This the first year that SEISS income has to be declared on your tax return, so if you are completing your own return, you need to know which grants to include and where to put the information on your return.
If your accounting year ends to 5 April 21 then there are no issues, and any grants that you have received in the tax year will align with your accounting year.
However, if your accounting year is not 5 April 21 then you need to be careful about which grants you include on your 20/21 tax return.
SEISS grants are treated differently to normal trading income and are taxed in the year of receipt, rather than in your normal accounting year. For example, if your year end is 31 December, your 20/21 tax return would include your accounting profits for the year ended 31 December 2020. But for SEISS grants, you would need to include all those received up to 5 April 21, even though if received after 1 Jan 2021 they will be in the following year’s accounts.
For most people, this will mean that SEISS grants 1-3 will need to be declared on this year’s tax return.
The grant income is reported in a separate box from your normal trading income. If it is not separated out, then HMRC will add in the grant income again to your tax calculation, as they will think that you have not declared it.
You also need to tick the section that confirms that you have received SEISS income in the year.
If you did receive SEISS income, and in hindsight do not think that you should have done, you can include the amount that you received “in error” on your return and HMRC will include the overpayment in your tax calculation for the year.
The addition of the grant income in the year could actually mean that your overall income for 20/21 was higher than normal. This will have knock on effects for any payments on account that you will need to make in January and July 22 as these are based on the previous year’s income. If your income for 21/22 will be lower, then you can make a claim to reduce your payments on account to avoid overpaying tax and then claiming a refund!