The LITRG has raised concerns surrounding the government’s Self-Employed Income Support Scheme, warning that those who have received the grant might not be aware that it’s taxable.
For many, a third of the grant might have to be ‘paid back’ in tax and Class 4 National Insurance Contributions (NIC), which will be payable by 31st January 2022.
The Low Incomes Tax Reform Group (LITRG) fears that people could instead assume the amount is exempt from tax, particularly as it is described by the Government as a ‘grant’.
The timing of the grants – early in the tax year – means that individuals might have to forecast their total taxable profits for 2020/21, so they can estimate the amount of tax and National Insurance due on the grant. For many, this is likely to be 20% tax and nine per cent Class 4 NIC.