Universal Credit if you're self-employed

You may be able to claim Universal Credit if you are self-employed.

If you are self-employed and want to claim Universal Credit, a 'gainfully self-employed test' will be carried out.  This involves checking whether your self-employment is:

  • organised, developed and regular
  • expected to make a profit and
  • your main job

If you are self-employed and also employed, a decision will be taken to decide which is your main job.

You will need to go to an interview and provide evidence of your self-employment (for example, your business plan, copies of invoices and receipts, or your accounts from the previous year).

If the decision is made that you are not gainfully self-employed, you may need to look for, and be available for other work. You will still need to report any earnings from your self-employment so they can be taken into account when calculating your Universal Credit payments.

As part of your claim you will need to accept a ‘Commitment’ which you will agree with your work coach.

Your Commitment sets out the things you need to do to prepare for work, look for work or increase your earnings (where appropriate).

You will regularly discuss and update your Commitment with your work coach, and you will need to agree to the Commitment each time to keep getting Universal Credit.

The actions set out in your Commitment will depend on things like your health, your responsibilities at home and how much help you need to increase your income.

How Universal Credit is worked out if you are self-employed

COVID-19
Payments made through the Self-Employment Income Support Scheme will be treated as earnings in Universal Credit.  This means payments will be taken into account in the Assessment Period in which they are received.  In this way Universal Credit provides support as your earnings change.

To work out your Universal Credit payments, it will be assumed you earn at least the ‘Minimum Income Floor’ even if your actual earnings fall below it.

Minimum Income Floor

COVID-19
Since 6 April 2020, the requirements of the Minimum Income Floor have been temporarily relaxed and will last until 31 July 2021.

The Minimum Income Floor is the minimum amount of earnings you would be expected to earn in an Assessment Period. This is based on the lowest amount an employed person with similar circumstances could be expected to earn in an Assessment Period.

If you earn more than the Minimum Income Floor you will get less Universal Credit.

If your business is less than 12 months old, the Minimum Income Floor may not apply for a ‘start-up period’ of up to one year.  During this time, Universal Credit will use your actual earnings to work out the amount you are entitled to.

The Minimum Income Floor won't apply to you if you:

  • are not considered gainfully self-employed,
  • are in a start-up period, or
  • are in:
    • the no work-related requirements group
    • the work focused interview group, or
    • the work preparation group

Your work coach will be able to tell you if you are in one of these groups.

If the Minimum Income Floor doesn't apply to you, your Universal Credit payments will be based on your actual income.

Work Allowance

You can earn a certain amount before your Universal Credit payments are reduced, if you or your partner:

  • are responsible for a child or young person or
  • have a disability or health condition that affects your ability to work

This is called a ‘Work Allowance’. You will keep 37p of every £1 you earn above your work allowance.  Your work allowance will be lower if your Universal Credit payment includes help with housing costs.

Work Allowance
Your Circumstances Work Allowance
You get help with housing costs £293 per month
You don't get help with housing costs £515 per month

For example, if you have a disability or you are living in temporary supported accommodation and you do not receive help or support with your housing costs from Universal Credit or Housing Benefit, your Work Allowance will be £515. This means you can earn £515 before your Universal Credit payments start to be reduced.

Self-employment information you need to give to get Universal Credit.

Every month you must tell us:

  • all payments you received (not amounts you have charged but not received) in the Assessment Period, and
  • your permitted expenses, income tax, National Insurance contributions and any pension contributions that qualify for tax relief

Permitted expenses are expenses that are:

  • appropriate to the business
  • necessary to the business
  • not excessive

Your work coach can give you more information about permitted expenses.

If your expenses for an assessment period are unusually high, you can’t offset them against your income in future assessment periods. This applies even if your expenses for the month are higher than your receipts.

If your business makes a loss in an assessment period, Universal Credit will take this into account when working out earnings in future assessment periods. The minimum income floor will continue to apply.

If your business is less than 12 months old

If you’re classed as gainfully self-employed and your business is less than 12 months old, it may be considered to be in a ‘start-up period’.

During a start-up period, if your earnings are low you will not have to look for other paid work. However, you will have to go to an interview with your work coach every three months to prove you are still gainfully self-employed and taking steps to increase your earnings.

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