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Declare COVID-19 Support Payments for Tax Purposes
Small business owners who received COVID-19 support through the Self-Employment Income Support Scheme (SEISS), furlough, or other government assistance schemes during the pandemic.
This page provides practical guidance on how to declare COVID- 19 support payments on your tax returns, the potential tax implications, and what to do if you received support payments but did not declare them correctly.
Declaring COVID support payments is critical for compliance with HMRC rules. Incorrect reporting can lead to penalties, fines, and further audits, so it’s important to understand what is required when filing your tax returns.
Do you need to declare COVID support payments?
Any support payments received from the government, including those through the Self-Employment Income Support Scheme (SEISS) or furlough scheme, must be declared on your Self-Assessment tax return. These payments are generally treated as taxable income and may affect your tax calculation.
If you received payments and did not declare them, it’s important to correct the error as soon as possible to avoid potential penalties. Even if your business was not fully operational, support payments still need to be reported.
What happens if you don’t declare COVID support payments?
Failure to declare COVID support payments or declaring them incorrectly can lead to significant penalties and legal consequences. Some potential risks include:
- Penalties for incorrect declarations: HMRC may impose penalties if the payments are not reported correctly or on time. The amount can vary depending on whether HMRC considers the error to be careless or deliberate.
- Interest on unpaid tax: Interest will be charged on any unpaid tax that results from failing to declare COVID support payments properly.
- Investigation by HMRC: HMRC may initiate a tax investigation if they suspect that payments were underreported or incorrectly claimed, potentially leading to further audits and fines.
If you’re unsure whether you’ve declared your support payments correctly, it’s important to seek professional advice or make any necessary amendments to your tax return before penalties are applied.
Common mistakes when declaring COVID support payments
Many small business owners make mistakes when declaring their COVID support payments. Some of the most common mistakes include:
- Not including the full amount of SEISS payments received in your tax return.
- Incorrectly reporting furlough payments or other support payments as non-taxable income.
- Failing to report the payments on time, which can trigger penalties for late filing.
- Not keeping accurate records of how much was received, making it difficult to complete the tax return correctly.
To avoid these mistakes, make sure you have accurate records of all support payments received, and double-check the details before submitting your tax return. It’s also a good idea to seek guidance from a tax professional to ensure full compliance.
In practice: What business owners need to know
In practice, many business owners are uncertain about whether the COVID support payments are considered taxable income or how they should be declared. In particular, confusion often arises around the distinction between furlough payments (which are taxable) and grants provided through SEISS (also taxable). The key takeaway is that all payments received through these schemes must be declared as income and reported in your tax return. A professional tax advisor can help ensure you’re reporting them correctly, especially if you’re unsure whether certain payments should be included.
Review whether you need to declare your COVID support payments
If you’re unsure whether your COVID support payments have been declared correctly, it’s important to review your tax return. We can help you ensure compliance, avoid penalties, and make any necessary amendments before HMRC takes action.
Declaring COVID Support Payments and HMRC Reporting Requirements
If you received government support during the pandemic, it’s important to understand how to declare COVID support payments received correctly. Many grants and relief schemes were taxable, meaning they must be included in your income when preparing your tax return. Failing to report them accurately can lead to HMRC corrections, penalties, or enquiries.
The tax on COVID grants UK depends on the type of support received, such as SEISS payments or business grants. These are typically treated as taxable income and must be included in your self assessment tax return or company accounts where applicable. Correct classification is essential to ensure that figures align with HMRC records and avoid discrepancies.
At Cigma Accounting, we support clients across Fulham Broadway, helping them report COVID support accurately and ensure compliance with HMRC rules. We also assist individuals and businesses in Munster Village and Bishop’s Park, ensuring all HMRC COVID support payments are properly declared and aligned with 2026 reporting requirements.
Declaring COVID Support Payments on Your Tax Return: Frequently Asked Questions
Do you need to declare COVID support payments on your tax return?
Yes. All COVID-19 support payments received from the government including SEISS grants, furlough payments, Bounce Back Loans used for personal income, and other pandemic support schemes must be declared on your Self Assessment tax return. These payments are treated as taxable income by HMRC and must be reported in the tax year in which they were received, regardless of whether your business was fully operational at the time. Failure to declare them is treated as a tax compliance failure and can trigger penalties and interest.
Are COVID grants and SEISS payments treated as taxable income?
Yes. SEISS grants and most other COVID support payments are treated as taxable income for UK tax purposes. This means they are subject to income tax and, where applicable, Class 4 National Insurance contributions in the same way as your trading profits. The grants were designed to replace lost income, and HMRC has always been clear that they are not tax-free. The taxable amount is the full grant received, and it must be included as income in your Self Assessment return for the relevant tax year.
Where do SEISS payments go on a Self Assessment tax return?
SEISS payments have a dedicated box on the Self Assessment tax return and must not be included as general business income or turnover. HMRC pre-populated many tax returns with the SEISS amounts it had on record for each taxpayer, but you should always verify the pre-populated figure against your own records to ensure accuracy. If the figure shown by HMRC does not match what you actually received, you must correct it before filing. Placing SEISS payments in the wrong box on the return is one of the most common errors HMRC identifies during compliance checks.
Are furlough payments taxable and do they need to go on a Self Assessment return?
Yes. Furlough payments received under the Coronavirus Job Retention Scheme are taxable employment income. For most employees, furlough pay was processed through PAYE and will already be reflected in their P60 or P45, meaning it does not usually require separate action on a Self Assessment return. However, if you were a company director who received furlough payments, or if there are discrepancies between your PAYE records and what you actually received, these should be reviewed carefully and declared correctly to avoid triggering an HMRC compliance check.
What penalties can HMRC impose for not declaring COVID support payments?
HMRC can impose significant penalties for failing to declare COVID support payments correctly. For careless errors, penalties typically range from 0% to 30% of the unpaid tax. For deliberate non-disclosure, penalties can reach 70% of the tax owed, rising to 100% for deliberate concealment. Interest also accrues on unpaid tax from the date it was originally due. HMRC has actively cross-referenced its own records of payments made through SEISS and furlough with submitted tax returns, making undeclared payments relatively straightforward for them to identify.
Can HMRC investigate taxpayers who did not declare COVID grants correctly?
Yes. HMRC has specifically allocated compliance resources to investigate incorrect COVID grant claims and undeclared payments. HMRC holds detailed records of every payment made through SEISS, the furlough scheme, and other pandemic support programmes and routinely matches these against submitted tax returns. Where discrepancies are found, HMRC issues compliance checks and formal enquiry notices. Taxpayers who proactively correct errors before HMRC makes contact through an amendment to their Self Assessment return or a voluntary disclosure will typically receive lower penalties than those who wait to be investigated.
Need Help With Declaring COVID-19 Support Payments on Your Tax Return?
COVID-19 support payments and grants are treated as taxable income and often need to be included on Self Assessment or company tax returns. Declaring them incorrectly can lead to unexpected tax bills or HMRC enquiries, so specialist guidance ensures they’re reported in the right place.
Trusted guidance from London-based accountants, focused on accuracy, clarity, and compliance.
