After a difficult year for most people, many freelancers are looking for ways to support their income over the holiday period.
Whether you have previously applied for the Self Employment Income Support Scheme (SEISS) grant or not, you may benefit from the recent extension.
We’ve put together a short guide on what the SEISS is, how it works, who is eligible, and how to apply.
What is the Self Employed Income Support Scheme?
The SEISS is a government scheme which aims to support sole traders struggling during the COVID-19 pandemic.
For those who have lost income or been unable to operate due to ill health, the SEISS is a lifeline to keep businesses running.
How much will I receive?
The SEISS grant covers 80% of profits for November, December and January, up to a total of £7,500. This will be paid in a single instalment.
Do I need to pay it back?
The good news is that this is a grant, not a loan so it won’t need to be paid back. However, it is subject to income tax and National Insurance, so keep that in mind for your tax return.
Am I eligible for SEISS as a freelancer?
To be eligible for the grant, at least half of your income must come from self-employment, and your trading profit must be less than £50,000.
The newly self-employed or those who receive more than 50% of their income through PAYE (e.g. from a job) in the 2018-19 tax year are not eligible for this grant.
How do I apply?
Applications for the third SEISS grant opened from 30 November 2020. If you are eligible for the grant, you will need to submit a claim on or before 29 January 2021.
What information do I need to submit?
To submit a claim, you will need to gather a few key pieces of information:
- Your Unique Taxpayer Reference (UTR)
- National Insurance number
- Government Gateway user ID and password
- UK bank details (account number, sort code, name and address on the account)
Evidence of reduced business
This scheme is only open for those who have been affected by COVID-19. That means it’s important to keep any evidence of your business experiencing lower profits, capacity or demand.
Some examples of this include:
- Evidence of cancelled contracts
- Fewer/smaller invoices
- Transaction records showing reduced activity compared to previous years/months
- Evidence of reduced activity due to government restrictions (e.g. retail or hospitality businesses closed during lockdown).
If your business is temporarily unable to trade at all, you must also keep evidence of this. For example, NHS letters telling you to shield or COVID-19 test results which prevent you from operating your business.
If you apply for the SEISS grant, you must keep a record of the amount claimed and your grant claim reference number. This amount must also be entered into your bookkeeping records and then included in your Self Assessment tax return.
As the SEISS is a taxable grant, it needs to be part of your tax return so that HMRC can calculate how much tax and NI you owe for the year.
What if I’m not eligible?
Not all self-employed people are eligible for the SEISS grants, but there are some alternatives for those ineligible.
- Bounce back loans. The Bounce Back Loan Scheme (BBLS) lets SMEs borrow between £2,000 and up to 25% of their annual turnover.
- Universal Credit. You may be able to apply for Universal Credit while you wait for your SEISS, or as an alternative if you’re not eligible for it.
- Coronavirus Job retention Scheme (CJRS). If you’re employed by your own limited company some of your salary could be covered by the Job Retention Scheme. Unfortunately you’ll only be able to claim CJRS for your salary. If most of your income comes from dividends, the scheme will not cover those earnings, which means you may only get a small amount.
We hope this short guide to SEISS for freelancers has helped. If you haven’t applied before and are eligible, it can provide a much-needed helping hand for the end of the year. Just be sure to keep accurate records of everything in case you need it!