What does SEISS mean for your tax return?

If you’ve received a grant as part of the government’s Self-Employed Income Support Scheme (SEISS), it’s important to know that this will affect your tax return. Read on for all you need to know.

So, do I need to pay tax on my SEISS grant?

Yes – in tax terms, the SEISS money you get is treated as self-employed income by HMRC (this applies to both grants offered in the two SEISS phases). So you’ll need to declare this money and pay income tax and national insurance on it as you would with any other self employment income. You don’t need to pay this until your 2020-21 return is due.

But, why is this considered income, and why do you need to pay tax on it? Both good questions. 

The grants are there to help make up some of the earnings you lost, and so are being treated as earnings in the eyes of HMRC. At 70% of your taxable income, it would look as though at least some of the tax has already been removed, but this is simply the percentage available through the scheme.

You CAN still claim expenses normally, if you receive SEISS 

Since you can work while claiming the grant, you’re still allowed to claim business expenses as normal. This includes:

  • Your home office

It doesn’t matter whether you’ve always worked from home, or you’ve adapted to home-working due to the effects of Coronavirus — if you’re self-employed and working from home, you can claim your home office as an expense.

  • Expenses you pay out in search of work

Despite claiming SEISS for loss of income, if you’re looking for new business, you can claim the associated costs of this, such as travel, as an expense.

  • Other business expenses, too 

You’re still entitled to claim other business expenses that you face during this period, just as you would normally. Find out what expenses you’re entitled to in your industry in our article: Business expenses explained for the self employed.

It’s not yet clear what the VAT implications are

HMRC is yet to provide guidance on whether the grants will be subject to VAT or count towards turnover for VAT registration limits. But it’s expected that’ normal principles will apply, meaning:

  • The SEISS grants would be outside the scope of VAT, and no output VAT should have to be accounted for.
  • SEISS grant income should be disregarded for VAT registration and deregistration limits.

You can still claim SEISS if you receive Universal Credit

During this time, you may have applied for Universal Credit to help with the income you’ve lost.

If you receive Universal Credit, you can still apply for an SEISS grant, but it could affect how much you get in Universal Credit once you receive the grant. This is because the grant is classed as income, and Universal Credit looks at your income to determine how much you get.

And that pretty much sums it up – SEISS grants are to be treated like any other self employed income, so they’re subject to tax and should definitely be declared on your tax return. Simple? Yes. Slightly disappointing? We’ll let you decide that one for yourself…

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