In order to support people who were financially affected by the Coronavirus pandemic, the UK government made available a number of schemes and grants. 

Millions of people we’re able to keep their jobs due to the Furlough Scheme, limited companies could apply for coronavirus loans and a huge number of self-employed people were given the opportunity to apply for grants through the Self Employed Income Support Scheme (SEISS).

SEISS grants were paid as a percentage of previous years’ average monthly income, as calculated from previous tax returns, and were released in batches throughout the past year.

Yet, while these grants were a lifeline for many self-employed people, they were paid gross - i.e. before tax. That means that self employed tax payers are expected to show the grant money received on their 20/21 tax returns and, you guessed it, pay tax on the money received. 

Following the Spring Budget announcement, these Covid grants have been extended, with a 4th and 5th grant announced, stretching to September 2021, which means your 21/22 tax return could also include Covid Grant Income! 

How will SEISS grants be recorded on tax returns? 

Well, HMRC will be altering the self assessment tax return, adding a section for you to include the amount claimed through the SEISS in the relevant tax year. You will simply need to record the income made available to you via the grants and include the grant money in your annual income calculations.

Unfortunately, since the SEISS grants will require a new entry field, those who have claimed SEISS grants will not be eligible to sign up for Making Tax Digital (MTD) early, as many other self-employed people already have.

What else should I be aware of?

It will still be your responsibility to confirm that the amount claimed is correctly stated and that the amount of tax calculated on that claim is correct. So, for example, a basic rate taxpayer who has earned over the Personal Allowance of £12,500 will have to pay roughly 20% of their grant back in tax.

To help provide some clarity on this figure, APARI has created the Covid Calculator ‒ a simple to use tool that will help you estimate the amount of tax owed on your SEISS grants. 

Using this tool to estimate the additional tax you will owe should help avoid any nasty surprises when it comes to completing your 20/21 return, and you can plan ahead and set that money aside!

Want to know more about self-assessment? We created the Ultimate Guide to Self-Assessment Tax Returns for YOU!