Self-employment income support scheme (Covid-19)

UPDATED 29 March 2021

Updates to the scheme

The scheme has been extended until September 2021.

  • A fourth grant will cover the period February to April, at 80% of average trading profits capped at £7,500 total. Make claims from April 2021
  • A fifth and final grant will cover the period from May onwards. For the fifth grant if your turnover has fallen by 30% or more, you can claim the full 80% grant. If your turnover has fallen by less than 30%, you will receive a 30% grant.

  • Scheme has been extended. Now self-employed people who couldn’t evidence 2018/19 tax returns, but who filed their 2019/20 tax return by midnight 03 March 2021, can now also access the scheme (fourth and fifth grant).

The grants are taxable income and also subject to National Insurance contributions.

Who can claim

To be eligible for the fourth grant you must be a self-employed individual or a member of a partnership.

Your trading profits must be no more than £50,000 and at least equal to your non-trading income, on your 2019 to 2020 Self Assessment tax return.

If you’re not eligible based on your 2019 to 2020 Self Assessment tax return, the assessment is based on the tax years 2016 to 2017, 2017 to 2018, 2018 to 2019 and 2019 to 2020.

You must also have traded in both tax years:

  • 2019 to 2020 and submitted your tax return by 2 March 2021
  • 2020 to 2021

You must either:

  • be currently trading but are impacted by reduced demand due to coronavirus
  • have been trading but are temporarily unable to do so due to coronavirus

You must also declare that:

  • you intend to continue to trade
  • you reasonably believe there will be a significant reduction in your trading profits due to reduced business activity, capacity, demand or inability to trade due to coronavirus

How the scheme works

The fourth grant will provide a taxable grant calculated at 80% of 3 months’ average trading profits. The fourth grant will be paid out in a single instalment and capped at £7,500 in total.

How to claim

Online claims service for the fourth grant will be available from late April 2021 until 31 May 2021.

If you are eligible, HMRC will contact you in mid-April to give you your personal claim date. This will be the date that you can make your claim from.

There will be more guidance from the Govt about the fourth grant in due course

For full details, check the government website:

How to record the grant once received

Once you receive the grant, you'll need to record it your accounts. We recommend that you create a special ledger account where the grant money is recorded. This helps you trace the amount of the grant received, making it easy to locate and report on, if required.

There are two ways you can process the grant

  1. Record that you've applied for the grant before you receive the funds. This shows that you expect to receive the funds from the government, so that your balance sheet reflects this in advance of receiving the money. Then record the receipt of the money once it arrives.
  2. Just record the receipt of the money once it arrives.

Record that you've applied for the grant and received the money

Some businesses want to record that they've applied for the grant before they receive the funds.

This shows that you expect to receive the funds from the government to cover payments you will make to employees, so that your balance sheet reflects this in advance of receiving the money.

To record the grant in this way, you'll need to create a ledger account for when you actually receive the money and a second ledger account to record that you've claimed the grant.

To record the grant

  1. Create two new ledger accounts. These will help you trace and report on the expected funds and the amount of the grant when you receive it, as it these amounts appear as a separate items on your management reports.

    1. Self Employed Support Grant Accrued Income - use this to record the expected funds. This is reported as an Asset on your balance sheet. When you receive the money, the balance of this ledger account is reduced to zero.
    2. Self Employed Support Grant Income - use this to record the amount of the grant. This is reported as Income on your profit and loss.
  2. Enter a journal to record that you've applied for the grant. This adds the funds to your balance sheet and your profit and loss

  3. Enter a bank receipt to record that you've received the grant. This adds the funds to you bank account and reduces the accrued income to zero.

Example

For this article we'll use the following example

  • Your company applies for a grant of £7,500 on 5 Dec
  • You enter a journal to show that you've requested the funds on your balance sheet.
  • You receive the money on 5th Janaury.
  • You enter a bank receipt to show that the money has been received.

Create the first ledger account

  1. From Settings, select Financial Settings, then Chart of Accounts.
  2. Select New Ledger Account and complete the following information:

    Included in Chart

    Leave this selected.

    It makes sure the balance of this account is included on your reports

    Ledger Name* Enter a name of your choice, such as Self Employed Support Grant Accrued Income
    Display Name* This is the name that appears on the reports. Enter a name that makes sense to you, such as Self Employed Support Grant Accrued Income.
    Nominal Code*

    For example 1155.

    You can use any number here but it's good practice to keep the numbers in each category consistent, so use a number that's close to you other Asset accounts. For the default chart of accounts use a number between 1000 and 1190.

    Category *

    Current Asset.

    The balance of the account will appear on your Balance Sheet in the Assets section.

    The category determines the report and report section where the balance of this account is reported.

    Category Group This defaults to Asset and you can’t change this.
    VAT Rate Choose No VAT.
    Visibility

    Leave the defaults selected.

Create the second ledger account

  1. From Settings, select Financial Settings, then Chart of Accounts.
  2. Select New Ledger Account and complete the following information:

    Included in Chart

    Leave this selected.

    It makes sure the balance of this account is included on your reports

    Ledger Name* Enter a name of your choice, such as Self Employed Support Grant Income
    Display Name* This is the name that appears on the reports. Enter a name that makes sense to you, such as Self Employed Support Grant Income.
    Nominal Code*

    For example 4960.

    You can use any number here but it's good practice to keep the numbers in each category consistent, so use a number that's close to you other Income accounts. For the default chart of accounts use a number between 4000 and 5000.

    Category *

    Other Income.

    The balance of the account will appear on your Profit and Loss in the Income section.

    The category determines the report and report section where the balance of this account is reported.

    Category Group This defaults to Income and you can’t change this.
    VAT Rate Choose No VAT.
    Visibility Leave the defaults selected.

Enter a journal to record that you've requested the funds

  1. Go to Adjustments, then Journals.
  2. Select New Journal.

    Reference If required, enter a reference.
    Date* Date you requested the funds.
    Description* e.g. Self Employed Income Support Grant Request

    *Field compulsory.

  3. Enter the details of the ledger accounts and debits and credits, for example:

    Ledger Account Deatils Debit Credit
    1155 - Self Employed Support Grant Accrued Income Self Employed Income Support Grant requested 7500.00  
    4960 - Self Employed Support Grant Received Self Employed Income Support Grant requested   7500.00
  4. Click Save.

Record receipt of the grant

Record that you received the money as an Other Receipt. For the purposes of this section we'll use the following example:

  1. Go to Banking, select New, then New Sale or Receipt.
  2. Select Other Receipt.

    Date Received* Date you received the money.
    Bank Account* The bank account the money was paid into
    Amount Received* Total amount you received, e.g 7500.
    Reference If required, enter a reference.
    Details Enter any additional details as required.

    *Field compulsory.

  3. Enter the information required to record the money received. This should be recorded against the ledger account you set for accrued income, as this balances off against the journal entered previously. For example:

    Ledger Account Details VAT rate Total
    1155 - Self Employed Support Grant Accrued Income Self Employed grant received No VAT 7500.00
  4. Click Save.

You’ve now recorded receipt of the grant. Using our example, your ledger accounts are updated as follows:

  Ledger Account Debit Credit
5 Dec 1155 - Self Employed Support Grant Accrued Income 7500  
  4960 - Self Employed Support Grant Received   7500
5th Jan 1200- Bank account 7500  
  1155 - Self Employed Support Grant Accrued Income   7500

Record receipt of the money only

To record the grant in this way there are two steps

  1. Self Employed Support Grant Received - Create a new ledger account for the money received. Use this to record the amount of the grant. This is reported as Income on your profit and loss.

    This will help you trace and report on the money received from the grant, as it will appear a separate item on your management reports.

  2. Record that you've received the grant.

Example

For this article we'll use the following example

  • Your company receives a grant of £7,500 on 5 June 2020.
  • The grant is paid into the main bank account for your company.
  • You enter a bank receipt to show that the money has been received.

Create a ledger account

  1. From Settings, select Financial Settings, then Chart of Accounts.
  2. Select New Ledger Account and complete the following information:

    Included in Chart

    Leave this selected.

    It makes sure the balance of this account is included on your reports

    Ledger Name* Enter a name of your choice, such as Self Employed Support Grant Accrued Income
    Display Name* This is the name that appears on the reports. Enter a name that makes sense to you, such as Self Employed Support Grant Income.
    Nominal Code*

    For example 4960.

    You can use any number here but it's good practice to keep the numbers in each category consistent, so use a number that's close to you other Income accounts. For the default chart of accounts use a number between 4000 and 5000.

    Category *

    Other Income.

    The balance of the account will appear on your Profit and Loss in the Income section.

    The category determines the report and report section where the balance of this account is reported.

    Category Group This defaults to Income and you can’t change this.
    VAT Rate Choose No VAT.
    Visibility Leave the defaults selected.

Record receipt of the grant

Record that you received the money as an Other Receipt.

For the purposes of this section we'll use the following example:

  • £7500 was paid into your bank account on 5 June 2020.
  1. Go to Banking, select New, then New Sale or Receipt.
  2. Select Other Receipt.

    Date Received* Date you received the money.
    Bank Account* The bank account the money was paid into
    Amount Received* Total amount you received, e.g 7500.
    Reference If required, enter a reference.
    Details Enter any additional details as required.

    *Field compulsory.

  3. Enter the information required to record the money received, for example:

    Ledger Account Details VAT rate Total
    4960 - Self Employed Support Grant Received Self Employed Support Grant received No VAT 7,500.00
  4. Click Save.

You’ve now recorded receipt of the loan. This updates your ledger accounts with the following posting.

Ledger Account Debit Credit
1200 - Bank account 7500  
4950 -Self Employed Support Grant Received   7500