Self-employment grant: Is the government’s SEISS right for you?

The fifth and final instalment of the UK government's grant for the self-employed, the Self-Employment Income Support Scheme (SEISS), can now be claimed on the HMRC website.

This article details what the SEISS is, who is eligible, how it works, and how to apply.

What is the SEISS?

The Self-Employment Income Support Scheme is a grant offered by the UK government in order to support self-employed people and members of a partnership whose income has been negatively impacted by the coronavirus pandemic.

It was initially launched to provide a single lump sum to cover the first 3 months of lockdown in 2020, but was extended during the summer once it became clear that coronavirus restrictions would continue to hamper the UK economy for longer than anticipated.

The upcoming instalment is due to cover the period from 1 May 2021 to 30 September 2021, and is open for applications up until 30 September 2021.

How do I know if I am eligible for a SEISS grant?

In order to be eligible for a SEISS grant, you must meet the following requirements:

You must be:

• Self-employed or;
• A member of a partnership

You cannot claim the grant if you trade through a limited company or a trust.

You must have traded in both tax years:

• 2019/20 (and submitted your tax return on or before 2 March 2021)
• 2020/21

You must either:

• Be currently trading, but are impacted by reduced demand due to coronavirus restrictions
• Have been trading, but are temporarily unable to do so due to coronavirus restrictions

You must also declare that you:

• Intend to continue to trade
• Reasonably believe there will be a significant reduction in your trading profits

To work out if you are eligible for the grant, HMRC will first look at your 2019/20 Self Assessment tax return. Your trading profits during this period must be no more than £50,000 and at least equal to, or more than, your non-trading income. If you are not eligible based on your 2019/20 Self Assessment tax return, HMRC will then look at the tax years 2016/17, 2017/18, 2018/19, and 2019/20.

At least 50% of your total income must also come from self-employment. This will similarly be judged on your 2019/2020 Self Assessment tax return, but if you're under the 50% criteria with that, HMRC will look at the tax years 2016/17, 2017/18, 2018/19 and 2019/20 to see if the average of your trading profits across the four years made up more than 50% of your total income.

You can keep working if you claim the grant, although you will need to declare your business has been impacted by coronavirus for the period you are claiming for. HMRC will check for fraudulent claims.

Losses over a year or more can affect your claim. If you made a loss in one of the tax years that counts, this will reduce your overall average earnings, and if you have other non-trading income which accounts for more than 50% of your total income, you will be unable to claim for the grant.

For more information on how the government works out trading profits and non-trading income for the SEISS, visit the government website's guidance.

How can you work out if you will suffer a significant reduction in trading profits when applying for SEISS?

You must be able to demonstrate that you expect to suffer a "significant reduction" in trading profits due to reduced business activity, capacity, demand, or inability to trade as a result of coronavirus restrictions between 1 February 2021 and 30 April 2021. HMRC is not able to make this decision for you.

In order to do this, you must keep up-to-date evidence that shows how your business has been impacted by coronavirus, resulting in less business activity than otherwise expected. This will be considered when deciding whether the projected reduction in trading profits is significant enough.

You do not have to include any other coronavirus scheme support payments that you have received from the government when deciding if you have had a significant reduction in your trading profits. HMRC advises that you should "wait until you have a reasonable belief that your trading profits are going to be significantly reduced" before you attempt to make a claim. It also states that it expects you to make an "honest assessment" about whether you reasonably believe your business will have a significant reduction in profits.

What factors could affect my eligibility for the SEISS grant?

The following matters can potentially affect your eligibility for a SEISS grant:

• Your tax return is late, amended or under enquiry
• You are a member of a partnership
• You have a new child
• You have loans covered by the loan charge provisions
• You claim averaging relief
• You are a military reservist
• You are a non-resident or chose the remittance basis

If you currently claim Maternity Allowance, this will not affect your eligibility.

For more details on eligibility, the HMRC website has a thorough explanation of all the circumstances which can affect your application.

How much money can I get from a SEISS grant?

The SEISS grant is calculated at 80% of 3 months’ of your average trading profits, paid out in a single instalment and capped at £7,500 in total. How much you receive, however, depends on your average trading profits.

HMRC will work out your average trading profits using up to 4 years’ of previously submitted tax returns. This may affect the amount you will receive, and could be higher or lower than previous instalments if you have received a SEISS grant before.

The calculations will take into account your trading profits across the 2016/17, 2017/18, 2018/19, and 2019/20 tax years. If there is a gap in the years that you have traded, HMRC will only use your most recent returns after the gap to work out how much you are entitled to.

Here is an example of how your grant would be calculated if your average trading profits were £45,000 over the last 4 tax years:

1. Start with your average trading profit (£45,000)
2. Divide by 12 = £3,750
3. Multiply by 3 = £11,250
4. Work out 80% of £11,250 = £9,000

However, you will only receive £7,500, due to the cap.

How do I apply for a SEISS grant?

In order to apply for a SEISS grant, you must make your claim through the HMRC website.

The government's website helpfully lists all the materials you will need for your application, and if your claim is accepted, you should receive the grant directly into your bank account within 6 working days.

HMRC will notify you with an email when your payment is due to be made.

What are the alternatives to a SEISS grant?

If you are not eligible for a SEISS grant or if it is simply not for you, there are a number of other options available for you to receive financial support as a result of the coronavirus pandemic.

• If you are currently enrolled in any other employment as a director or employee paid through PAYE, your employer may be able to get support by applying for the government's Coronavirus Job Retention Scheme.
• If you are not eligible for a SEISS grant, you may be able to claim for Universal Credit, although you should consider that an unsuccessful claim will affect any tax credits or benefits you receive.

For information on which benefits you may be eligible for, check out our article "Find out what benefits you are entitled to if any".