COVID-19: Self-Employed Income Support Scheme

Last updated 8 February 2021

On 26 March 2020, the Government announced a support package for those who are self-employed or a member of a partnership and have lost income due to the COVID-19 crisis. 

The Self-Employed Income Support Scheme (the ‘scheme’) is open to those who have annual profits of less than £50,000 and receive at least half their income from self-employment.  Where the conditions outlined below are met, eligible individuals can apply for a grant payment under a total four rounds of the scheme. All payments are subject to income tax and Class 4NICs.

The first round of grants, for which claims closed on 13 July 2020, was worth:

  • up to 80% of average monthly trading profits,
  • for a period of three months,
  • capped at an overall maximum of £7,500.

The second round of grants, for which claims opened on 17 August 2020 and closed on 19 October, is worth:

  • up to 70% of average monthly trading profits,
  • for a period of three months,
  • capped at an overall maximum of £6,570.

On 24 September 2020 it was announced in the Chancellor's Winter Economy Plan that the scheme would be extended further for self-employed individuals who were currently eligible for the SEISS and are actively continuing to trade, but facing reduced demand due to COVID-19.

This extension will be in the form of a further third and fourth round of grants. The third round of grants, for which applications opened on 30 November 2020 and closed on 29 January 2021, covered the period from the start of November 2020 until 29 January 2021 and was worth:

  • up to 80% of average monthly trading profits, 
  • for a period of three months,
  • capped at an overall maximum of £7,500.

The fourth round will cover a three-month period from the start of February until the end of April. The Government have indicated that they will announce more details about the design and level of this fourth round at the Budget on 3 March.

HMRC calculate how much eligible individuals will receive. Individuals therefore do not need to calculate the amount they are due, but they do need to make a claim to receive funds under the scheme. 

Below we have set out an outline of how HMRC determine eligibility, the amount receivable for both grants, and how the claims process works.  More information on various terms used below (e.g. trading profits, non-trading income) and FAQs covering issues such as eligibility, what to do if you disagree with HMRC and accounting for the grant, can be found in our article COVID-19: Self-Employed Income Support Scheme: FAQs.

Our latest free webinar on the SEISS scheme took place on Friday 27 November 2020, when we focused on the qualifying conditions for the third grant and how to claim it prior to the claims process opening on Monday 30 November. We also briefly covered eligibility, calculations and compliance aspects and a round-up of other recent COVID-19 tax announcements.

Previous free webinars on the scheme were held on 7 May, 7 July and 8 October. The first webinar, held on 7 May, explored who is eligible for the SEISS, how much they might receive and the process for making claims. A recording of this webinar and a copy of the slides can be accessed here. The second webinar, held on 7 July, looked at the extension of the scheme, as well as covering compliance issues and what is meant by 'adversely affected' in more detail. A recording of this webinar and a copy of the slides can be accessed here. The third webinar covered the extension to the scheme announced by the Chancellor on 24 September as well as other recent COVID-19 tax announcements. For more details see here.

Who is eligible?

HMRC have contacted individuals they believe may be eligible for grants, inviting them to claim online using a new GOV.UK online service. For the first round of grants, HMRC provided a standalone online eligibility checker which allowed individuals, or their agents, to check if they were eligible for the scheme in advance of making a claim. This eligibility checker was withdrawn for the second round of grants onwards, where eligibility was confirmed as part of the application process.

You could claim under the first and second rounds of the scheme if you were a self-employed individual or member of a partnership and you:

  • carry on a trade which has been adversely affected by COVID-19 (for example because you’re unable to work, or you have had to scale down/stop trading);
  • traded in the tax years 2018-19 and 2019-20;
  • submitted your self-assessment return for the tax year 2018-19 on or before 23 April 2020;
  • intend to continue trading in 2020-21; and
  • meet the profits condition.

These eligibility criteria were the same for both the first and second grant. The one notable variation was in the timing of when a trade has to be adversely affected:

  • To claim the first grant, the trade must have been adversely affected by COVID-19 in the period up to and including 13 July 2020.
  • To claim the second grant, the trade must have been adversely affected on or after 14 July 2020.

Please see our article COVID-19: Self-Employed Income Support Scheme: FAQs for further information on what is meant by 'adversely affected'.

The Treasury Direction dated 24 November sets out that, in order to be eligible for the third grant, all of the same conditions have to be met as for the first and second grants. However, there are two extra conditions which must also be met in order to be eligible for the third grant:

  • The trade must have suffered from reduced activity, capacity or demand in the period from 1 November 2020 to 29 January 2021 as a result of COVID-19; and
  • The claimant must reasonably believe they will suffer a significant reduction in trading profits for the basis period including those months as a result.

A claim could not be made for the third grant if the reduced activity, capacity or demand was caused solely because a person was required to self-isolate, or care for someone required to self-isolate, as a result of travelling to the UK.

Please see our article COVID-19: Self-Employed Income Support Scheme: FAQs for further information on what is meant by 'reduced activity, capacity or demand' and 'significant reduction in trading profits'.

The profits condition (which applies to all three grants to date) will be met if you meet any of the following three tests:

1. For tax year 2018-19, your trading profits were:

          a) greater than nil, but no more than £50,000, and

          b) at least equal to your non-trading income for the year.

2. You traded in each of tax years 2016-17, 2017-18 and 2018-19 and:

          a) your average trading profits for those years were greater than nil, but no more than than £50,000, and

          b) the total of those profits was at least equal to your non-trading income for those years.

3. You traded in tax years 2017-18 and 2018-19, but not 2016-17, and

         a) your average trading profits for the tax years 2017-18 and 2018-19 were greater than nil, but no more than £50,000, and

         b) the total of those profits was at least equal to your non-trading income for those tax years.

For example, if a taxpayer had the following profits and income:

  2016-17 2017-18 2018-19 Average Total
Trading profit / (loss) £50,000 £50,000 (£10,000) £30,000 £90,000
Non-trading income £15,000 £15,000 £15,000 N/A £45,000

They would not meet the first test, as their trading profits are not greater than nil in 2018-19.

However, they would still eligible for the scheme as they would meet the second test because:

  • their average taxable profit for the three years of £30,000 does not exceed £50,000; and
  • the sum of their trading profits for the three years is £90,000, which is at least equal to the sum of their other income (£45,000) for those years.

Please see our article COVID-19: Self-Employed Income Support Scheme: FAQs for further information on what constitutes ‘trading profits’, ‘average trading profits’ and ‘non-trading income’ for these purposes.

As set out in HMRC guidance, different rules apply for individuals who are subject to the loan charge.

Special rules also apply if an individual would not otherwise qualify for the scheme due to the effect on their trading profits and other income in the 2018-19 tax year of:

Who isn’t eligible?

You will not be eligible for the first, second or third grants if any of the following apply:

  • You started your trade after 5 April 2019 (i.e. you did not trade in the tax 2018-19).
  • You did not submit your 2018-19 tax return by 23 April 2020.
  • Your trading income forms less than half of your total income (for example, your main income comes from employment, which you top up with a smaller amount from self-employment).
  • You traded in 2016-17 and 2018-19 but not 2017-18; and you do not meet the first test of the profit condition (i.e. in 2018-19 your trading profits were more than £50,000, or less than your non-trading income in that year).
  • You are a director of a limited company (though you may be eligible for some support under the Job Retention Scheme).
  • You operate a Furnished Holiday Letting business.
  • You are operating a trade through a trust.

Other points to note:

  • In calculating eligibility and the amount which can be claimed, HMRC will not take into account any self-assessment returns submitted after 23 April 2020.
  • Claims based on late returns submitted between 26 March and 23 April 2020 will be subject to additional anti-fraud checks.
  • If you amend a submitted return after 26 March 2020 any changes will not be taken into account when working out your eligibility or amount of the grant.
  • HMRC will only look at your original return if a tax return is under enquiry, or the subject of a contract settlement.
  • If you are taking a break from your trade due to having a baby or adoption, or have done so since 6 April 2019, you will still be eligible.  Claiming maternity allowance will not affect eligibility.
  • The scheme is open to non-residents, and those claiming the remittance basis, but they will be required to certify that their trading profits are at least equal to their other worldwide income (including overseas income) for any relevant tax years.
  • Grants under the scheme are not counted as ‘access to public funds’ and can therefore be claimed under all categories of work visa.
  • Special rules apply to those who would not normally be eligible due to the effect on their 2018/19 profits of having a child or undertaking military reservist activities.

How much might I get?

The first grant was calculated as 80% of average trading profits for a three-month period, subject to an overall cap of £7,500.  The second grant is calculated as 70% of average trading profits for a three-month period, and capped at £6,570. The third grant was calculated as 80% of average trading profits for a three-month period, and capped at £7,500. The Government have not yet confirmed how the fourth grant will be calculated (more details are expected to be announced at the Budget on 3 March).

There is no link between the amount of grant received and the level of income lost by the trade due to COVID-19.

Example 1

An individual had the following trading profits:

  • 2016-17 - £25,000
  • 2017-18 - £20,000
  • 2018-19 - £24,000

The first grant was calculated as follows:

  • Average annual profits - (£25,000 + £20,000 + £24,000)/ 3 = £23,000
  • Pro-rated for the three-month period is £23,000 x 3/12 = £5,750
  • 80% of £5,750 = £4,600

As this amount is below the overall cap of £7,500, the £4,600 would be payable in full.

The second grant was calculated as follows:

  • Average annual profits - (£25,000 + £20,000 + £24,000)/ 3 = £23,000
  • Pro-rated for the three-month period is £23,000 x 3/12 = £5,750
  • 70% of £5,750 = £4,025

As this amount is below the overall cap of £6,750, the £4,025 would be payable in full.

The third grant was calculated as follows:

  • Average annual profits - (£25,000 + £20,000 + £24000)/ 3 = £23,000
  • Pro-rated for the three-month period is £23,000 x 3/12 = £5,750
  • 80% of £5,750 = £4,600

As this amount is below the overall cap of £7,500, the £4,600 will be payable in full.

Example 2

An individual had the following trading profits:

  • 2016-17 - £50,000
  • 2017-18 - £36,000
  • 2018-19 - £45,000

The first grant was calculated as follows:

  • Average annual profits - (£50,000 + £36,000 + £45,000)/ 3 = £42,000
  • Pro-rated for the three-month period is £42,000 x 3/12 = £10,500
  • 80% of £10,500 = £8,400

As this is above the overall cap, only £7,500 would be payable.

The second grant was calculated as follows:

  • Average annual profits - (£50,000 + £36,000 + £45,000)/ 3 = £42,000
  • Pro-rated for the three-month period is £42,000 x 3/12 = £10,500
  • 70% of £10,500 = £7,350

As this is above the overall cap of £6,570, only £6,570 will be payable.

The third grant was calculated as follows:

  • Average annual profits - (£50,000 + £36,000 + £45,000)/ 3 = £42,000
  • Pro-rated for the three-month period is £42,000 x 3/12 = £10,500
  • 80% of £10,500 = £8,400

As this is above the overall cap of £7,500, only £7,500 would be payable.

See our article COVID-19: Self-Employed Income Support Scheme: FAQs for more on what constitutes trading profits, and how average trading profits are calculated for these purposes.

How do I claim?

The online claims portal for the third grant opened on 30 November 2020 and closed on 29 January 2021.

Claims for the second grant opened on 17 August and closed on 19 October. Claims for the first grant opened on 13 May and closed on 13 July 2020.

Those who are unable to claim online should call the dedicated SEISS helpline to make their application.

In order to make a claim individuals need all of the following information:

  • Your self-assessment Unique Taxpayer Reference (UTR) number;
  • Your National Insurance number;
  • Your Government Gateway user ID and password; and
  • Details of the bank account you want the grant to be paid into.

Although agents can help their clients check eligibility, the actual claim cannot be made by an agent – the taxpayer has to make the claim personally.  If an agent claims on behalf of their client this will trigger a fraud alert which will delay payment. Tax agents may however help or support the taxpayer in doing so.

There is no requirement to self-assess the amount to be claimed.  You should be told straight away if your claim is approved, how much you are eligible for and how this has been calculated, with payment following within six working days.  Payment is by way of a single instalment directly into your bank account. If you do not agree with the amount HMRC has calculated, you should complete your claim anyway and then ask HMRC for a review. For the first round of grants HMRC provided an online form which individuals and their agents could use to request a review. This form has been withdrawn for the second and subsequent rounds, and reviews can only be requested by contacting HMRC. Both individuals and their authorised agents can request a review.

You must keep a record of the amount claimed, your claim reference number and evidence that your business has been adversely affected by coronavirus.

Please note that claims will be dealt with through GOV.UK only – any texts, calls or emails purporting to be from HMRC asking you to click a link or provide personal information are likely to be a scam so please exercise caution.

More information

You can find more information on the various terms used above (e.g. trading profits, non-trading income) and answers to frequently asked questions on the scheme in our article COVID-19: Self-Employed Income Support Scheme: FAQs.

You can find more details on GOV.UK regarding:

The Treasury Directions providing the legislative basis for the scheme can all be found here.

Legislation included in s102 and Schedule 15 of Finance Act 2020 addresses reporting the grants for tax purposes and HMRC recovery and penalty powers.

Further support available in Scotland, Wales and Northern Ireland

The SEISS is a UK wide scheme, meaning it is available in all four nations.  However, the devolved administrations have also set up additional schemes for eligible businesses in those countries.  These include schemes specifically for the newly self-employed and company directors, who would not normally qualify for the SEISS.

You can find more information on the additional support available at the following links: