Budgeting for tax on SEISS grants

The Low Incomes Tax Reform Group (LITRG) has urged HMRC to publicise the tax implications for recipients of payments under the SEISS. Grants made under the scheme are taxable and will need to be included in claimants’ 2020/21 self-assessment tax returns. LITRG notes that recipients might need to consider budgeting for income tax and class 4 NIC to take into account payments received under the scheme and to reduce the risk of unwelcome surprises for taxpayers in January 2022. In some cases, taxpayers may decide to reduce their payments on account for 2020/21, based on an expected fall in profits compared to 2019/20. In these circumstances, SEISS grant payments should be factored in, to avoid a heavier than expected balancing payment.