Coronavirus support payments

Coronavirus support payments

  The payments may be treated differently for means-tested benefits such as tax credits and universal credit. See the bottom of this page for more information.

Make sure you are clear exactly which payment you received. Some schemes have very similar names.

The first step is to identify whether the payment is a ‘coronavirus support payment’ by checking to see if you fall into one of the categories below. All coronavirus support payments are taxable, but they are not all liable to UK National Insurance contributions (NIC).

If your payment is not a ‘coronavirus support payment’ and the position is not clarified on this page, you should check the position with HMRC.

When to report your coronavirus support payment

If you need to report a payment on a self assessment tax return, in most cases you should do (or have done) this on your tax return for the year in which you received the payment (usually either 2020/21 or 2021/22).

Note that there is an exception for Self-employment Income Support Scheme grants paid to a partnership in certain circumstances.

If you did not include a payment on your tax return but you should have done, see the heading below.

References below to box numbers are to the 2021/22 self assessment tax return.

Businesses: coronavirus support payments

If you are self-employed (either as a sole trader or partner in a partnership) and you received a payment to support your business in connection with the effect of coronavirus from either:

• the UK government (including HMRC),
• a local authority, or
• a devolved administration,

then this payment is, in general, taxable and liable to Class 4 National Insurance. It also counts as profits to be tested against the small profits threshold for Class 2 National Insurance purposes. This includes the following:

• the Self-Employment Income Support Scheme (SEISS)
• Eat Out to Help Out
• Coronavirus Statutory Sick Pay Rebate
• Coronavirus Business Support Grants

There are many different types of Coronavirus Business Support Grant. Some of the more common ones are listed on GOV.UK. If you are unsure, you should ask HMRC.

The payment should be reported as ‘other business income’ on your self assessment tax return – unless it is a payment under the Self-Employment Income Support Scheme, which is reported separately in its own box.

You should also ensure that you tick box 20.1 on page TR8 on the relevant return to declare that you have included the payments as taxable income of your business.

If you operate your business through a limited company or partnership, you should be aware that the reporting position may be different. If in doubt, you should check with HMRC.

Loan schemes

Loans to businesses are not taxable (or liable to National Insurance) as income. This includes the Coronavirus Business Interruption Loan Scheme (CBILS), the Recovery Loan Scheme and the Bounce Back Loan Scheme.

Coronavirus Job Retention Scheme (CJRS) payments

If you are a business, CJRS grants are taxable income for your business (and should have been reported in box 16 of the full Self-employment pages or box 10 of the short pages). However, they should be offset by the employment costs that you deduct when calculating taxable profits. As stated above, there is a box to tick on page TR8 to confirm that these payments have been included as taxable income for the purposes of calculating your profits.

If you have overclaimed an amount of CJRS grant and have not already told HMRC or paid it back in line with their guidance, that amount should not be included as business income in box 16 or box 10. Instead, it should be included in box 1 of the section called ‘Incorrectly claimed coronavirus support scheme payments’ on page TR5.

Any CJRS grant received by an employer who is an individual and not employing staff in the course of a business is not taxable and does not need be reported to HMRC.

Individuals: test and trace or self-isolation payments

These payments were made to certain self-employed or employed individuals if you needed to self-isolate and you could not work from home.

In England, Scotland and Wales, these payments are taxable but not liable to National Insurance.

If you were employed, HMRC should have adjusted your tax code to collect the tax on the payment. If you were employed and you also needed to complete a tax return for the year in which you receive the payments, HMRC say you should have reported them in box 15 (‘Other benefits’) of the Employment pages on your return. Even though the payments were made by your local authority, HMRC say they are treated as earnings from employment if you received them on the basis of being employed.

If you were not employed but you were self-employed, the payments are treated as income of your business. You should have reported the payments received on your self assessment tax return in the ‘other business income’ box (box 16 on the Self-employment (full) (SA103F) pages).

However, to ensure the amounts are not subject to Class 4 National Insurance, you also needed to report the figure as an adjustment to your profits chargeable to Class 4 National Insurance (in the 2021/22 tax return, this is box 102 of page SEF 5). Note that the relevant box is only available on the Self-employment (full) (SA103F) pages, not the Self-employment (short) (SA103S) pages.

You should also ensure that box 20.1 is ticked on page TR8 to declare that you have included the payments as taxable income of your business.

If you need to make student loan repayments for the year, you do not need to pay these on the test and trace payments received in that year if you do not need to complete a self assessment tax return for the year. Otherwise, student loan repayments are due if the relevant repayment threshold is exceeded.

In Northern Ireland, our understanding is that the Discretionary Support self-isolation grant is neither taxable nor liable to National Insurance.

You can also find guidance on GOV.UK.

Individuals: bonus payments for certain employees

The following payments are all liable to tax and National Insurance, as employment income:

• £500 gift for staff employed in the social sector in Wales
• £500 bonus for NHS and social care staff in Scotland
• £500 special recognition payment for nurses in Northern Ireland

The payments are also treated as income for student loan repayments and, in general, means-tested benefits.

For universal credit, the net amount of the payments after income tax and National Insurance is taken into account.

For tax credits, the gross amount of the payment is taken into account.

For other benefits, we recommend checking the position with HMRC or DWP as appropriate.

Individuals: other payments

In general, as an individual if you received a payment from an authority under a coronavirus support scheme which does not require that you are either employed or self-employed, then this payment will not usually be taxable or liable to National Insurance.

This is because the payment could not be said to derive from your employment or self-employed business, and therefore could not be categorised as earnings from employment or self-employment.

Some examples of these payments are given below.

Welfare payments

If you have received a welfare payment from your local council to counter hardship, such as housing benefit or help with council tax payments, these are not treated as coronavirus support payments.

These payments are not taxable or liable to National Insurance. You do not need to report them to HMRC for tax purposes.

Other payments

Certain other specific payments are also not treated as coronavirus support payments. These include:

• The NHS and Social Care Life Assurance Scheme (England, Scotland and Wales)
• The Health and Social Care Life Assurance Scheme (Northern Ireland)
• The COVID Winter Grant Scheme (England)
• The COVID Winter Hardship Payment (Scotland)

The above payments are neither taxable nor liable to National Insurance.

If you are unsure about whether a specific payment is reportable, you should check with HMRC.

If you did not include a taxable payment on your tax return

You should correct the error as soon as possible.

If you are in time to do so, you should amend your return to include the payment. However, in most cases the deadline to make an amendment to either your 2020/21 or 2021/22 self assessment tax return has now passed (it is extended only if HMRC issued a notice to file that return after 31 October following the end of the tax year).

For details of how to make the amendment, including information on what to do if you are out of time, see GOV.UK.

HMRC may charge penalties for the error, if you did not take reasonable care. However, the penalty may be reduced to nil if the error was not deliberate, you make an unprompted disclosure to correct it and you qualify for the maximum reductions based on the quality of that disclosure.

However, late payment interest will always be charged on late paid tax, whatever the behaviour which led to the error and the nature of the disclosure.

Coronavirus support payments and means-tested benefits

If you are claiming means-tested benefits, such as tax credits or universal credit, you need to consider the status of any payments received separately.

For example, the test and trace self-isolation payments are taxable but are not treated as income for either tax credits or universal credit.

If you are claiming universal credit, note that most Coronavirus Business Support Grants (except the Self-employment Income Support Scheme grants) are classed as capital and not income. Grants which are designed to meet the expenses or losses of the trade are disregarded as capital for twelve months. However, grants and loans intended to provide support during the coronavirus outbreak are classed as business assets and so are disregarded indefinitely. Self-employment Income Support Scheme grants are treated as income for universal credit in the assessment period received.

If you have received a coronavirus-related payment and get universal credit, you should contact DWP to confirm how the payment is treated.

If you have received a coronavirus-related payment and get tax credits, you should contact HMRC to confirm how the payment is treated.