How and When Should You Report a SEISS Grant on Your Tax Return?

When Chancellor Rishi Sunak presented his 2021 Budget on 3 March, he announced a further extension of the Self-employment Income Support Scheme (SEISS), which will now run until the end of September 2021. It was welcome news for many self-employed people throughout the UK.

The SEISS is a temporary measure the government introduced in May 2020 to help self-employed people (aka sole traders) whose earnings had been severely impacted by the coronavirus pandemic and first UK lockdown.

There have already been three rounds of SEISS grants. The fourth will be open for applications from late April and it will cover 80% of earnings lost between February and April 2021, up to a total SEISS grant value of £7,500 per sole trader, paid in one instalment.

The fifth and final SEISS grant will cover lost earnings from May onwards, and the self-employed can claim it from late July 2021 (the exact date is to be confirmed). It covers 80% of average self-employed profits if your turnover has fallen by more than 30 per cent; those who haven’t been as badly affected can still get a 30% SEISS grant.

Who can claim a SEISS grant?

The SEISS is only available to those who complete the self-employment or partnership trading pages of the Self-Assessment tax return. Your trading profits must usually be less than £50,000 a year and most of your income must come from self-employment.

Those who earn income from property, including furnished holiday lets, cannot apply for a SEISS grant. A member of an ordinary partnership can make a claim for the SEISS grant and their eligibility is based on their share of the partnership’s trading profits.

To apply for a SEISS grant, as a sole trader (ie self-employed person), you must have suffered a significant reduction in your profits, either because of lower demand or capacity or because you’ve temporarily been unable to trade because of COVID-19.

You apply online for the SEISS grant, and when you do you must declare that you intend to continue to trade if that is true. If you are eligible to apply for a fourth-round SEISS grant, HMRC will contact you in mid-April to tell you the date from which you can make your SEISS claim. If your claim is successful, you should expect to receive your SEISS payment within six working days.

What makes the fourth SEISS grant different?

Many self-employed people who haven’t so far been able to claim a SEISS grant may qualify for the fourth and fifth round of awards – as long as they filed their 2019-20 Self-Assessment tax return by midnight on 2 March 2021. If you filed late – you cannot apply. You don’t need to have claimed the first, second or third SEISS payments to claim the fourth or fifth.

SEISS will now take into account 2019/2020 tax returns, so those who became self-employed in the 2019/2020 tax year may be able to apply (between late April 2021 and 31 May 2021). Reportedly, this could benefit an estimated 600,000 self-employed people who up until now haven’t been able to apply for SEISS grant support.

Reporting a SEISS grant on your Self-Assessment return

You don’t need to repay a SEISS grant – it’s not a loan. However, SEISS grant awards are subject to Income Tax and Class 4 National Insurance contributions.

The SEISS grants are taxable in the tax year in which they are received. So, the first three SEISS grants are taxable in the 2020/21 tax year and they should be reported in full in your 2020/21 Self-Assessment tax return.

If you’re self-employed and your sole trader business receives a SEISS grant in the fourth or fifth rounds, they’re taxable in the 2021/22 tax year and should be reported on your 2021/22 Self-Assessment return.

To make it easier for self-employed people to enter money received from SEISS grants, HMRC will include a box on the 2020/21 and 2021/22 Self-Assessment tax return forms.

SEISS grants – a few other key points

If you’ve received a SEISS grant that you weren’t entitled to or were paid more than you should have, you should notify HMRC within 90 days and arrange to pay the money back, otherwise, you may be charged a penalty.

According to HMRC, sole traders will not need to register for VAT if the money they receive via SEISS pushes their turnover above the VAT threshold (currently £85,000 a year). SEISS is not part of your taxable turnover for VAT purposes.

If the impact of coronavirus (COVID-19) has left you unable to pay your self-Assessment tax bill, you may be able to pay in more affordable monthly instalments. According to Gov.uk: “This includes any delayed (deferred) ‘payments on account’ that were due in July 2020, if you did not pay them at the time.” Visit Gov.uk for more information.

If you’re not eligible for a SEISS grant, your business may be able to access other government loans, tax relief and cash grants, whether your business is open or closed. Visit government website Gov.uk for more information about coronavirus financial support for your business.

Sign up for our free trial and start streamlining your Self Assessment today.

What is the income tax personal allowance for 2020?

WHAT IS A PERSONAL TAX ALLOWANCE?

Much to the disappointment of HMRC, every tax year most UK taxpayers are entitled to a UK personal allowance on their taxable income. To put it simply, most people can receive a certain amount of money before having to pay any income tax. This is what is known as a personal tax allowance.

If you’re struggling to get your head around personal tax allowances, GoSimpleTax is here to explain everything you need to know, simply and easily.

HOW MUCH IS THE STANDARD PERSONAL TAX ALLOWANCE?

The standard personal tax allowance amount is £12,500 for 2019/2020. Any income you earn after that will be taxable. The amount of tax you pay after your personal allowance is dependent on how much you earn during a tax year. For example, If your income is above £100,000, basic personal allowance is reduced by £1 for each £2 you earn over the £100,000 limit, irrespective of age.

Personal Allowance & Tax Thresholds

Personal Tax Allowance2018/20192019/2020
Tax-free personal allowance£11,850£12,500
Basic Tax Rate (20%)£1-£34,500 (after allowance)£1-£37,500 (after allowance)
Higher Tax Rate (40%)Income over £34,500Income over £37,500
Additional Tax Rate (45%)Income over £150,000Income over £150,000

If your tax affairs are a little more complex, for example, if you’re married or in a civil partnership and receive a marriage allowance, or for age-related or income-related reasons, then your personal allowance works a little differently. You could also receive tax-free allowances for:

  • your first £1,000 of income from self-employment
  • your first £1,000 of income from property you rent

HOW DO I GET MY PERSONAL ALLOWANCE?

Getting your personal allowance is simple. If you file a self-assessment tax return, you will automatically receive your tax-free personal allowance.

Is there an easier way to file?

If you need to file a tax return, GoSimpleTax is here to make things unbelievably simple. Forget about long-winded form-filling and unwelcome phone calls with HMRC. Simply enter the details of your income and expenses and we’ll create your tax return for you and submit it online directly to HMRC. 

Access GoSimpleTax and discover a new free way of filing your return (HMRC approved), know what expenses will help you lower your tax bill and keep all your records online, safe & sound. Ready to file with one click. Start your free trial today!

Do I need an accountant to do my tax return?

When you realise you have to submit a tax return, you’ll have a lot of questions. ‘When is it due?’ and ‘What do I include?’ will probably be on your list. The one at the very top of it will likely be, ‘Do I need an accountant for a watertight tax return?’.

Some people undertake the DIY method, but doing your taxes for the first time can be scary. Here, we take a look at the benefits and drawbacks of outsourcing this task to an accountant. With the advent of mobile tax software, you may want to avoid them altogether…

WHAT IS A TAX RETURN ACCOUNTANT?

An accountant does many tasks for the taxpayer, and the tax return is one of the biggest – they will file it for you on an annual basis. Other duties include:

  • Keeping on top of your books
  • Claiming expenses
  • Calculating the tax owed
  • Finding savings to reduce your tax liability

HOW MUCH DOES A TAX RETURN ACCOUNTANT COST?

As with any service, a low cost is unlikely to get you great value for money. How much you should pay for a tax return accountant will depend on the amount of work they do for you, but you can easily pay up to £500 for the service described above.

You might find that some quotes are fixed and offer you more services than you require. Additionally, the cost may differ according to the type of tax return you need, and there are specific requirements related to your circumstances too – a general self-employed tax return will be different to that of a sole trader who also has a job or rental income, for example.

DO I NEED AN ACCOUNTANT?

No – GoSimpleTax allows you to easily stay on top of your taxes without the use of an accountant. Our no-jargon tax return software helps you understand and learn how to do your own Self Assessment tax return in minutes, just like an expert.

GoSimpleTax keeps things super simple and enables you to discover tax savings you didn’t even know existed. Just ask Liam, one of our users – he was able to reduce his tax liability by claiming for homeworking costs.

Whether you have a good grasp on your tax savings or you’re clueless when it comes to tax, GoSimpleTax will make sense of everything for you. It means you’ll potentially save hundreds of pounds in accounting fees, whilst still fulfilling your tax obligations and maximising your take-home pay. 

SUBMIT YOUR SELF-EMPLOYED TAX RETURN WITH GOSIMPLETAX

Tax return software is about three things: accuracy, convenience, and zero confusion.

Our Self Assessment software gives you full visibility over your finances. You can see everything in real time and from any device, including your tax liability. It also provides you with tax-saving suggestions by revealing deductible items that will automatically save you money.

‘Do I need an accountant to do my tax return?’ Not with Self Assessment software. GoSimpleTax allows anyone to be a tax expert. Find out for yourself by signing up for our free trial. You can use it to start calculating your tax bill straight away – no credit card required.

Do I Have To Pay Tax As An Online Seller? Guidelines And Boundaries

HMRC believe that, while it is perfectly okay to sell online, individuals often breach boundaries where they are making what constitutes a ‘business profit’. In this case, they may owe tax on profit made through selling on sites like eBay or Depop – and HMRC expects you to disclose such information in your annual Self Assessment return.

Declaring extra income to HMRC can be frustrating if you aren’t confident where you stand. But attempting to operate as an online seller and covering up what could be defined as trade can be potentially devastating for your finances.

That’s why here we’ve provided guidance on paying taxes as an online seller.

Do I need to pay taxes if I’m on online seller?

In 2016, the Finance Act empowered HMRC with ‘snooping’ authority to compile information from internet selling sites on ‘self-employed’ individuals who aren’t declaring income. There are certain elements to online selling that the government considers before defining something as a trade. They are:

  • Intention to make a profit as opposed to selling for fun or raise small emergency funds
  • Repetition of similar transactions over a short period of time
  • Money is borrowed to buy an item intended for sale, only to be repaid once the transaction has cleared
  • Inability to prove the items sold gave you a ‘pride of possession’ before being listed
  • The item is sold at a fixed price in a similar fashion to retailers
  • Limited time between purchase and selling, bringing into question the ownership of the seller
  • Modification of items in order to sell them for a greater profit.

For those still asking, “do you have to pay taxes on an online business?”, yes – unless you feel that you aren’t necessarily breaching the above considerations.

How much can you sell on eBay before you have to pay taxes?

HMRC does not want to tax those just hoping to make a small amount on the side. In fact, in 2017, the government agreed to a trading allowance that gave sellers the freedom to earn up to £1,000 in sales without paying anything in tax. The aim was to simplify the tax system and to help the UK “become leaders in the digital and sharing economy”.

It’s not just Ebay sellers that need to be aware of the potential tax trap, Depop, for instance, is a fast-growing community of young sellers that are making a living out of second-hand fashion. There are entrepreneurs earning thousands on the platform, unaware that they may have to pay tax as a sole trader. Gumtree and Etsy sellers are similarly affected by taxes when you sell things online – all being recognised as platforms where sellers are able to evade paying tax, and are therefore in HMRC’s firing line.

What are the consequences of not disclosing online income?

In the more severe cases, online tax evasion could result in prison – as was the case with a user in 2014 who failed to declare their eBay income. As HMRC has the authority to access PayPal information and request extensive details from online auctioning sites, it’s unlikely that such schemes will remain hidden for the foreseeable future. In 2016, approximately 870,000 people failed to submit a Self Assessment return with some cases having noticeably small amounts of income from online sales. This resulted in huge fines for the sellers, with HMRC predicting an increase for years to come.

Thankfully, completing a Self Assessment tax return has never been so straightforward. With GoSimpleTax software, you can see clearly what you need to disclose and how to avoid HMRC penalties. Our online and telephone support can guide you through the Self Assessment process so that it is accurate and transparent.

Interested? Trial our 14-day demo to see how you can streamline your accounts.

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