Claimants of the Self-Employed Grant (SEISS) are warned the grant is taxable

Whilst many Self-Employed individuals who have professional representation with an accountant, tax advisor or similar, will have likely been reminded that this is the case, the Group fears that those who may not be represented may not be aware.

The taxable status of the grant was included within the detail when the support was first provided, but naturally at the beginning of lockdown for many this was a very pressured time and the Group is concerned that the rules on the tax position may not have been fully understood by everyone.

The LITRG therefore wants to raise awareness of this, to ensure those who have claimed the grant are fully aware.

In summary, grants made to the self-employed and partners in a trading business under the SEISS will need to be included on the claimants 2020/21 self-assessment tax return. The draft legislation as it currently stands does not indicate there is any apportionment back to the 2019/20 tax year.

What this means is that income tax and national insurance will be calculated on the total self-employment income, inclusive of the grant, for the 2020/21 tax year.

As the grant is not paid with tax already taken off, this needs careful consideration by subcontractors working in the construction industry, who may be used to receiving income with tax already deducted and in some cases due a refund. For 2020/21 these individuals may not receive their expected refund after submitting their tax return.  

It may therefore be sensible for individuals to forecast their total taxable profits for 2020/21 and estimate the tax and national insurance due.