A couple of weeks ago, we looked at what Universal Credit is, how it works, when you might need to claim and when you would get paid. You can read our article here.

This week we focus on:

Universal Credit for the self-employed

If you receive Universal Credit and you are self-employed, you’ll need to report your self-employment earnings on a monthly basis. This must include payments into and out of your business during each assessment period.

This includes:

• total amount your business received
• how much your business spent on different types of expenses, such as travel costs, stock, equipment and tools, clothing and office costs
• how much tax and National Insurance you paid
• any money you paid into a pension

You won’t get a reminder, and if you fail to supply these figures within a fixed period for each monthly assessment period, your Universal Credit payment will be suspended.

What work counts for Universal Credit?

All work is taken into consideration for Universal Credit. If you’re required to look for, and be available for work, but you’d rather be self-employed, you will need to show that you’re ‘gainfully self-employed’.

Gainful self-employment means that:

• your main employment is self-employment
• you have self-employed earnings
• your work is organised, regular and you expect to make a profit, even if your business is not yet in profit

You will need to provide evidence about your business and earnings to your work coach, when you first claim Universal Credit.  Various things will be taken into account, such as:

• tax returns and accounts
• any business plan or steps you are taking to increase business income
• Unique Taxpayer Reference (UTR), if you’re registered for Self-Assessment
• customer and supplier lists, receipts and invoices
• how much work is in the pipeline
• any marketing or advertising activity

If you’re considered to be gainfully self-employed you will be exempt from job search requirements and can concentrate on growing your business and earnings.

However, if you’re not gainfully self-employed, you’ll need to look for other work.

You still have to report any earnings from your self-employment.

If you need to look for work or prepare for work as part of getting Universal Credit, any requirements should be tailored to your individual needs and should take into account any caring responsibilities, or any disability or health problems, and anything else that might affect your ability to work

How your Universal Credit payment is worked out?

If you’re gainfully self-employed, your Universal Credit payment may be calculated using an assumed level of earnings, called a Minimum Income Floor. It’s based on what an employed person on minimum wage would expect to earn in similar circumstances.

If you earn more than this, then your Universal Credit amount is based on your actual earnings.

If you earn less, the Minimum Income Floor is used to work out how much Universal Credit you will receive. You may need to look for additional work to top up your income.

However, if you’re newly self-employed and you’re within 12 months of starting your business, you may be eligible for a startup period of up to 12 months.  During your start up period your actual monthly earnings are used to work out your Universal Credit and the Minimum Income Floor doesn’t apply. You’ll also receive support from a work coach who’s trained to work with the self-employed.

If you need help setting up and growing your new business see gov.uk.

Even if you are gainfully self-employed, you may need to attend occasional appointments with your Work Coach, providing evidence to show that you’re still gainfully self-employed and actively taking steps to build your business.

You will also need to report any change in circumstances, such as:

• closing your business
• starting a different kind of business
• starting to work for an employer
• if you are no longer able to work

Depending on the change, your gainful self-employment may need to be reassessed.

If you’re both self-employed and employed

Your Universal Credit payment will be worked out using your combined earnings or any applicable Minimum Income Floor, whichever is higher.

You can check your entitlement with an online benefits checker.

If you are thinking about making a new claim for Universal Credit, get webchat, phone or face to face advice from the Citizens Advice Help to Claim Service

For more information about Universal Credit see:

For help with other matters, please contact us via Advice line South on 03444 111 306 or pop in and see us