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Claiming Universal Credit when you're self-employed

If you are self-employed you may be able to claim Universal Credit

Who should register as self-employed

You should register as self-employed in your Universal Credit account if you are:

  • a company director
  • a sub-contractor or contractor
  • working for yourself
  • in the ‘gig’ economy, such as short-term and temporary contracts

You need to report your work status so that you get the correct amount of Universal Credit.

Foster carers

You do not need to register as self-employed if you are a foster carer.

Self-employed interview

When you tell Universal Credit you’re self-employed, you will be asked to go to a self-employed interview with a work coach.

At this interview Universal Credit will decide if:

  • your self-employed work is your main job or your main source of income
  • you’re gainfully self-employed
  • you qualify for a start up period
  • your business could have a similar set up to a sole-trader, if you are a company director

If you do not come to this interview, you may not be able to get Universal Credit.

What being ‘gainfully self-employed’ means

At your self-employed interview, Universal Credit will decide if you’re ‘gainfully self-employed’.

You’re ‘gainfully self-employed’ if your self-employed work is:

  • your main job or main source of income
  • expected to make a profit
  • regular
  • organised, for example you keep records of your business activities

If you can prove all these things, you’ll be considered ‘gainfully self-employed’. This means you do not have to look for other work.

If you cannot prove all these things, you may have to look for other work if you want to claim Universal Credit.

What you need to bring

Bring as much evidence as you can to your appointment.  These can be paper or digital copies.

Business details

You’ll need to show evidence of your business details.

This can include:

  • business name
  • business address
  • the date you first started doing business
  • your Unique Taxpayer Reference (UTR) from HMRC, if you have one
  • VAT registration number, if you’re registered for VAT

Business records

You’ll need to bring your business records with you.

This can include:

  • invoices
  • receipts
  • bank statements
  • tax returns
  • records of customers, suppliers or contracts

Business activities

You’ll need to show evidence of your business activities, for example:

  • your business website
  • business social media accounts
  • any marketing activities or materials
  • a business plan or portfolio

Other evidence to support your claim

You can also bring other evidence to your appointment that can support your self-employed work.

This can include:

  • letters from HMRC and other official sources
  • payslips, if you work for someone else as well as being self-employed
  • business certificates, such as for insurance or professional accreditation

What does ‘minimum income floor’ mean if you’re self-employed

The minimum income floor is the amount of money an employed person in a similar situation to you would earn on the National Living Wage or National Minimum Wage, after taking off tax and National Insurance.

You’ll find out what your minimum income floor is at your self-employed interview.

If you earn more than the minimum income floor,  your Universal Credit payment will be calculated using your actual income.

If you earn less than the minimum income floor, your payment will be calculated using the minimum income floor. This will only be done if:

  • your self-employed work is your main job or main source of income, and
  • you are not in a start-up period

If the minimum income floor applies to you, and your income is below that floor, then your Universal Credit payment will be lower than if it had been based on the payment on your actual income. If this happens you will need to look for additional work. Your work coach can support you with this.

If you’re eligible for a ‘start-up period’

At your self-employed interview, Universal Credit will decide if you’re eligible for a start-up period.

A start-up period is up to 12 months, when you can focus on growing your business, while getting Universal Credit payments.

You may qualify for a start-up period if:

  • your self-employed work is your main job or main source of income, and
  • you are taking active steps to increase your business income

During your start-up period:

  • you will not have to look for, or be available for, other work
  • your Universal Credit payment will be calculated using your actual monthly earnings
  • you will get support from a work coach who’s trained to work with self-employed people

You must:

  • come to meetings with your work coach every few months
  • show evidence that you still qualify for a start-up period

If you cannot show that you still qualify, or if you do not come to these meetings, your start-up period could be ended. If you fail to go to a meeting, your Universal Credit may be affected.

If your self-employed work changes, for example you decided to start a different kind of business, you will not automatically get another start-up period. This is because you are only entitled to one start-up period:

  • once per self-employment business

and

  • once every 5 years

Important information: If your self-employed earnings are below your minimum income floor when your start-up period ends, your Universal Credit payment will be reduced.

Reporting business income and expenses

You must report your business income and expenses to Universal Credit each month.

You must do this even if:

  • self-employment is not your main work or main source of income
  • Universal Credit does not class you as ‘gainfully self-employed’
  • you did not have any income or expenses

You can find more information on report your income and expenses from self-employment. This includes how to work out your income, and the expenses you can include.

Keeping business records

You’ll need to keep an accurate record of:

  • income, or any payments into your business
  • expenses, or any payments you made out of your business

You can find more information on Business expenses you can report to Universal Credit if you are self-employed.

How your Universal Credit payments are calculated

Whichever amount is higher will be used to calculate your Universal Credit payment:

  • your minimum income floor, or
  • your total income for the monthly reporting period

Your total income for a monthly reporting period is all the money you received during that period, including any:

  • employed earnings
  • self-employed earnings
  • additional earned income
  • other income, such as dividends or passive income

Your self-employed earnings are calculated by:

  • adding up the total income you report from your business, and
  • taking off any  allowed expenses

You must report your income and expenses accurately and tell Universal Credit about any changes to your situation. If you do not do this you may be sanctioned.

You can find out more on how much universal credit you get and how you're paid 

Profits and losses

Your self-employed earnings may vary each monthly reporting period. Universal Credit will look at your earnings over many reporting periods to help keep your payments consistent.

If you’re self-employed and make a loss, the loss will be carried over until you make a profit. This means you may get more Universal Credit until the loss has been accounted for.

Each month you report a profit, this will be used to balance out any previous losses.  This will be done until:

  • your profits have made up for all your losses

or

  • your self-employed business ends

There’s also a limit to the total amount you can earn before you receive no Universal Credit for that month. If you earn £2,500 or more over this limit, you have ‘surplus earnings’.

If you earn £2,500 or more over your limit

If you earn £2,500 or more over your limit then:

  • you will get no Universal Credit
  • the amount over £2,500 will be counted as earnings in the next assessment period

This could happen if you’re self-employed or get a bonus for example.

You will continue to get no Universal Credit until your earnings (including the amount that’s carried over) go under the limit and you become entitled to Universal Credit again.

If you are claiming with a partner

If you live with a partner, you both need to claim Universal Credit.

If your partner is in work

Your partner’s earnings may affect the level of minimum income floor applied to your claim in certain circumstances.

If your partner is also self-employed

You would each have your own minimum income floor calculated depending on your circumstances. Together these are used to calculate your joint Universal Credit payment.

Tell Universal Credit if something changes

You’ll need to report any change in your situation if it affects your self-employed work. 

You can find more information on changes you need to tell universal credit about. 

Tell Universal Credit as soon as possible if you:

  • close your business
  • significantly reduce the amount of self-employed work you do
  • have seasonal changes that impact your business
  • are no longer able to work
  • start a different business
  • take a permanent job

If you close your business or significantly reduce the amount of self-employed work you do, you may need to show evidence.

You can report changes:

  • using your Universal Credit online account. Messages to your online account will be answered as soon as possible during business hours.
  • by speaking to your Work Coach at your local Jobs & Benefits office
  • by phoning the Universal Credit Service Centre.

Help and Support

If you would like independent help and advice on Universal Credit or any of the other welfare changes, you can visit any independent advice office or contact:

  • AdviceNI
  • Housing Rights
  • Money Helper

More useful links

  • Support if you're employed or looking for work
  • On a low income
  • Finance Support
  • Managing money
  • Work and families
  • Employers for Childcare
  • Contacting 08 and 03 numbers
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