People who enrolled in the Self-Employment Income Support Scheme (SEISS) have been reminded that they must include income from their grants on tax returns to HM Revenue & Customs (HMRC), as it is subject to Income Tax and National Insurance.
Caroline Hicks, Accountant and Portfolio Manager at George Hay, comments: It’s really important that any Covid-related financial support is reflected accurately on returns sent to HMRC and so, to avoid getting into any ‘hot water’, individuals should liaise with their accountants to ensure nothing is overlooked.
The SEISS was set up by the Government to provide support during the Coronavirus pandemic for those who are self-employed, either as a sole trader or a partner in a partnership.
More than a year on from its establishment, eligible individuals have so far had access to four grants, with an extension to the scheme and fifth grant announced at Spring Budget 2021.
The scheme will now continue to the end of September 2021, and the fifth grant will cover lost earnings from May-September. It is expected that claims can be made from late July, but the exact date is yet to be confirmed.
The final grant will cover 80 per cent of the average self-employed profits if your turnover has fallen by more than 30 per cent; those who haven’t been as severely impacted can still get a 30 per cent grant.
Whilst not repayable, the grant awards are subject to Income Tax and Class 4 National Insurance contributions (NI).
Caroline continues: “The SEISS and other government-backed grants are taxable in the year that they are received, something some individuals utilising this support still don’t realise.
“What this means is that the first three grants are taxable in 2020/21 and as such should have been reported in your 2020/21 Self-Assessment tax return.
If you are unsure about how Covid grants are going to impact your tax liabilities or concerned that prior grants may not have been reported correctly, we can advise and assist you accordingly.”
SEISS grants received under the fourth or fifth rounds of funding are taxable in 2021/22 tax year and should, therefore, be reported on the 2021/22 Self-Assessment tax return.
To make it easier to report money received from SEISS grants, HMRC will include a space for this on the 2020/21 and 2021/22 tax return forms.
How can George Hay help?
Our experienced team of chartered accountants and business advisers are here for you, no matter the challenges you face. The pandemic has forced individuals and business owners to quickly familiarise themselves with new processes and reporting requirements, and we know this can be daunting.
We can help you to understand the rules surrounding the SEISS grants and ensure that grants are reported correctly on your Self-Assessment tax return, meaning that you always have an accurate picture of your liabilities.
To discuss your concerns or requirements with one of our accountants and business advisers in Bedfordshire, Hertfordshire or Cambridgeshire, contact us.
Link: Check if you can claim a grant through the Self-Employment Income Support Scheme
