Self-employed workers have been hit particularly hard by the coronavirus (COVID-19) outbreak. Not only do they face losing income because of the lockdown but they also have additional ongoing fixed-cost expenses such as vehicles or premises.
The Self-Employment Income Support Scheme (SEISS) is a lifeline and offers similar salary financial assistance as offered to furloughed workers within larger businesses – a grant of 80% of your average monthly trading profits for three months, capped at £7,500 in total.
To be clear, the SEISS is a grant. Unlike other government coronavirus schemes, it’s not a loan, so it doesn’t have to be paid back (outside of situations where it’s been claimed fraudulently).
The grant is considered declarable income just like any other, though, so is still subject to the usual tax and National Insurance deductions.
See below to check if you’re eligible for SEISS, what you’re likely to receive, and when.
Am I eligible for the Self-Employment Income Support Scheme?
The government has created an online tool by which you can find out if you’re eligible. The tool uses your existing Self Assessment records to determine this.
To use the tool, you’ll need your Unique Taxpayer Reference (UTR), which you should find on your most recent Self Assessment return, and your National Insurance number.
Should the tool say you’re not eligible, and you believe you are, you can ask HMRC to review the conclusion by contacting them using the details they provide.
Alternatively, if your situation changes for any reason and you believe you have now become eligible, you can use the tool again.
If you wish to assess your eligibility manually, the criteria are as follows (all of the below statements must be true):
- You’re an individual who’s self-employed in the UK (or a member of a partnership) for the tax year 2020/21.
- You’ve been adversely affected by the coronavirus See below for guidance of what the government considers to be adverse reasons.
- Your 2018-19 Self Assessment tax return was filed on or before 23 April 2020.
- You’ve carried on a trade in the tax years 2018/19 and 2019/20 (or longer).
- Your 2018/19 trading profit was £50,000 or less OR your average trading profit for tax years 2018/19, 2017/18 and 2016/17 were £50,000 or less. Your trading profit is the taxable profit generated from your business that is calculated as part of your income tax return, and the average is determined by the government simply by adding the trading profits (or losses) for the three years, then dividing by three. If you’ve only been trading for two years, the government will add those two years and divide by two instead.
- More than half of your income comes from your self-employment. In other words, you can’t claim if more than half your income comes from another source, such as full-time employment. Similarly, if more than 50% of your income comes from other sources usually included on your Self Assessment tax return, such as investment or rental income, then you are not eligible.
- You aren’t already above the state aid limits, as claiming the SEISS grant would take you above the state aid limits.
- You don’t trade through a trust.
How much do I get?
You can claim a grant of 80% of your average earnings for three months. However, the grant is capped at £2,500 for each month (that is, £7,500 in total). It is paid in a lump sum after application, rather than in monthly instalments.
To work out how much you should receive, the government will calculate the average of your trading profit across the years you traded during the 2016/17, 2017/18 and 2018/19 tax years (that is, it adds up your trading profits then divides by the number of years you traded in).
Then it produces a monthly figure from this by dividing by 12. This figure is then multiplied by three and the government will then give you a grant of 80% of that amount, capped at £7,500.
If any of your Self Assessment returns have been amended or had a contract settlement applied after 6pm on 26 March 2020, the government will use the earlier, unamended version(s) for its calculations.
The grant is taxed, just like your regular income. In other words, the income must be declared along with other income sources in your 2020/21 Self Assessment tax return.
You will then pay any tax due as you would usually, but you can also offset losses against it too, as usual.
If you claim tax credits, the grant will need to be listed in your tax credit claim as income.
If you are subject to a loan charge, the average trading profits of tax years 2016/17 and 2017/18 are used to calculate what you’ll receive (or 2017/18 if you didn’t trade across 2016/17).
Who isn’t eligible?
You are not eligible for the SEISS grant if any of the following applies:
- Your trading profits are more than £50,000 – for both tax year 2018/19 and when averaged across the tax years you traded in during the last three full tax years starting in 2016/17.
- You aren’t self-employed or in a partnership at the moment, or don’t intend to be in the future. It’s not enough to merely be enrolled for Self Assessment and to have undertaken self-employment work or have a role in a partnership at some point in the past year. You must be trading now and intend to do so in the 2020/21 tax year too.
- You failed to submit a Self Assessment tax return for the 2018/19 tax year before 23 April 2020.
- You haven’t lost trading profits due to the coronavirus outbreak. During your application process, HMRC requires you to legally declare you are adversely affected, and it may attempt to retrieve the grant if it believes your application is fraudulent.
- Less than 50% of your income came from your self-employment or partnership for both tax year 2018/19 and when averaged across the tax years you traded in during the last three full tax years starting in 2016/17.
Can I continue to work while apply for, or after receiving, the SEISS grant?
Yes, you can continue to trade despite applying for or receiving the SEISS grant. Similarly, the amount you can claim for is not affected by any work you’ve done, are doing now, or will do in the future.
This is a significant difference from the similar Coronavirus Job Retention Scheme that employers use, where furloughed employees are not allowed to work or provide any services for the employer who furloughed them (but are allowed to work for other employers).
In other words, you may find that your furloughed employees are unable to work for you if you use the Job Retention Scheme, but you can continue to work within your business under the SEISS scheme.
The government says that, even though you apply for and receive the SEISS grant, you can also start a new trade or take on other employment. This includes voluntary work, or your duties if you’re a reservist in the armed forces.
What criteria is the government using to judge if I’m adversely affected by coronavirus?
The government quote a handful of examples of how a self-employed person might be adversely affected sufficiently that they can claim the SEISS grant.
You might be self-isolating after suspecting you have the virus, or sick because you’ve caught it. You may have caring responsibilities because of the virus outbreak, or be shielding.
Alternatively, you might be raring to work as usual, but find yourself unable to because you have no customers or clients because of the coronavirus outbreak.
You might be unable to work because your staff are isolating themselves. You might be unable to trade because your suppliers are affected and can’t provide the materials you need.
How do I apply for the scheme?
HMRC’s online portal for making applications opened on 13 May 2020.
It’s staggering applications between 13 and 18 May to stop the system becoming congested. You can find out the date when you should apply by using the eligibility checker.
You must apply yourself. A third party, such as your accountant or financial adviser, cannot do it on your behalf.
It’s vital to note that, unlike some of the other coronavirus-related grants from the UK government, receiving the SEISS grant money is not automatic. If you don’t apply, after being contacted by HMRC, you will not receive it.
If you’re unable to claim online (because of disability, for example) there will be an alternative route available, and HMRC will update its information page on the SEISS once this is known.
The government asks that you don’t contact HMRC to enquire about the grant because it’s busy supporting with numerous queries.
To apply, you’ll need the following information to hand:
- Your Self Assessment Unique Taxpayer Reference (UTR). This will be on your Self Assessment documentation.
- Your National Insurance number.
- The Government Gateway user ID and password that you ordinarily use to login the Self Assessment online services. If you haven’t already got one, you will be invited to create one by utilising the government’s SEISS eligibility service. Bear in mind this will require you prove your identity, which could require details from personal documents such as your passport or driving licence.
- The bank sort code and account number where you wish the money to be paid. You might want to inquire with the bank that they accept BACS payments for that particular account, although most UK banks do.
When will I receive the grant?
Payments should be received within six working days after you apply online.
If you are able to apply immediately upon the service going online as of 13 May 2020, this could mean payments are received around 21 May 2020. The entire grant is paid in a single lump sum, rather than in monthly instalments.
What admin or paperwork requirements does the SEISS have?
You need to keep the documentation relating to SEISS with your other Self Assessment records, as per existing requirements to keep records for five years. In other words, you will need to keep the records until at least 2027 after the 31 January 2022 submission deadline for the 2020/21 tax year.
You should keep the records relating to the amount claimed, the claim reference number, and any evidence that your business has been adversely affected by the coronavirus outbreak (for example, cancelled orders).
Remember that the reason for keeping the records in this way is to explain to HMRC what your situation was should it investigate for any reason, so the more evidence you save, the easier this will be.
Other coronavirus measures for self-employed workers
There are other coronavirus emergency measures that the government has put in place that might help you, as a self-employed individual or member of a partnership.
Deferred income tax payments
Self Assessment payments due on 31 July 2020 (that is, income tax payments on account) can be deferred until 31 January 2021.
Anybody who fills in a Self Assessment return and is liable for payments on account can make use of this, not just the self-employed.
Time to Pay
If you’re self-employed and struggling to meet outstanding tax obligations due to financial difficulties, you can contact HMRC to see if you’re eligible for support via the HMRC Time to Pay Scheme.
This allows more time to settle financial obligations if you can demonstrate a reasonable ability to pay in future. Contact HMRC on the special coronavirus helpline: 0800 0159 559.
Universal Credit increases
Because of the coronavirus outbreak, the government has increased Universal Credit amounts beyond the already anticipated yearly increase as of April 2020.
The standard allowance will be £409.89 per month.
Grants for businesses that pay little or no rates
If your business operates from a property and is registered for the Small Business Rate Relief (SBRR), or Rural Rate Relief (RRR), then it will receive an automatic grant of £10,000 from your local authority.
You don’t need to do anything to receive this (note: the requirements differ depending on where in the UK your business is located).
However, if your business doesn’t pay any rates, you may need to contact your local authority to ensure it has your bank details for the payment.
Coronavirus Business Interruption Loan Scheme
It will also pay the interest for the first six months.
MOTs have been suspended
Those who use a vehicle for their self-employed work will be pleased to hear that MOTs have been suspended for six months, provided the MOT falls after 30 March 2020.
The vehicle must be kept in a road-worthy condition but the exemption is automatic, so there’s no need to apply for it.
If in your self-employment business you use a lorry, bus or trailer then there are different rules – MOTs are suspended for three months as of 21 March 2020.
This again is automatic, although you may need to apply under certain conditions.
Conclusion on self-employment support
If you’re self-employed or in a business partnership, it’s worth making use of every government scheme that you’re eligible for.
Additionally, it’s vital to keep up with announcements and developments because the government is announcing new measures on a regular basis.
Editor’s note: This article was first published in March 2020 and has been updated for relevance.
Coronavirus and your business
We’ve gathered information and resources to help navigate this situation, including tools and webinars, to help you understand what financial support is available.