Tax and NICs warning for SEISS recipients
11th June 2020
Recipients of the self-employed income support grants may not realise they are taxable, a tax group has warned.
The grants are worth up to 80% of trading profits, paid in a lump sum to cover three months, and capped at £7,500.
More than 2.6 million lump sums worth £7.5 billion had been provided through the scheme up to 7 June 2020.
Up to a third of those grants may have to be repaid in tax and class 4 National Insurance contributions (NICs) in a 2020/21 tax return.
The low incomes tax reforms group (LITRG) fears recipients may assume the lump sums are exempt for tax and NICs as they are labelled ‘grants'.
The LITRG said self-employed subcontractors in the construction industry will need to watch out for the grants being paid without tax taken off.
This is different to their other, usually taxed, income and may mean they miss out on their usual refund after submitting their 2020/21 tax return.
Victoria Todd, head of LITRG, said:
"Many claimants might use the money as soon as they get it, for example, to catch up on liabilities or to meet essential living costs - but they need to think now about budgeting for income tax and NICs on it.
"HMRC needs to publicise that the grants are chargeable to income tax and NICs, to reduce the risk of people getting higher-than-expected tax bills."
Get in touch to discuss your accounts.