SEISS, or the Self Employment Income Support Scheme, was extended by Chancellor Rishi Sunak in his recent Budget, providing an important lifeline to millions of self-employed individuals. Mr Sunak also extended the terms of the scheme to allow, as the Government claims, an extra 600,000 people to potentially benefit from the scheme. Many will be keen to understand how the next self-employment grants will work and any steps they may need to take ahead of time.
“Both the fourth grant from February to April, and the fifth and final grant from May to September, cover 80 percent of average annual profits, and are both capped at £7,500.”
However, for those who are looking to claim SEISS in the coming months, it is important to bear in mind the tax implications of the scheme.
Mr Warne continued: “Our expectation is that both fourth and fifth grants will be taxable, as with previous grants.
“Taxpayers will need to budget for tax payments in the normal way and keep an eye on HMRC’s website for applications to open in late April.
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“The fifth grant in particular has additional conditions attached, and come July, when applications open, taxpayers will need to carefully consider whether their turnover has indeed dropped to the required 30 percent to claim the higher grant.”
Previous grants have been subject to both tax and National Insurance contributions, so being aware of this will avoid Britons being shocked with a nasty surprise.
And when it comes to the self-employment support, there could be certain actions individuals can take ahead of time.
Mr Warne highlighted that self-employed people can be proactive about their affairs before the grant is released.
He added: “The first thing the self-employed need to do is to ensure their income tax compliance affairs are up to date as this is the base data to confirm grant eligibility.
“This includes those who became self-employed in 2019/20 as they can participate in SEISS if they filed their tax return by March 2.”
The Government has stated the online claims service for the fourth grant will be available from late April 2021 until May 31, 2021.
However, some may be struggling to make their finances stretch until they can receive SEISS grant support.
Mr Warne added that if individuals are particularly struggling while waiting for the next SEISS grant, they may feel it necessary to turn to the benefits system.
He highlighted Universal Credit payments as a potential solution to work as a stopgap for individuals concerned.
Another update provided by the Chancellor in the Budget was the decision to freeze the personal tax allowance until 2026.
Aside from SEISS support, this is a decision which could clearly have impacts for self-employed Britons, an issue Mr Warne concluded by touching upon.
He said: “The freezing of personal allowance represents a stealth tax, the effects of which won’t be felt immediately, but over time.
“As earnings rise, perhaps merely in line with inflation, progressively more income is taxed at 20 percent rather than being treated as tax-free within the allowance.
“Average rates of tax collected will rise in the future despite the rates of tax remaining constant.
“This could make a real difference to living standards if inflation becomes a significant factor.”
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