Claiming Universal Credit when you're self-employed
If you are self-employed you may be able to claim Universal Credit.
If you have received a Migration Notice and are gainfully self-employed, you will be eligible for a 12-month start-up period before the minimum income floor applies.
If your self-employed earnings are below your minimum income floor when your start-up period ends, your Universal Credit payment will be reduced.
Who should report as self-employed
You should report as self-employed in your Universal Credit account if you are:
- trading through a limited company
- 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
Universal Credit does not consider foster care as self-employment. You do not need to report your foster care allowance to Universal Credit as self-employed income. Your foster care allowance is not used to calculate how much Universal Credit you get.
Self-employed interview
When you tell Universal Credit you’re self-employed, you may be asked to go to a self-employed interview with a work coach. This is known as the gainful self-employment test.
You will only be asked to go to a self-employed interview if your circumstances mean you would normally be expected to look for or be available for work.
At this interview Universal Credit will decide if:
- you’re gainfully self-employed for Universal Credit purposes
- you qualify for a start-up period
- your business could have a similar set up to a sole-trader, if you trade through a limited company
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
- organised, for example you keep records of your business activities
- developed, for example you have a business plan or are advertising the work you do
- regular, for example you have steady work now and in future
- expected to make a profit
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
Minimum income floor if you’re gainfully self-employed
If you’re gainfully 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. That's after taking off tax and National Insurance.
You’ll find out what your minimum income floor is at your self-employed interview.
Minimum income floor and your Universal Credit payment
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 you are:
- gainfully self-employed
and
- 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 this might mean you 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.
You will qualify for a start-up period if:
- you have not previously been gainfully self-employed while claiming Universal Credit
and
- you are taking active steps to increase your self-employed earnings
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 are taking active steps to increase your self-employed earnings
If you do not come to these meetings, or cannot show this evidence, your start-up period could be ended early. If you fail to go to a meeting, your Universal Credit may be affected.
If your self-employed work changes, you are entitled to another start-up period if:
- it’s more than 5 years since your last start-up period
and
- your new self-employed business is for a different trade, profession or vocation
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 how you report your income and expenses from self-employment including 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 about keeping records for tax purposes
Check what 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, unless you are in a start-up period:
- 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
- passive income, such as a pension
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
- you stop being self-employed
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
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 gainfully 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 and continuously reduce the amount of self-employed work you do or how much you earn
- significantly and continuously increase the amount of self-employed work you do or how much you earn
- have seasonal changes that impact your business
- are no longer able to work
- start a different business
- take employed work
If you close your business or significantly reduce the amount of self-employed work you do, you may need to meet your work coach and show evidence of the changes.
You must also tell HMRC about a change to your business
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
You can find a printable resource which provides Universal Credit self-employed information
Videos are available on Universal Credit explained and Universal Credit if you're self-employed
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: