COVID-19: Self-Employed Income Support Scheme

Last updated 2 July 2020

On 26 March 2020, the Government announced a new 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, it will initially provide a single taxable payment worth:

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

On 28 May 2020 the Government announced that the scheme will be extended, with a second and final payment being made in August 2020.  This additional payment will be worth:

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

HMRC will identify and contact those who are eligible to tell them to claim. As set out below, there is also the option for individuals to go online and check their eligibility for the scheme.

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

Below we have set out an outline of how HMRC will determine eligibility and the amount receivable for both the first and second 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.

The ATT and CIOT held free webinars on the scheme on 7 May and 7 July. 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

Who is eligible?

Starting on 4 May 2020, HMRC began contacting eligible individuals and inviting them to claim online using a new GOV.UK online service.  As set out below under ‘How do I claim?’ HMRC have also provided an eligibility checker service which allows individuals, or their agents, to check if they are eligible for the scheme in advance of making a claim. 

You can claim under the scheme if you are 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 are the same for both the first and second grant (which will be payable in August). The only slight variation is that, to claim the second grant, the trade must have been adversely affected on or after 14 July 2020. An individual does not need to have claimed the first grant to receive the second grant: for example, they may only have been adversely affected by COVID-19 in this later phase.

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

The profits condition 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 scheme 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 amended 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.

How much might I get?

The first grant is calculated as 80% of average trading profits for a three-month period, subject to an overall cap of £7,500.  The second grant will be calculated as 70% of average trading profits for a three-month period, and capped at £6,570.

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 would be 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

We understand that the second grant in August 2020 will be 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 £7,500, the £4,600 would 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 would be 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.

We understand that the second grant in August 2020 will be 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 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 first grant opened on 13 May. Applications for the first grant payment opened in tranches between 13 and 18 May, based on taxpayers’ Unique Taxpayer References (UTRs). The deadline for claiming the first grant is 13 July 2020.  The online service for the second and final grant will open on 17 August and close on 19 October.

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

Starting on 4 May, HMRC began contacting eligible individuals by a combination of emails, SMS texts and letters, inviting them to claim online using the new GOV.UK online service.  

As outlined above, HMRC are also inviting taxpayers, or their agents, to go online and check their eligibility for the scheme.

In order to use this eligibility checker, you will need your:

  • Unique Taxpayer Reference (UTR); and
  • National Insurance number.

Once the online eligibility check is complete, eligible taxpayers will be given a date and time when they can submit their claim. They will also be encouraged to enter their Government Gateway account to update their contact details, or set up a Government Gateway account if they do not already have one. Taxpayers who do not already have a Government Gateway account should follow this route to set one up, as they will benefit from a streamlined process with no requirement to wait for an authentication code to be sent in the post.

If the eligibility checker indicates a taxpayer is not eligible for the scheme, they will be provided with information on how to ask HMRC to review their position. Agents can also request a review of HMRC's decision on eligibility on behalf of their clients.

Claims for the first grant have to be made using an online system, which went live on 13 May 2020.  In order to make a claim you will 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.

When claiming you will also be asked to confirm that your business has been adversely affected by coronavirus. 

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 will be by way of a single instalment directly into your bank account and you can check the status of your payment with HMRC. If you do not agree with the amount HMRC has calculated, you should complete your claim anyway and then ask HMRC for a review. Agents can also ask HMRC to review a client's grant amount.

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:

This information will be updated as HMRC have more information and work on the scheme progresses.

A detailed Treasury Direction for the scheme was published on 1 May 2020. A second Treasury Direction covering the extension of the scheme was published on 1 July 2020.

Legislation on reporting the grants for tax purposes and HMRC recovery powers will be included in Finance Bill 2020.