a break from my self-employment due to maternity or adoption leave since 6 April 2019?
If you are taking a break from your self-employment because of a new baby or adoption, or have had a break for this purpose since 6 April 2019, HMRC will treat you as still trading throughout the period and so you will remain eligible for SEISS if all the eligibility criteria above are met. If you receive any Maternity Allowance this will not affect your eligibility for the grant.
Your self-employed profits are the trading profits shown on your tax return (usually in box 28). It is the difference between the turnover ie trading income (usually the box 9 figure on the tax return) and the expenses you are allowed to deduct for tax purposes, this includes capital allowances such as the Annual Investment Allowance. You can find out more about working out taxable profits on our website. Any trading losses from a different tax year which are used to reduce taxable profits in either 2016/17, 2017/18 or 2018/19 are ignored for this purpose. Please note that if your allowable expenses are more than your income then you will have a trading loss for the tax year rather than a taxable profit. The way this is dealt with for the purpose of SEISS is explained below in the section What if I have made a trading loss in one of the three tax years 2016/17 to 2018/19?
If you have more than one self-employment you must add together the trading profits and losses for all self-employments to work out your overall trading profits. See the Example in HMRC’s guidance which shows how this works.
Your non-trading income is the total of all your:
- income from earnings
- trading profits
- property income (eg rental profits)
- savings income
- pension income
- miscellaneous income (including taxable social security income)
Please note that tax credit and universal credit payments are NOT taxable social security income. See our section on state benefits if you are not sure whether your social security income is taxable.
⚠️ These figures will be on your tax return and will also show on the online tax calculation for the particular tax year or on the SA302 tax calculation if you received a paper calculation from HMRC.
What will I receive under the SEISS?
HMRC should contact you directly if they consider you are eligible for the scheme and you will be invited to apply to receive the taxable grant using an online claim form on GOV.UK, which should be available from 13 May. See our recent news article How to claim a grant under the Self-employment Income Support Scheme for more information on the claim process.
The grant is based on 80% of your average monthly profits from self-employment for the 2016/17, 2017/18 and 2018/19 tax years. The grant will be subject to both income tax and Class 4 National Insurance contributions.
If you are unable to claim online then you should contact HMRC using their SEISS helpline, make sure you have your National Insurance number and UTR to hand before you call.
Sean has self-employment trading profits for the last three tax years, he has no other income, he is unable to work because of the coronavirus but is planning to get back to work as soon as he can:
2016/17 tax year £20,000
2017/18 tax year £23,000
2018/19 tax year £29,000
HMRC will contact Sean to invite him to make a claim which he does through GOV.UK (see below) and will calculate his grant as £4,800 which will be paid directly into his bank account.
The grant is calculated as £20,000 + £23,000 + £29,000, which totals £72,000 and averages at £24,000 per tax year.
Sean can receive from the government 80% of his average monthly profits of £2,000 (£24,000 divided by 12) for three months so £2,000 x 80% x 3, which is £4,800.
We understand that the grant will be treated as taxable income in the year of receipt ie 2020/21, so subject to income tax and Class 4 National Insurance contributions in that tax year. More guidance confirming the tax treatment of the payments will be issued by HMRC shortly.
If Sean’s average monthly profits were higher than the example above, such as £3,500 per month the amount of the SEISS grant would be capped at £2,500. So, the maximum Sean could receive for the three months would be £7,500 (£2,500 x 3 months).
HMRC intend to contact everyone who is eligible for the scheme by mid-May 2020. If you are eligible and make a claim for the SEISS grant then the payment should be made directly into your nominated bank account within six working days. HMRC will send you an email confirming that the payment has been made.
A number of firms and organisations have produced online calculators to provide an indication of payments that might be expected based on Government guidance so far. Please note we have not checked the accuracy of these calculators and you should check your position with HMRC to confirm. For example Deloitte has given us a link to its calculator.
If you have made a loss in one tax year, this is deducted from the profits for the other two years when working out an average profit for the three-year period. There is an Example of this in HMRC’s guidance which shows how this works.
⚠️ Be careful of fraudsters pretending to be HMRC or the government and requesting your bank account details. You will be asked to access the SEISS and provide your contact and bank details only through GOV.UK.
What if I am receiving tax credits?
If you claim tax credits you will need to include this grant as part of your income for your tax credits claim.
Although we know that the grant will be taken into account as income for tax credit purposes – it is currently unclear how that will be done. We are seeking an answer from HMRC about this and also about the tax treatment of the grant. We will publish an update as soon as we receive it.
What if I am receiving universal credit?
Our understanding is that the grant will be treated as self-employed earnings in the universal credit (UC) assessment period that it is received. Self-employed UC claimants must send their earnings to DWP after the end of each assessment period.
You usually need to report payments into and out of the business in the assessment period – that includes the total amount of income your business received, which we assume will also include the SEISS grant. We are seeking confirmation of this. You will also report any expenses paid out in that assessment period along with any payments of tax, National Insurance and any money you paid into your pension. Although the grant is taxable, you can only deduct any tax actually paid in that assessment period for UC purposes.
Although the grant covers the period from 1 March to 31 May (3 months), it will not impact any UC received during that period – in other words it will not affect past UC entitlement.
However, it is possible that receipt of the whole amount of the grant in one UC assessment period will trigger something called ‘surplus earnings’ and as a result, it may affect your UC in subsequent assessment periods. We will be adding more information about surplus earnings shortly – in the meantime you can read the information on our Revenue Benefits website for advisers.
What if I haven’t been self-employed for all of the last 3 tax years?
If you have not been self-employed for all of the previous three tax years (2016/17, 2017/18 and 2018/19) then HMRC will use the information based on the submitted tax returns they have received. So, in the case of Sean (see the example above) if he had only been self-employed from 2018/19 then HMRC will only look at his 2018/19 tax return. His grant for the three months will be calculated as follows:
- £29,000 divided by 12 = £2,416.67
- £2,416.67 x 80% x 3 = £5,800.
If Sean had only started working on a self-employed basis part way through the 2018/19 tax year the calculation of his grant would be the same. So, if his self-employment began in July 2018, his profits of £29,000 would still be divided by 12 to work out his average monthly profits even though he has only traded for 9 months.
Your 2018/19 tax return should have been submitted by 31 January 2020. You will still be considered for the scheme if you submitted your tax return by 23 April 2020.
⚠️ If the return was submitted after 23 April 2020 you will not be eligible for SEISS.
Filing a 2018/19 tax return after 31 January 2020 means it is a late submission and therefore, late filing penalties will be charged by HMRC in these circumstances in due course.
What if I have already submitted my 2018/19 tax return but I have then amended it to correct a mistake?
If you amended a 2018/19 tax return after 26 March 2020 the changes made will not be taken into account when eligibility for SEISS is considered. However, eligibility for SEISS will be based on amended details if the amendments were made before 26 March.
How do enquiries affect the SEISS calculation?
If an amendment has been made to your tax return after 26 March 2020 following an enquiry, this will be disregarded and the eligibility for SEISS will be based on the original return before the enquiry amendments. If there has been an enquiry and it has been closed with a contract settlement then HMRC will use the original figures on the tax return when calculating the SEISS payment.
What if I have an outstanding tax return for either 2016/17 or 2017/18 – will I still be eligible for SEISS?
HMRC will still consider you for a grant in these circumstances and will work out your average profits based on periods of continuous self-employment, so either:
- 2017/18 and 2018/19 if missing tax return is for 2016/17
- 2018/19 only if missing tax return is for 2017/18 even if you have submitted a 2016/17 tax return.
What if my self-employment began after 5 April 2019?
Unfortunately, if you were not self-employed in the 2018/19 tax year and so did not submit a 2018/19 tax return showing any self-employed income then you are not eligible for this scheme. You may qualify for other government support.
If you live in Scotland, Wales or Northern Ireland, you can find out whether there is any additional provision for you in our section: Coronavirus: help for businesses in Northern Ireland, Scotland and Wales.
How do I make a claim for the SEISS grant?
We explain how you can check if you are eligible for the SEISS grant and how you can obtain the grant in our news article How to claim a grant under the Self-Employment Income Support Scheme (SEISS).
What happens after I made my claim for the SEISS grant?
As part of the claim process you will confirm that you meet all of the eligibility criteria and HMRC will explain how the grant has been calculated and what you will receive. It is important to either print or take a screenshot of the calculation of your SEISS grant and the grant claim reference.
If you think that the grant calculation is incorrect then you can request a review from HMRC, you will need your grant claim details and the explanation of why you do not agree with the calculation. You should still claim the grant as you can request a review afterwards and this will mean you will receive a grant payment within six working days whereas we are unsure how long the HMRC review process will take.
Remember it is important to keep records detailing how your business was adversely affected by the coronavirus outbreak. The records could include details of when your business premises were closed, when you were unable to work because of shielding or caring responsibilities (for example if you are home-schooling) or any business support loans you have applied for.