Self-employed professionals who have claimed for the SEISS are being warned of a tax hit on the grant, with the LITRG raising concerns that this might not be common knowledge.
The Low Incomes Tax Reform Group (LITRG) fears that many recipients of the government’s Self-Employed Income Support Scheme (SEISS) might not realise that it is taxable, especially as it is described as a ‘grant’.
Claimants might not be aware that income tax and Class 4 National Insurance is due on the grant and payable by 31st January 2022 at the latest.
Self-employed subcontractors in the construction industry will also need to watch out for the SEISS grant being paid without tax taken off. This is different to their other, usually taxed, income and it could mean that they do not get their usual expected refund after submitting their tax return next year.
Victoria Todd, Head of LITRG, said, “Many claimants of SEISS grants might, understandably, 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 National Insurance on it.
“The Government has announced recently that a second wave of grants will be paid under the scheme in August 2020. We urge HMRC to do as much as they can to publicise that the grants are chargeable to income tax and National Insurance, to reduce the risk of people being surprised by higher-than-expected 2020/21 tax bills.”
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