The grants – five in total – have helped to plug a much-needed financial gap created by enforced closures and months of national and regional restrictions. The scheme, which was designed for those who have lost income due the COVID-19 crisis, has been combined with dispensations, such as the option to defer the second payment on account for the 2019 to 2020 tax year until 31 January 2021, VAT deferrals and the option of paying by 11 monthly instalments, as well as the extension of the self-assessment tax deadline.
While the SEISS has not been without its critics – coming almost a month after the Coronavirus Job Retention Scheme (CJRS) was announced, with a significant number of people falling through the eligibility cracks – it has provided greater support for the self-employed market.
However, the reality is that hairdressers will be feeling the effects of the coronavirus pandemic long after support measures are withdrawn and scaled back. A recent survey carried out by GoSimpleTax showed that 85% of self-employed workers believe the Government should provide greater support, with 27% of sole traders seeing a fall in revenue and a quarter experiencing restricted trade.
Interestingly, it also revealed a certain amount of confusion around the SEISS funding, with nearly half of self-employed workers saying they don’t need to declare COVID-19 grants in future tax returns.
Emergency financial support, such as the SEISS and the Small Business Grant Fund (SBGF), are subject to Income Tax and Self-Employed National Insurance and any government support received during the pandemic must be included in the 2020/21 tax returns, under HMRC rules. This also applies to taking a paid job or applying for state benefits for the first time, as a result of the pandemic.
Not doing so could leave people open to potential penalties from HMRC, as a result of failing to include all sources of income. Penalties cover:
It’s essential to understand the implications and tax liabilities that come with these emergency measures and to file your 2020/21 tax return as soon as possible. It’s important to include details of all your income, even if tax has been deducted at source – don’t wait until January 2022. Filing early will offer confirmation of your tax bill, allowing you to plan for tax payments that may be due in January and July 2022.
While 2020 has placed immeasurable pressure on people’s earnings, the fact still remains that crucial to avoiding debt is ensuring you put away a minimum of 15%, maybe more depending upon the nature of the business, of sole trader earnings to help cover tax bills and avoid any nasty surprises.
Mike Parkes is Technical Director at GoSimpleTax – the online tax return and self-assessment software.
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