SEISS Payment Effect on Universal Credit Payment When Used to Put Aside To Pay Tax Due

Rain_Dancing

Afternoon everyone,

Newbie post (but long time MSE lurker)  and a bit long...so please bear with me.
I'm a self employed sole trader. I had to stop work on the 19th March due to my job being one of the highest risk for COVID19 transmission, due to this I am also not likely to be back to work for the foreseeable future, and even when I eventually can, my income, like many people's is still going to be severely affected for some time to come.

I applied for Universal Credit on the 23rd March as I knew I would have no income at all for the foreseeable, I received some income (a much lower amount) on the 12 April, my regular pay date,  for work carried out up to the end of March. I had to declare this income to UC even though the payment was for work done in March, I earned nothing in April, but due to the date received this effectively wiped out April's UC payment and I got nothing. 

I also applied for the SEISS grant and have been lucky enough to receive it today, problem is I took the date they sent me to claim as a deadline and I now realise ( too late)  that I could have delayed claiming, to still receive the May UC payment.  I understand that the full SEISS grant has to be declared as income for UC this month.

I still have a tax and NI bill of nearly £4k due 31st July ( I know that can be deferred but it says that HMRC can charge penalties and interest if deferred till Jan 21)
and also will need to put aside another £2.5K  from income for this tax year from April (including the taxable amount for the SEISS that will need to be repaid) with still NO income for the foreseeable.

I have had to use the money I had put aside for tax to survive and pay household expenses these last two months so currently have no tax savings, but I still have these tax liabilities. 

 Now....If I understand it correctly, savings put aside to pay your tax bill are not taken into account when calculating your UC entitlement?
So I guess the question really is... If I now use my SEISS grant to put  back aside in a savings account the amounts I need to pay these future tax liabilities (In effect a business expense) and declare it on my UC journal as such, can it then be classed as business savings and discounted from the UC calculation for May, so that I can receive the UC payment  for May?

I'm just terrified that this is the ONLY income I will receive for the foreseeable and I have no income except  potentially UC from June onwards to pay the tax bill due July 31st and even if I defer it to January they may potentially charge interest and a penalty and I still might not have any income apart from UC to pay it even then!

Any advice would be appreciated, I'm guessing there must be more than me in this situation at the moment? 

Jeremy535897

You will not be charged interest or penalties if you defer your self assessment tax due 31 July 2020 until 31 January 2021, but you might be charged back to 1 August 2020 if you don't pay by 31 January 2021. That is not clear.

My recollection was that DWP made a statement that money in a personal bank account could be disregarded for calculating capital (which can reduce entitlement to UC if it is over £6,000), if it was to be used for paying self assessment tax bills. That is not the same as deducting it from income in the month you receive SEISS. UC works on a cash basis, as you discovered when debtors paid you in April. I am almost certain that you would actually have to pay the tax to deduct it from SEISS (others more familiar with UC may be able to comment). Have you no business expenses that need paying in the same assessment period as you receive the grant?

Rain_Dancing

Thanks for the reply  
It's just that I checked my SA HMRC account and it still states that penalties and interest may apply if you defer due to Coronavirus until Jan 21 and I don't want to pay any more than I have to! 
I wasn't sure if I would actually have to  actually pay the liability or just the fact that I had put the money aside to pay it in July when needed would suffice.
Unfortunately no business expenses, at the moment, apart from tax due, that would reduce the SEISS by much.

Jeremy535897

Rain_Dancing said:

Thanks for the reply  
It's just that I checked my SA HMRC account and it still states that penalties and interest may apply if you defer due to Coronavirus until Jan 21 and I don't want to pay any more than I have to! 
I wasn't sure if I would actually have to  actually pay the liability or just the fact that I had put the money aside to pay it in July when needed would suffice.
Unfortunately no business expenses at the moment that would reduce the SEISS by much.

I agree it could be worded better, but there would have been an outcry if they had offered a deferral but continued to apply both interest and penalties. As I said, DWP have said you can disregard capital put aside to pay tax in the future, but you can't actually set unpaid tax against income.

calcotti

Rain_Dancing said:

Thanks for the reply  
It's just that I checked my SA HMRC account and it still states that penalties and interest may apply if you defer due to Coronavirus until Jan 21 and I don't want to pay any more than I have to! 
I wasn't sure if I would actually have to  actually pay the liability or just the fact that I had put the money aside to pay it in July when needed would suffice.
Unfortunately no business expenses, at the moment, apart from tax due, that would reduce the SEISS by much.

My understanding is that the disregard for money that is set aside for tax liabilities is a capital disregard, not an income disregard. If you wanted to reduce the impact of SEISS on your next UC payment you would need to actually pay your tax liability before the end of the assessment period (which is a week before your UC pay date).

Rain_Dancing

calcotti said:

Rain_Dancing said:

Thanks for the reply  
It's just that I checked my SA HMRC account and it still states that penalties and interest may apply if you defer due to Coronavirus until Jan 21 and I don't want to pay any more than I have to! 
I wasn't sure if I would actually have to  actually pay the liability or just the fact that I had put the money aside to pay it in July when needed would suffice.
Unfortunately no business expenses, at the moment, apart from tax due, that would reduce the SEISS by much.

My understanding is that the disregard for money that is set aside for tax liabilities is a capital disregard, not an income disregard. If you wanted to reduce the impact of SEISS on your next UC payment you would need to actually pay your tax liability before the end of the assessment period (which is a week before your UC pay date).

Thanks for the clarification, I suspected as much...
I am still going to put the money aside from the SEISS to pay the tax bill in January if there are no penalties (phew!... you could be a bit clearer on this HMRC! )
 But I think for now I'm going to have to hang on to it as an emergency fund rather than paying HMRC in July and hope my income situation improves or the SEISS is extended to October at least as with PAYE, which will at least give me some chance at some income to recoup!
Looks like I'm going to have to miss this months UC credit payment too...