Many sole traders and partners have received a rough deal out of the self-employed income support scheme (SEISS). They don’t qualify for SEISS grants if they started their business after 5 April 2019, or where earlier profits were too high (over £50,000), although their earnings may have dropped considerably since April.
A third SEISS grant will be payable for November 2020 to January 2021, at 55% of the average profits reported in 2016/17 to 2018/19, capped at £5,160 for three months. The portal for applications will open on 30 November, but the qualifying conditions for SEISS-3 remain the same as for the earlier grants, so the same people are excluded.
Remember the SEISS grants are taxable in 2020/21 as if they were trading profits, so they will affect the tax due for 2020/21 due by 31 January 2022. You may need help to plan your cashflow into 2021 and beyond, as many will have already deferred tax due on 31 July 2020 to 31 January 2021.
HMRC is encouraging taxpayers to submit their 2019/20 tax returns before December, so their payments on account for 2020/21 can be calculated accurately. The taxpayer will then have full information to agree a Time to Pay instalment arrangement. These agreements can be set-up automatically online if the debt is less than £30,000.
Where the sole-trader has very low income they may be forced to claim Universal Credit (UC) as we explained on 29 October 2020. The good news is that the minimum income floor has been suspended for all self-employed UC claimants until 30 April 2021. This means the individual is not assumed to make a minimum income from their self-employed trade.
Written by the Tax Advice Network