Martin Lewis gives advice on the launch of the third SEISS
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SEISS, formally known as the Self-Employment Income Support Scheme, has been designed to offer support amid the COVID-19 crisis. The scheme was established earlier in 2020 and offered two grants to cover a proportion of trading profits. However, with the effects of the pandemic ongoing, two further grants have been offered by Chancellor Rishi Sunak.
The support from the third grant is now to cover 80 percent of average trading profits from November to January.
Third grant support will be up to a maximum of £7,500 to provide help to the self-employed.
However, for those who are hoping to make a claim from today onwards, there are important considerations to take into account.
The SEISS third grant should not simply be viewed as ‘free money’ by those who are claiming.
SEISS: Britons urged to consider tax burden as third grant applications open today (Image: Getty)
This is because there are tax implications to bear in mind which may have an effect later down the line.
The government has confirmed the third grant will be taxable, and so it is worth bearing this in mind when claiming.
It has explained the grant will not need to be repaid if a person is eligible to receive the sum.
However, it will be subject to Income Tax, as well as self-employed National Insurance.
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As a result, this must be reported on a person’s 2020/21 Self Assessment tax return.
But because of this, it may be a while until a self-employed individual actually has to pay the tax back.
The expected deadline for 2020/21 Self Assessment is January 31, 2022, giving people the time to get their affairs in order.
For those who are hoping to plan ahead, there is a way to estimate the potential tax bill one may incur.
SEISS: Furlough is the PAYE alternative to self-employed grants (Image: EXPRESS)
For most people, Income Tax will be charged at a basic taxpayer rate of 20 percent.
In addition, Class Four National Insurance is usually at a rate of nine percent.
Britons are required to keep evidence supporting their claim for SEISS to provide to HMRC going forward.
This is because, in order to claim, a person must “reasonably believe” they will suffer a significant reduction in their trading profits due to reduced activity, capacity, demand or an inability to trade.
Recently, Simon Warne, partner at Crowe UK, spoke about the SEISS extension.
Mr Warne said: “SEISS will prove to be a lifeline for many who cannot otherwise trade due to COVID restrictions.
“However, applicants will need to remember grants are taxable.
“There are also other elements of help which include the recently extended Bounce Back Loan Scheme, tax deferrals for Income Tax and Value Added Tax, targeted business support grants and rates relief.”
To claim the third grant from today onwards, self-employed people must have traded in 2018/19 and have submitted their Self Assessment tax return on time, as well as trading in the 2019/20 tax year.
Trading profits must be no more than £50,000 and at least equal to a person’s non-trading income.