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Recovery loan scheme opens for applications, but still no date for the fourth SEISS grant

Find out how the UK’s self-employed income support scheme works and the new support on offer to businesses

Recovery loan scheme opens for applications, but still no date for the fourth SEISS grant

UK businesses whose trading has been affected by Covid-19 can now apply for up to £10m from the government’s recovery loan scheme, which opened for applications on 6 April 2021.

The scheme, which was first announced in the Budget on 3 March, is for businesses which are still trading in the UK, and will be administered by the British Business Bank.

Companies can use the money however they like – be it cashflow, investment or funding for growth – and interest will be charged at up to 14.99%.

There is still no confirmed date on when the fourth self-employed income support scheme (SEISS) grant will be open for applications; in the Budget, Chancellor Rishi Sunak said it would be available from late April, covering up to 80% of lost earnings during February, March and April up to £7,500.

Here, Which? explains the support for self-employed workers and what it could mean for your finances, as well as how to avoid a scam. You can jump to different sections using the links below:

What is the recovery loan scheme?

First announced in the Budget on 3 March, the government-backed recovery loan scheme can be paid out to any businesses still trading in the UK that have had trading affected by Covid-19.

Payouts can be up to £10m, with the government backing the loans up to 80%.

The loans are aiming to help businesses get back on track as lockdown measures continue to ease, but businesses can decide for themselves on how to spend the money.

Under the scheme, businesses can get term loans and asset finance for between three months and six years, and overdrafts and invoice finance for between three months and three years.

Fees and charges apply, including interest of up to 14.99%.

Accredited lenders are listed on the British Business Bank website, but it says business owners should approach their own finance provider initially to see if they are offering the scheme.

Find out more about the recovery loan scheme from the British Business Bank.

What help is available for self-employed workers?

There is a fourth SEISS grant some self-employed workers will be able to claim, covering up to 80% of lost earnings between February and April, up to £7,500.

This will be open for applications in late April and, like the third grant, you must have a significant profit reduction either due to lower demand or capacity, or due to being temporarily unable to trade.

The fifth and final SEISS grant covers lost earnings from May onwards, and can be claimed from late July 2021 (exact date to be confirmed). What you’ll get with this grant will depend on your fall in turnover. If it’s been reduced by 30% or more, you’ll get a grant of up to 80% as usual.

For those whose turnover has been reduced by less than 30%, the fifth grant will be worth 30% of lost earnings up to a maximum of £2,850.

The third SEISS grant covered up to 80% of average monthly profits in November, December and January, up to a maximum of £7,500. Applications for this are now closed.

The Coronavirus Job Retention Scheme, covering 80% of a furloughed employee’s salary up to £2,500, will be extended until the end of September 2021.

Listen: our experts discuss the Budget on the Which? Money Podcast.

How much will self-employed workers get?

If you qualify, you will get a taxable grant based on your average profits from the past three tax years.

To calculate the average, HMRC will add up the total trading profit for the three tax years, divide this amount by three and use this to calculate the monthly amount.

So, say your profit stood at:

  • £25,000 for 2016-17
  • £21,000 for 2017-18
  • £22,000 for 2018-19.

HMRC would base your grant on the average of these three years: a total of £68,000 divided by three, giving £22,666.

If you don’t have three years’ worth of tax returns, averages will be taken from whatever tax return filing history is available.

If you’re newly self-employed, it’s possible to claim the fourth and fifth grants if you’ve submitted a 2019-20 tax return, averages will be taken from this.

Grants covering March to May

The grant you’d receive would have been 80% of this average profit, which is £18,133 – equal to £1,511 per month.

The grant was worth up to £2,500 a month for three months, paid directly into your bank account in one instalment.

The upper limit of £2,500 a month applied to people with self-employed profits of £37,500 to £49,999.

Grants covering June to August

The grant you would have received would have been 70%, which in our example is £15,866 – equal to £1,322 per month.

Annual profits were taken after expenses and capital allowances, but before pension contributions and charitable donations. Therefore, workers who have made significant investments into their businesses were likely to lose out.

Grants covering November to January 2021

The grant you would have received was up to 80% of your average profit, which in our example is £18,133 – equal to £1,511 per month.

Grants covering February to April 2021

You can claim up to 80% of your average profit, which in our example is £18,133 – equal to £1,511 per month.

Grants covering May 2021 onwards

If your turnover has been reduced by 30% or more, you can claim up to 80% of your average profit, which in our example is £18,133 – equal to £1,511 per month.

For those whose turnover has been reduced by less than 30%, you can claim up to 30% of your average profit, which is £6,800 in our example – equal to £567 per month.

Who is eligible for the SEISS?

According to data from the Office for National Statistics (ONS), there are currently 5.02 million self-employed workers in the UK, many of whom would have been among the first to feel the effects of restrictions caused by the coronavirus outbreak.

For the fourth and fifth grants:

To apply, you must be a self-employed individual or a member of a partnership and:

  • Traded in the 2019-20 and intend to continue trading in 2020-21
  • Have trading profits of less than £50,000 a year
  • Earn the majority of your income (ie 50% or more) through self-employment
  • Have filed a tax return for the 2019-20 tax year by midnight on 2 March 2021.

For the first three grants:

To apply, you must be a self-employed individual or a member of a partnership and:

  • Traded in the tax year 2019-20 and intend to continue trading in 2020-21
  • Have trading profits of less than £50,000 a year
  • Earn the majority of your income (ie 50% or more) through self-employment
  • Have filed a tax return for the 2018-19 tax year. Anyone who missed the 31 January 2020 deadline was given four weeks from 26 March 2020 to file their 2018-19 return and benefit from the scheme.

You can see further details on gov.uk.

When will the help be available?

The scheme is being run through HMRC. The first round of the scheme opened to applications on 13 May.

The second round of applications opened on 17 August.

Applications for the third grant opened on 30 November.

The fourth grant opens for applications in late April, with a specific date yet to be announced.

Applications will open for the fifth grant in July, but a specific date hasn’t been announced yet.

What if I don’t have three years of tax returns?

For any self-employed workers who don’t have three years of self-assessment history, averages will be taken from whatever history is available – be it one year or two years.

For those who don’t have a full year’s self-assessment history, the Chancellor said there is little the scheme can do, due to the fraud risk of people signing up to the scheme without any proof of being self-employed.

This means that people who started self-employment in the 2019-20 tax year, and haven’t submitted a tax return for the 2018-19 tax year, won’t qualify for the scheme.

How does self-assessment tax deferral work?

Self-assessment tax bill payments owed by self-employed workers can be delayed via a Time to Pay arrangement so that they’re spread across several months to January 2022.

Those who deferred their payment on account instalment, which would usually have been due by 31 July 2020, initially didn’t have to pay until 31 January 2021. You must apply for this arrangement by 1 April 2021.

But now those who will struggle to pay their tax bill for the 2019-20 tax year, where the tax is due by 31 January 2021, can apply to the government’s Time to Pay scheme.

However, you’ll have to pay 2.6% interest on any outstanding tax after 31 January 2021.

The Time to Pay scheme itself isn’t anything new, but under the Chancellor’s Winter Economy Plan it has been opened out to those who are experiencing financial hardship due to the coronavirus pandemic.

For instance, the scheme only used to be an option for those who owed less than £10,000 in tax – a threshold that has been massively increased.

To be eligible, you must:

  • Owe less than £30,000
  • Be signed up to gov.uk and have a Government Gateway ID
  • Have filed your 2019-20 tax return and know how much tax you owe
  • Not have any other outstanding tax returns, or owe any other money to HMRC.

If you owe more than £30,000, or need more than 12 months to pay, you may be able to get a different instalment plan by calling the Payment Support Service on 0300 200 3835.

If you’re a self-employed trader or run your own small business, see our story on Which? Trusted Traders: coronavirus advice for small businesses and the self-employed.

What happens if I was overpaid for my last grant?

If you’ve received an SEISS grant that you weren’t entitled to, or you were overpaid, you should notify HMRC within 90 days of receiving the money and pay it back. Failing to do so may result in being charged a penalty.

If you notify HMRC about the overpaid grant but don’t make a voluntary repayment, the tax authority may recover the full value of the grant by making a tax assessment for the amount that you weren’t entitled to and haven’t repaid. The extra tax payment will be due 30 days after the assessment has been made.

If the assessment hasn’t been made by the time you file your 2020-21 tax return, you should include details of the overpaid grant as part of your self-assessment return.

HMRC will charge penalties to those who knew they were not entitled to the grant, based on how much they weren’t entitled to receive and the amount left outstanding 30 days after the assessment.

If you didn’t know you were overpaid or ineligible, you’ll only receive a penalty if you haven’t repaid what you owe by 31 January 2022.

Will I have to pay the money back?

The money available through the new self-employed income support scheme won’t have to be paid back.

However, the Chancellor has indicated in the past that self-employed workers’ tax might need to be reviewed.

The Chancellor has previously remarked that the equal level of help received by employed and self-employed workers may lead to questions of whether self-employed workers should pay the same levels of National Insurance in future.

But, according to the 2021 Budget, this isn’t set to happen any time soon, as Class 4 National Insurance rates will remain the same in 2021-22.

Can I continue working, or get another job?

As long as you intend to continue trading in the self-employed business you’re claiming for in 2020-21, you can claim the money and continue to work in whatever capacity is possible.

This can be continuing your usual job or getting another job.

Can I claim from this scheme and be furloughed?

If you already have more than one job, and are both employed and self-employed, as long as the income from your self-employment makes up at least 50% of your earnings, you could feasibly take the self-employment grant and be furloughed from your employment.

How to avoid an HMRC scam

Unfortunately, the coronavirus crisis has caused a huge increase in scams; on 20 March 2020, the City of London Police reported a 400% increase in scams as a result of coronavirus-related fraud.

HMRC scams have been around for some time, so it’s likely that fraudsters may also try to use the self-employed income support scheme to their advantage.

If you qualify for the scheme, HMRC will contact you to let you know. It will send you a link to an online form, where you’ll be asked to enter your bank details. You’ll then receive a payment from HMRC directly into the bank account you’ve given details for.

If you’re contacted and asked to do anything different to this, don’t do it. Check whether or not it’s actually HMRC contacting you; you can call its helpline or use its webchat services.

Also be wary of phone calls claiming to be from HMRC and carefully check the details of email correspondence you receive.

Other help available for self-employed workers

In the Budget on 3 March 2021, Chancellor Rishi Sunak announced that the government would provide an additional £5bn funding for businesses to support those that have had to close during the latest lockdowns.

The new Restart Grant will give non-essential retail businesses up to £6,000 when they’re allowed to reopen, and up to £18,000 to businesses in the hospitality and leisure sectors, including personal care.

On 5 January 2021, Mr Sunak announced £4.6bn government support in new grants to support businesses during the national lockdown.

This includes one-off grants of up to £9,000 for retail, hospitality and leisure businesses, plus a £594m discretionary fund for other affected businesses.

You can find out more about government business support on gov.uk.

Self-employed and gig economy workers can apply for Universal Credit or new-style Employment and Support Allowance (ESA) to compensate for the fact that they’re not entitled to statutory sick pay.

This is only suitable for those who are under state pension age; older workers should apply for pension credit instead.

Advances for Universal Credit are available immediately (as the benefit usually takes around five weeks to set up).

The minimum income floor has been suspended since March 2020, meaning that self-employed workers will be able to apply for a rate of Universal Credit that’s equivalent to statutory sick pay.

The Universal Credit standard allowance and working tax credit basic element will both be increased by £1,000. Initially, this was set to last until March 2021, but in the Budget speech on 3 March 2021, Sunak announced it was being extended for a further six months. Working tax credit recipients will receive a one-off payment of £500 to reflect this.

The effect of savings on Universal Credit

As Universal Credit is means-tested, it not only takes your income into account, but also any savings you have to your name.

Universal Credit payments will be incrementally reduced for every £1 of savings of more than £6,000, and anyone with more than £16,000 saved won’t be eligible to claim. If you’re part of a couple, your partner’s savings will also be taken into account, even if you’re making a claim as an individual.

Renters will also benefit from increases to housing benefit and the housing element of Universal Credit, so that the Local Housing Allowance will cover at least 30% of the market rents in each area.

Scotland’s newly self-employed hardship fund

In a bid to help those who don’t qualify for the UK government’s self-employed income support scheme, the Scottish government launched an alternative scheme, called the ‘newly self-employed hardship fund’, which paid grants of up to £2,000 for those who had only been self-employed for a short time.

This scheme has now closed.

Which? advice on coronavirus

Experts from across Which? have been compiling the advice you need to stay safe and make sure you’re not left out of pocket.

Read the latest coronavirus news and advice from Which?

This story was originally published on 25 March 2020 when the Self-employed Income Support Scheme (SEISS) was announced by the Chancellor. It has since been updated multiple times since then to reflect the changing details of the scheme. The last update was on 7 April 2021, with information on the new recovery loan scheme.


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