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Can Sole Traders Claim COVID Disaster Payment?

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Last editedNov 20212 min read

COVID-19 has proven a disaster for businesses of all shapes and sizes throughout 2020. Indeed, many SMEs continue to feel its effects well into 2021. Upon releasing his recent budget, chancellor Rishi Sunak stated that the economy was set to bounce back to pre-pandemic levels by the end of the year. But despite these bold claims, many small business owners and self-employed are struggling to return their businesses and income to pre-pandemic levels.

Fortunately, for self-employed sole traders, a disaster payment was made available in the form of the Self-Employment Income Support Scheme (SEISS). This was a series of grants designed to help sole traders and partnerships whose business was impacted by the pandemic. All grant assistance was classed as taxable income.

Please note: The SEISS grant is no longer available

It’s important to note that at the time of writing, new applicants are unable to apply to the SEISS grant. The last date businesses could make a claim was 30 September 2021.

Despite widespread vaccinations, the UK still has a very high COVID infection rate that experts warn could place a huge strain on the NHS by winter. Time will tell if another lockdown is necessary, and the SEISS makes a return.

In the meantime, this guide will outline the support that was available to sole traders.

Who was eligible for a self-employed COVID-19 payment?

The eligibility criteria changed between different SEISS grants. We’ll look at the different grant payments and their eligibility criteria shortly. Broadly speaking, however, they were available to sole traders and partnerships whose business had been adversely affected by the pandemic and subsequent lockdown, and their profits for the previous financial year were less than £50,000 and at least equal to that year’s non-trading income.

Grants 1 and 2

The first 2 grants were available to sole traders and partnerships who were adversely affected by the pandemic in the time leading up to 13 July 2020 for the first grant and on or after 14 July for the second grant. 80% of last year’s profits would be payable for a 3-month period if:

  • The applicant can demonstrate that they were unable to work, or had to scale   down or stop trading

  • They traded in the 2018–19 and 2019–20 tax years

  • They had submitted their self-assessment return for the tax year 2018–19

  • They intended to continue trading after the pandemic.

Grant 3

For the third grant, the same eligibility criteria as above applied. However, there were two more conditions that needed to be met. These were:

  • That trade be adversely affected by reduced activity, capacity or demand   between 1 November 2020 to 29 January 2021 as a result of the pandemic,       applicants must also have:

  • Reasonably believed that they will sustain a significant reduction in trading   profits throughout the above period.

Furthermore, a stipulation was made that the third grant could not be claimed if the reduced business was solely caused by a person having to self-isolate, or care for someone who is self-isolating, as a result of travelling to the UK.

Grants 4 and 5

Conditions for the final two grants were slightly different and were based more on individual trading profits.

The final grant award also depended on how much trade had been affected by the pandemic. If turnover had reduced by 30% or more due to the pandemic, the grant was awarded for 80% of 3 months’ average trading profits, up to a maximum of £7,500, or 30% of 3 months’ average profits up to a maximum of £2,850 if turnover was reduced by under 30%.

We can help

If you’re interested in finding out more about how to bounce back from the pandemic as a sole trader, then get in touch with our financial experts. Discover how GoCardless can help you with ad hoc payments or recurring payments.

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