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Don’t forget COVID-19 grants on self-assessment tax returns

As anyone who files an annual tax return will know, the deadline for 2020-2021 self-assessment tax returns is approaching. However, not everyone is aware that they also have to declare COVID-19 grant payments on their tax return. This is the first year that these taxable grants must be included.

While over 6 million taxpayers have already submitted their tax returns, anyone who needs extra time to file and pay can do so without worrying about late fees. HMRC is helpfully waiving late payment penalties for a month – so you have a few extra weeks to organise your tax returns.

How do you report COVID-19 grants on tax returns?

Many self-employed taxpayers and businesses received funding from the government to support them during the COVID-19 pandemic. If you are self-employed, a business, or in a partnership, and you received a Self-Employment Income Support Scheme (SEISS) payment or another COVID-19 grant
between April 2020 and April 2021, then you’ll need to report it in your self-assessment tax return.

There is a specific separate entry for reporting SEISS grants on the tax return form. You should provide the details of any other COVID-19 support payments in the ‘any other business income’ box.

For partnerships, individual partners should include SEISS grants on their personal tax returns, and other COVID-19 grants on the partnership’s tax return. Companies who received payments through the Coronavirus Job Retention Scheme (CJRS) or the Eat Out to Help Out Scheme (EOHOS)
must include these in taxable profit calculations, and report them separately on the company tax return.

If you’ve already submitted your self-assessment tax return, but did not report the COVID-19 payments you received, then you must update your tax return before midnight on 31st January.

Which COVID-19 payments do you have to report on tax returns?

If you’re not sure which COVID-19 grants to include in your self-assessment tax return, HMRC is reminding taxpayers that they need to disclose all COVID-19 support payments they received during the 2020-2021 tax year. This includes the following payments, rebates, and support schemes:

  • Furlough/test and trace/self-isolation payments
  • Coronavirus Statutory Sick Pay Rebate
  • Coronavirus Job Retention Scheme
  • Self-Employment Income Support Scheme
  • Eat Out to Help Out Scheme
  • Coronavirus Business Support Grants

For SEISS grants, there were five rounds of payments, but you should only report the first three. The final two payments will be due for reporting the following year. These were the payment windows:

  • First SEISS grant – 13th May to 13th July 2020
  • Second SEISS grant – 17th August to 19th October 2020
  • Third SEISS grant – 29th November 2020 to 29th January 2021

If you received a Bounce Back Loan Scheme (BBLS) or Coronavirus Business Interruption Loan Scheme (CBILS) payment, you do not have to report these. HMRC does not count them as coronavirus support grants. Similarly, individuals don’t have to include welfare payments like housing benefits or council tax relief on their tax returns, as these are not taxable income.

When is the deadline for 2021 self-assessment tax returns?

The regular deadline for 2021 self-assessment tax returns still applies – which is 31st January 2022. HMRC still recommends that taxpayers file and pay their returns before midnight on this date, but you won’t be subject to late filing or payment fines if you do miss this deadline. You now have until:

  • 28th February 2022 to file self-assessment tax returns online
  • 1st April 2022 to pay self-assessment tax or set up a Time to Pay

Normally, HMRC will charge a 5% penalty for outstanding tax from 3rd March. This year, the penalty on unpaid tax won’t apply until 2nd April. If you fail to submit your tax return before the end of February, the late fines will apply as normal. HMRC will still be charging 2.75% interest on late returns – meaning that if you file between 1st and 28th February, the interest rate still applies.

Can I get help with paying self-assessment income tax?

Yes – if you’re unable to pay your self-assessment tax bill by the deadline, HMRC might allow you to set up a payment plan. This is called a Time to Pay arrangement, where you agree to pay your tax bill in monthly instalments over a set period. If you owe more than £30,000 in self-assessment tax, this won’t be possible. In this case, you’ll have to call HMRC’s self-assessment helpline to discuss it.

If you struggle to stay on top of self-reporting your income and paying taxes, you might benefit from hiring a tax consultant
to manage it all for you. When you delegate tax management to accounting experts like the team at GBAC, you’ll be sure to get everything in order and meet the deadlines. If you’re interested in our tax services, please call us on 01226 298 298 or email info@gbac.co.uk.