Sarah Bradford explains the help available to the self-employed through the self-employment income support scheme.
The government has put in place a number of measures, encompassing both grants and loans, to help individuals and businesses affected by the Covid-19 pandemic.
As far as the self-employed are concerned, grants are available for eligible traders under the self-employment income support scheme (SEISS). Claims under the scheme made can be from 13 May 2020 onwards.
Nature of the scheme
The scheme provides a taxable grant to self-employed taxpayers whose business has been adversely affected by the Covid-19 pandemic. The grant is based on 80% average monthly profits (calculated by reference to profits over the three tax years to 5 April 2019) for a period of three months, capped at a maximum of £2,500 per month.
There are, however, eligibility conditions that must be met.
Who can claim?
A self-employed individual or an individual member of a partnership can make a claim for a grant under the SEISS if:
- they traded in the 2018/19 tax year and submitted their 2018/19 tax return no later than 23 April 2020;
- they traded in 2019/20;
- they intend to continue to trade in 2020/21;
- their business was adversely affected by the Covid-19 pandemic;
- their profits for 2018/19 or their average profits for 2016/17 to 2018/19 inclusive are not more than £50,000 a year; and
- profits from self-employment at least 50% of total income. are less than 50% of total income.
A trader’s business may be adversely affected by Covid-19 if the trader is unable to work because they are shielding, self-isolating, sick as a result of the virus or because they have caring responsibilities. This may include being unable to work because they need to look after their children while schools are shut.
A business may also be adversely affected by the virus because it is of a type which was not allowed to continue to operate during the lockdown, such as a hairdresser or a café. Alternatively, the business may have had to scale down its work or close temporarily because of interruptions to their supply chain, lack of customers or because staff are unable to work.
Self-employed individuals who have been able to carry on their business as usual during the pandemic without any loss of profits cannot claim a grant under the scheme.
Eligibility checker
HMRC is writing to those who, based on returns submitted for the three tax years up to and including 2018/19, they believe are eligible to make a claim under the scheme. Traders can check their eligibility using the online tool which is available on the Gov.uk website at
Individuals will need their unique tax reference (UTR) and their National Insurance number to check whether they are eligible.
£50,000 profit cap
A profit cap applies to the scheme. A trader will be eligible if their profits from self-employment in 2018/19 were not more than £50,000. However, if a trader has profits of more than £50,000 in 2018/19, all is not lost and they may be able to claim if their average profits over the three tax years from 2016/17 to 2018/19 inclusive are not more than £50,000.
As the scheme is targeted at those who rely on their income from self-employment, to qualify for a grant income from self-employment must comprise at least 50% of the trader’s total income. This means that someone who is employed in a job that provides most of their income and who also has a small business run on a self-employed basis will be unable to make a claim.
The amount of the grant
The grant is equal to 80% of average monthly profits up to a maximum of £2,500 per month for a period of three months. Thus, the maximum grant payable under the scheme is £7,500.
Monthly profits are calculated by reference to average trading profits over 2016/17, 2017/18 and 2018/19. The profits are those as per filed self-assessment returns. Traders must have filed a tax return for 2018/19 to be eligible. However, to enable those who had missed the 31 January 2020 filing deadline to qualify, traders were given until 23 April 2020 to file their 2018/19 return. Traders who had not filed their return by this date are not entitled to a grant.
To prevent attempts to manipulate the scheme, amendments made to returns after 26 March 2020 are not taken into account in working out the amount of the grant.
Example 1: Uncapped grant
Hayley is self-employed as a mobile hairdresser. Due to the nature of her business she is unable to trade as a result of the pandemic. She is eligible to claim a grant under the SEISS.
Her profits as shown on her tax returns for 2016/17 to 2018/19 are as follows:
Tax year Profits (per self-assessment return)
2018/19 £21,546
2017/18 £19,442
2016/17 £11,870
Her total profits for the three years are £52,858. Consequently, her average profits for a year are £17,619, equivalent to £1,468.25 a month, of which 80% is £1,174.60.
The grant is therefore £3,523.80 (i.e. 3 x £1,174.60).
As this example shows, as her profits were lower in 2016/17 and 2018/19, she will not be compensated at the rate at which she was earning in 2018/19.
Example 2: Capped grant
Louisa is self-employed and has run a tea shop for a number of years. Her profits, as per her self-assessment returns, for 2016/17 to 2018/19 are as follows:
Tax year Profits (per self-assessment return)
2018/19 £52,000
2017/18 £46,200
2016/17 £48,660
As her profits for 2018/19 are more than £52,000, it is necessary to calculate her average profits over the three years from 2016/17 to 2018/19 inclusive to check whether she is eligible for a grant. Louisa’s total profits over the period are £146,860, and her average annual profits are £49,620. Consequently she is eligible to claim.
Her average monthly profits are £4,135, 80% of which is £3,308. As this is more than £2,500, the grant is capped at £2,500 per month. She is therefore eligible to receive the maximum grant of £7,500.
Less than three years’ profits
If a trader did not have profits from self-employment for 2016/17, 2017/18 and 2018/19, the claim is based on the available consecutive years ending with 2018/19. So, if a trader started trading in 2017/18, the grant will be calculated on the profits of 2017/18 and 2018/19.
However, if the trader traded in 2016/17 and 2018/19, but not in 2017/18, the claim is based only on the profits for 2018/19.
New businesses
To qualify for a grant, the trader must have been trading in 2018/19 and filed a self-assessment tax return for that year. As a result, no help is available under the scheme for those who commenced trading in 2019/20 (or 2020/21).
Where help is needed, the trader will need to look at other options, such as loan finance under the bounce back scheme, grants for traders eligible for small business rate relief or for those in the retail, leisure and hospitality sectors and at claims for Universal Credit.
Making a claim
Claims can be made online on the Gov.uk website (see www.gov.uk/guidance/claim-a-grant-through-the-self-employment-income-support-scheme). The claim portal opened on 13 May 2020, but a trader can only make their claim from the date given to them by HMRC, which is between 13 and 18 May 2020.
The claims must be made by the trader; they cannot be made by the trader’s accountant on their behalf. Where the accountant files the returns and deals with HMRC, the trader may not have a government gateway login, and will need to set one up in order to make their claim. There is a link to do this in the eligibility checker.
Once a claim is made, HMRC aim to pay the grant into the trader’s designated bank account by 25 May or, where later, within six working days of the date on which the claim is made.
Remember the grant is taxable
Grants received under the SEISS are taxable and should be included when working out taxable profits for 2020/21. As such, they will also be liable for Class 4 National Insurance contributions.
Practical tip
Self-employed traders whose business has suffered as a result of the Covid-19 pandemic should check whether they are eligible for a grant under the SEISS, and make a claim if they are.
