There have been two rounds of grant support for the self-employed so far which have both been based on the trader’s average profits to for the three tax years to 2018/19. Those with annual average profits exceeding £50,000, or where self-employed income made up less than half of their income were not eligible to claim the first two SEISS grants. These conditions – and other eligibility criteria which mean that the only half of self-employed traders qualify - will continue to apply to the third and fourth grants.

Initially the Chancellor announced that there would be two more SEISS grants payable in the six months from November 2020, indicating that the first of those grants would be restricted to 20% of average profits.

But on 22 October he boosted the level of the next SEISS grant to 40% of average monthly profits, capped at £3,750 for three months. No details have been released concerning the fourth SEISS grant.

Who qualifies?

HMRC has yet to publish legislation to set the rules for the next two SEISS grants, but we expect the following conditions to apply: 

• The trader must have been eligible for the previous SEISS grants (even if they didn’t apply for them).
• The business has not ceased permanently at the date of the claim.
• If the business is not actively trading there is an intention to resume trading before April 2021.
• The business has been adversely affected by the covid-19 pandemic in the period from 1 November 2020 to the date of the claim.

The third SEISS grant will be based on the trader’s reported self-employed profits in the three years to 2018/19, or parts of that period when he was in business as a self-employed individual or partner. 

Fourth grant

The government has promised a fourth SEISS grant payable for three months from February to April 2021. We have no information about the level of this grant, or the capped amount.

In September 2020 HMRC indicated that this fourth grant would be based on the trader’s average annual self-employed profits for the tax years: 2016/17 to 2018/19. By the time the fourth SEISS grant is paid in early 2021, almost two years of recent trading results will have been left out of that profit calculation. It is quite possible that the Chancellor will change his mind again by February 2021 to allow profits from 2019/20 to be included in the averaging calculation.

Universal credit

The level of the SEISS grant may not be enough to support the trader, in which case they should consider applying for universal credit (UC), which can be received in addition to the SEISS grants. The trader should bear in mind that it can take five to six weeks for the first UC award to arrive following the initial claim.

Another disadvantage of the claiming UC is the operation of the minimum income floor (MIF). Self-employed individuals are assumed to make profits at least equal to the MIF when applying for UC. The MIF is broadly equivalent to the national minimum wage for 35 hours per week (or the hours the claimant is expected to work), less tax and NIC due on that notional income, even though many self-employed traders earn less than the national minimum wage.

Fortunately, the MIF does not apply in the first 12 months the individual starts their self-employed trade, or for the first 12 months of a new UC claim by a self-employed individual submitted from 23 September 2020.

As with the first two grants, self-employed traders must make their claim themselves as their accountants cannot do so for them.

Noel Guilford