Are SEISS Grants Taxable

31st August 2021

A SEISS grant is a temporary measure that was implemented back in May 2020 due to the coronavirus.

It was put in place to help self-employed people who had experienced a loss of earnings due to the pandemic and the lockdown. 

When Rishi Sunak presented the 2021 budget in March, he announced that SEISS (self-employment income support scheme) will be extended to September 2021, to help self-employed people/ sole traders who are still being affected financially by coronavirus. 

The scheme covers 80% of average self-employed profits and can be claimed if your turnover has decreased by 30% or more.

However, if your earnings haven’t been affected as much, you can still claim 30% of your average profits. 

The scheme has helped thousands of people in the UK, but are SEISS grants taxable? Keep reading to learn more about how to claim a SEISS grant, and whether the grant is taxable. 

Who Can Claim A SEISS Grant?

The SEISS grant is available to you if you complete the self-employment pages of the self-assessment tax return, or if you complete the partnership trading pages.

To be eligible, you must have trading profits of less than £50,000 per year, but some exceptions can be made.

Most of your income should be from self-employment, and if the majority of your income comes from a full-time job, then you most likely won’t be eligible for the SEISS grant. 

In order to be accepted for the grant, your self-employment earnings must have been significantly impacted.

The pandemic has had knock-on effects, so whether it’s due to covid-19 directly, or whether you’re experiencing a lower demand or capacity, you should be eligible for the SEISS grant. 

If your income comes from a property or from renting holiday homes, you won’t be eligible for a SEISS grant.

If you’re in an ordinary partnership, you can still make a claim for a SEISS grant but your eligibility will be based on your share of the trading profits.

It’s a quick and easy process applying for the SEISS grant - you simply log onto the gov.uk website using your government gateway ID, and input your information.

If any information you input is dishonest, then any payments will be recovered and you may also have to pay a penalty.

Once your claim has been submitted and accepted, you should receive the funds within six working days.

Are SEISS Grants Taxable? 

A grant is a sum of funds that you don’t need to pay back - so you won’t need to repay a SEISS grant.

However, SEISS grants are taxable - both Income Tax and Class 4 National Insurance contributions. 

If you receive a SEISS grant, it’s the only taxable in the year that you received it. If you received the first three grants, they would’ve been taxable in the 2020/2021 tax year, and you should report them in the tax return for that tax year. 

If you received the fourth and/or fifth SEISS grant, then it would be taxable in the 2021/2022 tax year, and you should report this in this tax year’s tax return.

Tax returns can be daunting, especially if you haven’t been self-employed for a while - which is why HMRC have included a box on the latest tax return forms.

This will make it easier to enter any funds received from SEISS grants.

If you claimed and got accepted for a SEISS grant that you weren’t entitled to and the system hadn’t picked up on it, then you should notify HMRC within 90 days and make arrangements to repay the funds to avoid receiving a penalty. 

If the SEISS grant pushes your turnover above the current VAT threshold (£85,000 per year), then you won’t need to register for VAT, as it isn’t part of your taxable turnover in regards to VAT.

If the effects of the pandemic have left you in a position where you can’t pay your self-assessment tax, then you should be able to come to an arrangement - for example, monthly instalments. 

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