Living On Benefits vs Self Employment

confusedbybenefits

Hello Everyone.

I have been thinking about this for some time and don't seem to be able to find an easy answer. Now I am in no way suggesting doing anything questionable, just that in some cases a person may be better off (or not significantly worse off) by not working.

I am currently on JSA at about £80 a week so about £4000 a year. Also get full housing / coucil tax benefit totalling £4400 a year and tax credits of about £6000?. So this all totals £14,400 which is enough to cover bills etc.

If I were to take a low paid job, say £18,000 I'd lose all benefits except for Tax Credits which would reduce to about £1500 but I'd also be taxed on my income and end up with a total of £15500.

As you can see, it is not a particularly large amount extra. Now I do want to be working, but losing your job is demotivating enough without knowing that by taking another you are effectively earning £1100 for a years work.

Please don't think I'm lazy. In fact I have been doing some volunteer work and spending lots of time with family and it's just hard to work out what to do next!

I thought maybe starting a business could be the way forward as I have a good idea. If it takes off well then I will be better off without benefits and if it ends up being a small income (say £5000k) then that would cover the loss of JSA and I should still get the other benefits without much (if any) of a reduction. As soon as the income of the business approaches £10,000 it looks to me that I actually end up worse off due to the affect on benefits!

It's so complicated and confusing to work out exactly what happens with different incomes etc espicially with the confusion of tax credits!

Thanks

happywarmgun

Your very well articulated post illustrates the thought process the most educated people will go through in the same situation.

I think in a society that has just bailed out bankers and seemed to turn a blind eye to MPs goings on etc, what used to be a very compelling argument to people who go through this thought process "get some pride, don't be a sponger, the state help is supposed to be a temporary measure to keep your head above water while you find a job - not a meal ticket. Having taken advantage of the state cushion you then have a moral obligation to work in the job and contribute back for the help you have recieved." doesn't have quite the moral authority it used to have. Benefits to me are always better branded as 'support' rather than 'entitlements'.

Our well meaning benefits system is CRAZY that it puts people in this situation in the first place. The whole of Britain is imploding on people's selfishness. Bankers, MPs, Welfare Spongers. The honest john's are the ones who get screwed. Sooner we have a change of government the better...

alwaysonthego_2

GOING OFF-TOPIC


Hi, Martin’s asked me to post this in these circumstances: While it’s easy to wander off-topic that often prevents newbies finding the information they want quickly and easily (please see this rule). Please keep this thread on topic. If you’d like to discuss non-MoneySaving related topics please continue your discussion in The MoneySavers Arms or Discussion Time. If you have any questions about this policy please email [EMAIL="%20abuse@moneysavingexpert.com"]abuse@moneysavingexpert.com[/EMAIL].

alwaysonthego_2

To the op,

I am at work so this is a quick post.

You are not going to necessarily lose all your benefits, you could be entitled to LHA, CTB aswell as TC and CB.

Try www.enttiledto.co.uk for an idea.

Uncertain

The benefit situation here is important and I do not know the full details. However I spent the bulk of my working life self employed so perhaps I can help with this aspect.

Sadly, the hard fact is that most start up businesses fail and we are not in a good economic situation. However, some do very well and others at least tick over OK.

Do you have a clear idea of what you might do? Do you have particular skills in some area or are you loooking for basic gardening or cleaning work? What would it cost you to get started in whatever field you have in mind? Do you have this money or would you need to borrow?

Have you investigated whether any start up grants or other help are available?

What is the bottom line if it doesn't work out? Suppose you gave it a go but could not bring in as much money (at first) as you are currently getting? Do you have any savings that would bridge the gap in the short term? Are you prepared to risk them?

Would you be able to go back on JSA say 6 or 9 months down the line if it doesn't work out?

In most cases running a business needs to be something you WANT to do rather than something to be undertaken out of desperation.

However, the rewards can be great (and I don't just mean financial). There is nothing like being your own boss (for me at least) and it is often said that the man who never makes a mistake nave makes anything!

Best of luck.

computershack

OK, I'm maybe in a position to comment on this.

My circumstances:
Wife that works 20hrs a week and earns £9k, 2 kids.
Made redundant at the end of October 2008. Went onto JSA and then ESA because my back packed up again. Lost a fair amount of tax credits when I went onto JSA/ESA.

Got to June, health situation not improved and no sign of a job. Decided to go self employed doing laptops because sitting at home was driving me insane. Piled what money I had into stock and cracked on with it. Finally reached break even point last month. Estimated that I was going to make maybe £2k combined ESA/ profit by April. Tax credits rose as a result of doing a combined hours over 30 and also the income.

OK, so I'm not massively better off than being on ESA but more importantly I'm actually doing something other than sitting around. The benefits for my mental health have far outweighed any monetary gains.

Anyway, you say you think you'll clear £5k profit. Personally, I'd aim for less than that. Remember that if you start now, you're only going to get 4 months of trading by April so in that time, I'd say to tax credits you're looking at £1000 plus the JSA you've been paid from April to the date you start. You would still be entitled to any means tested benefits and working tax credit. In addition to that, there's a Back to Work bonus of £250 tax free and also if you've been unemployed and are on New Deal, there's other benefits available. I got Return To Work Credit (only for people coming off a health related benefit) which gives me £40 a week for a year. It is tax free and is not regarded nor needs to be declared as income for working tax credits, HB or CTB. There may be something similar.

confusedbybenefits

Thanks for all the replies so far.

happywarmgun wrote: »

Our well meaning benefits system is CRAZY that it puts people in this situation in the first place.

Exactly my thoughts!

alwaysonthego wrote: »

GOING OFF-TOPIC

I would love to know what was said here!

alwaysonthego wrote: »

To the op,

You are not going to necessarily lose all your benefits, you could be entitled to LHA, CTB aswell as TC and CB.

Have spent many an hour on entitledto!

Uncertain wrote: »

Do you have a clear idea of what you might do? Do you have particular skills in some area or are you loooking for basic gardening or cleaning work? What would it cost you to get started in whatever field you have in mind? Do you have this money or would you need to borrow?

Have you investigated whether any start up grants or other help are available?

Yes, I actually have quite a detailed business plan, and I will be doing something I worked in for a number of years. Start up costs will be minimal.

Looking into grants, but we have some savings which may count against us.

Uncertain wrote: »

What is the bottom line if it doesn't work out? Suppose you gave it a go but could not bring in as much money (at first) as you are currently getting? Do you have any savings that would bridge the gap in the short term? Are you prepared to risk them?

I guess this depends on what kind of income we class as not working out. If less than £6k, then housing, council tax & tax credits will not change much anyway.

Uncertain wrote: »

Would you be able to go back on JSA say 6 or 9 months down the line if it doesn't work out?

This is a possibility. Perhaps it's a risk, but my other option now would be to go on gateway courses etc and I think trying to start a business would be a better use of my time.

computershack wrote: »

OK, so I'm not massively better off than being on ESA but more importantly I'm actually doing something other than sitting around. The benefits for my mental health have far outweighed any monetary gains.

Anyway, you say you think you'll clear £5k profit. Personally, I'd aim for less than that. there's a Back to Work bonus of £250 tax free

I know exactly what you mean. I guess I would be happier doing some self employed work than not at all. But I also think that I would be less stressed if I don't aim for huge profits. I will look into the bonus.

alwaysonthego_2

confusedbybenefits wrote: »

I would love to know what was said here!

This is a money saving board, not a discussion board, so the off topic post was to remind people that if they want to discuss benefits policy to take it to the discussion board, thanks.

Grassy_Knollington

Alwaysonthego - All you seem to do is post "Going off topic", then hide behind your Board Guide priveledge. I know the Board Guide thing is still a bit new for you, and you are still trying to find your feet.

Why don't you let the conversation flow a bit before you stick your Mod head on?

alwaysonthego_2

Grassy_Knollington wrote: »

Alwaysonthego - All you seem to do is post "Going off topic", then hide behind your Board Guide priveledge. I know the Board Guide thing is still a bit new for you, and you are still trying to find your feet.

Why don't you let the conversation flow a bit before you stick your Mod head on?

MSEMartin wrote:

Of course we all know the benefits system is a mess

Whatever you're political persuasion, we're all aware the benefits system is a mess. Whether its the malpayments of tax credits on one hand, benefit fraud on the other hand, or simply the fact that sometimes it doesn't pay to work - everyone has their grumble.

This board is here to help people with their money though..

Yet that isn't what this board is for. It's here to help people find out what they are entitled to under the current system, and to help them get it. Benefits do provide a lifeline for many, and this site is here to help people with their money, and not to judge. Of course, how to illegally defraud the benefits system shouldn't be discussed here, but ensuring you're getting your entitlement is exactly what its about.

Want to discuss the benefits system? Go to the discussion board

If you want to discuss the benefits system itself and issues around it, the appropriate place isn't here but the Discussion Board and even there, please remember courtesy and not to make it personal about anyone. This site's prime purpose it to help people with their money and I will always act to protect that.

Thanks for your co-operation

Martin

I am just following the rules set by Martin and his team, if you have a problem with this please email [EMAIL="abuse@moneysaving.com"]abuse@moneysaving.com[/EMAIL]