Self-Employed Income Support fourth grant

The online service for the fourth Self-Employed Income Support Scheme (SEISS) grant is now available.

Claims must be submitted by 1 June 2021

This fourth grant was announced in the March 2021 Budget as an extension of SEISS.

The grant is worth 80% of three months' average trading profits, capped at £7,500.

The fourth grant takes account of 2019-2020 tax returns and so is open to those who became self-employed in the tax year 2019 to 2020. The rest of the eligibility criteria for the previous three grants remain unchanged.

A fifth SEISS grant will be made available in late July covering the period from May to September.

What is different this time?

The fourth SEISS grant looks at profits from the 2019-20 tax year as well as the 2016-17, 2017-18, 2018-19 tax years, where applicable. So unlike the previous three grants, the fourth grant is based on average profits over four years rather three. This will create a different grant amount from the previous claims.

Whilst the fourth grant is equal to 80% of three months’ average profits, as per the first and third grants, this time it will depend on whether you had higher or lower profits during 2019-20 when compared to the average of 2016-17, 2017-18 and 2018-19.

The change in calculation from the first three grants may help those who started their business during the 2018-19 tax year and will not have a full year’s results for that year. This is because their fourth grant computation will now include 2019-20 as well as 2018-19, which could mean a higher average profit and so a higher grant this time around.

Who can claim

A self-employed individual or a member of a partnership can claim, but you cannot claim if you trade through a limited company or a trust.

You must have traded in both tax years:

• 2019 to 2020 and submitted your tax return on or before 2 March 2021
• 2020 to 2021

You must either:

• be currently trading but are impacted by reduced demand due to coronavirus
• have been trading but are temporarily unable to do so due to coronavirus

You must also declare that you:

• intend to continue to trade
• reasonably believe there will be a significant reduction in your trading profits

Reasonable belief

In order to claim the fourth grant, HMRC says you must reasonably believe that you’ll suffer a significant reduction in trading profits, due to reduced business activity, capacity, demand or inability to trade due to coronavirus between 1 February 2021 and 30 April 2021.

You must keep evidence that shows how your business has been impacted by coronavirus resulting in less business activity than otherwise expected.

HMRC says it expects claimants to make an honest assessment about whether they reasonably believe their business will have a significant reduction in profits.

Significant reduction

Before making a claim you need to decide if the impact of coronavirus on your business between 1 February 2021 and 30 April 2021 will cause a significant reduction in trading profits for the tax year in which you report them.

In making this decision you need to take account of your individual and wider business circumstances. You should wait until you have a reasonable belief that your trading profits are going to be significantly reduced before you make your claim.

You do not have to consider any other coronavirus scheme support payments that you have received when deciding if you’ve had a significant reduction in your trading profits.

There are some examples that can help you decide.

How HMRC works out your eligibility based on your tax returns

To work out your eligibility for the fourth grant HMRC will first look at your 2019-2020 tax return. Your trading profits must be no more than £50,000 and at least equal to or more than your non-trading income.

If you’re not eligible based on your 2019-2020 return, HMRC will then look at the tax years 2016 to 2017, 2017 to 2018, 2018 to 2019 and 2019 to 2020.

Find out more information on how HMRC works out trading profits and non-trading income for the self-employment income support scheme.

How different circumstances affect the scheme

There are some circumstances that can affect your eligibility such as if:

• your return is late, amended or under enquiry
• you’re a member of a partnership
• you had a new child
• you have loans covered by the loan charge provisions
• you claim averaging relief
• you’re a military reservist
• you’re non-resident or chose the remittance basis

If you claim Maternity Allowance this will not affect your eligibility for the grant.

Find out more information on how your circumstances affect your eligibility.

How much you’ll get

The fourth grant is calculated at 80% of 3 months’ average trading profits. It will be paid out in a single instalment and capped at £7,500 in total.

HMRC will work out your average trading profits using up to 4 years’ of submitted tax returns. This may affect the amount you’ll get which could be higher or lower than your previous grants.

It will take into account trading profits from the 2016 to 2017, 2017 to 2018, 2018 to 2019 and 2019 to 2020 tax years. If you have a gap in the years you have traded, only your most recent returns after the gap will be used to work out the grant.

Example

Working out the grant on average trading profits of £42,000 over the last 4 tax years.

1. Start with average trading profit (£42,000).
2. Divide by 12 = £3,500.
3. Multiply by 3 = £10,500.
4. Work out 80% of £10,500 = £8,400. You’ll receive £7,500 due to the cap.

Find out more information on how HMRC work out your trading profits.

How to claim

Find out how to make a claim for the fourth grant.

You can check a list of genuine HMRC contacts if you receive any suspicious texts, calls or emails claiming to be from HMRC as this may be a scam.

How the grant is treated

The grant is subject to income tax and National Insurance Contributions and needs to be included in the 2021-2022 tax return.

The grant also counts towards your annual allowance for pension contributions.

SEISS grants are not counted as ‘access to public funds’, and you can claim the grant on all categories of work visa.

Further support

There will be a fifth grant covering May 2021 to September 2021.

Guidance on how to claim the fifth grant will be provided in due course.

Other government measures already in place to support businesses and workers during the coronavirus emergency can be found in our Business after COVID-19: Transition Knowledge Hub.