The deadline to submit tax returns for 2019/20 through self-employed self-assessment is on or before midnight on 31 January 2021, with around 10.7 million returns sent in last year.
Last month, an extension to the self-employed income support scheme (SEISS) was announced, offering two further payouts covering the three months from 1 November 2020 to 31 January 2021 and 1 February 2021 to 30 April 2021.
Applications for the third taxable grant opened for existing claimants on 30 November 2020, although the Treasury has yet to publish details on the fourth taxable grant.
The first taxable grant, which covered 1 March 2020 to 31 May 2020, was offered to self-employed workers who were either forced to close or saw their business negatively affected by COVID-19.
As this covered the final five weeks of the 2019/20 tax year, which ended on 5 April 2020, and the payout was based on profits of up to £50,000 from 2018/19, some self-employed people fear submitting a tax return early will negatively affect their claim for the fourth grant.
HMRC has not confirmed if it will use updated figures from 2019/20 or remain using historical data, but the assumption is that the fourth claim will be based on the existing criteria.
Submitting 2019/20 tax returns early should, therefore, not impact on entitlement to the fourth taxable grant and they should be submitted as early as possible.
As SEISS grants are taxable and subject to class 4 National Insurance contributions, they mostly need to be included in 2020/21 self-assessment tax returns.
How they are reported will depend on whether the cash basis or accruals basis is used, and the accounting year-end. In some cases, the grants might need to be apportioned between 2019/20 and 2020/21.