The Low Income Tax Reform Group ("LITRG") is warning people who have claimed Self-Employment Income Support Scheme ("SEISS") grants that they are subject to income tax and self-employment National Insurance contributions.
The first three SEISS grants must be included as taxable income in the 2020/21 tax year, regardless of the accounting period of the self-employed business or partnership.
The only exception is for partners whose SEISS grants have been paid into their business partnership and the distributed as per the Partnership Agreement.
Class 2 NIC's must be paid when profits are above the Small Profit Threshold which is £6,475 and is levied at £3.05 per week. Class 4 NIC is calculated at 9% for profits between £9,500 and £50,000 and 2% on profits above £50,000.
For most SEISS claimants, the first three grants must be included on their 2020/21 tax returns and the fourth and fifth grants should be included on their 2021/22 tax return.
If you have more than one self-employment trade and claimed the SEISS grants you need to apportion the grants between different trades in a reasonable way.