The Self-Employment Income Support Scheme (SEISS) has been a vital lifeline for thousands of self-employed individuals in the UK throughout the COVID-19 pandemic. The pandemic hit self-employed workers hard: in January 2021, 57% of self-employed survey respondents earned less than £1,000 per month. Likewise, almost two-thirds of respondents were financially worse off than they were pre-pandemic.
Thankfully, the Government introduced the SEISS to help self-employed individuals through the crisis. The fourth grant was launched to help newly self-employed individuals who could not claim for previous grants. Chancellor of the Exchequer Rishi Sunak confirmed that approximately 600,000 recently self-employed people might be eligible for the fourth grant.
The fourth SEISS grant is open for applications now but will close on June 1st 2021. It differs from the first three grants because it takes profit figures from the 2019/20 year into account. To be eligible for the fourth grant, you must be a self-employed individual or a member of a partnership rather than a limited company or a trust. Similarly, you must have traded in the tax years 2019-2020 and 2020-2021, and you must either be currently trading but are adversely impacted by reduced demand due to the pandemic, or you have had to cease trading due to the crisis.
Finally, to be eligible for the fourth SEISS grant, you must also declare that you intend to continue trading and have a reasonable belief that there will be a significant reduction in your trading profits due to the pandemic. Let’s explore those two terms in greater detail.
‘Reasonable belief’ and ‘significant reduction’
HMRC is asking individuals to assess their financial situation carefully before trying to claim the fourth grant. To successfully claim, self-employed individuals must reasonably believe that they will suffer a significant reduction to their trading profits. The causes of such a reduction can be due to business activity, capacity, demand or inability to trade due to the pandemic between February 2021 and April 30th 2021. HMRC has reminded claimants to keep evidence that shows the negative financial impact on their business and only to claim if they have a reasonable belief that the pandemic will significantly reduce their trading profits. Vitally, claimants need to be aware that they do not need to consider any other coronavirus support scheme payments they have already received when deciding if profits have significantly reduced.
How much will successful claimants receive?
If successful, claimants will receive 80% of three months average trading profits, which is capped at £7,500 per claimant. HMRC will calculate how much a claimant will receive based on up to four years of submitted tax returns. As a result, the amount received may differ from previous grants.
Important to note
Claimants should be aware that the grant is subject to Income Tax and self-employed National Insurance Contributions and, as a result, must be included in 2021 to 2022 Self Assessment tax returns. The grant also counts towards pension contribution annual allowances.
To make a claim before the fourth grant closes on June 1st 2021, please visit the GOV.UK website.