Confusing self-employment scenario - WTC, HB, CTB, no income?

wontfallforit

Hi all,

Couple of questions for a friend of mine who is planning to quit work (!) to write a textbook.

He is 29, no children, single and living in rented accommodation, and would be registered as self-employed.

He earned £14500 this financial year, and is planning on quitting work next week. He has no savings.

On his textbook, he will be working approximately 40 hours per week (researching, writing, typing, clearing permissions, dealing with prospective publishers, etc.) for the first 6 months. After the 6 month deadline, intensive work on the textbook is expected to slow down a little as (hopefully), the book will be going into the copyediting/printing/publishing/sales/marketing stage. He expects to be working around 20 hours per week on the textbook at this point.

He does not expect to make any profit in the 2010/11 financial year, and in fact does not anticipate any earned income from the book within 2010/11. Profits are expected in 2011/12 and beyond. He is already in liason with a potential publisher, but there is obviously a lot of work to be done before the book makes a penny.

Questions:

- Is it acceptable - for WTC credit purposes - to work 40hrs pw for half of the year, and 20hpw for the rest of the year, given the nature of this project? Or would he have to work exactly 30hrs or more week by week?

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- Given that he is unlikely to make any profit from this venture in the first year, what level of WTC would be available to him?

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- He earned money in the 2009/10 tax year, which was above the WTC threshold for someone of his single/childless status. However, because he will be newly self-employed (major change in circumstances), would he be able to claim WTC for the year ahead? (i.e. would he have some money in his pocket during this difficult time ahead?)

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- What evidence of working 30hrs+ per week will HMRC accept for WTC purposes? Should he keep a work diary? Timesheets? Copies of contact with publisher, etc?

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- What impact will the fact that he doesn't expect to make money in the first year have upon any WTC claim? Are they sympathetic towards new business and self-employment start-ups? Is this a common scenario?

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- Housing benefit and council tax benefit will be required, for the first year at least. But could my friend actually be refused HB and CTB, given the fact that he has effectively walked out of a paying job, into a potentially unstable self-employed venture?

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I've included all the information I know, but feel free to ask any further questions...I'm worried because this is something my friend doesn't seem to have put a great deal of thought into. He's one of those mad-genius type of people...he will write this textbook, he will put the blood, sweat and tears into it, and it will sell (hopefully!), but he doesn't appear to have thought about keeping a roof over his head and food on the table in the meantime!

Any advice I could pass on would be very useful x

karenx

to qualify for working tax credits he must be working 30 hours plus per week. Once he drops down to 20 hours he will not qualify.
Why us he quitting with having no savings??
he will get housing benefit, its now called lha. But how much he gets depends on his rent just now. Google lha rates and it will tell you how much he is entitled to per week. Just 1 bedroom rate he will get. So if I'd says the rate a £50 per week and his rent is £100 per week he will have to make up the £50 per week shortfall himself.

wontfallforit

karenx wrote: »

to qualify for working tax credits he must be working 30 hours plus per week. Once he drops down to 20 hours he will not qualify.

That's useful - thanks.

Why us he quitting with having no savings??

Tbh, that's my concern too. But it's his life, I guess I can't answer for him

he will get housing benefit, its now called lha. But how much he gets depends on his rent just now. Google lha rates and it will tell you how much he is entitled to per week. Just 1 bedroom rate he will get. So if I'd says the rate a £50 per week and his rent is £100 per week he will have to make up the £50 per week shortfall himself.

It's a 1-bed council owned property, on which he has claimed full HB before, in different circumstances, a few years ago (redundancy).

Thanks x

DX2

http://www.hmrc.gov.uk/taxcredits/start/claiming/income-hours/self-employed-income.htm#5

Caz3121

It looks like the max working tax credits is £51 per week. (having 0 income the year before which he could be reassessed at) ..even if he gets full HB and CT benefit that is not a lot for bills, food etc...could he maybe take on a part time position as well
I admire someone looking to follow their dream but it is a huge gamble that not many people can afford to take

wontfallforit

Caz3121 wrote: »

It looks like the max working tax credits is £51 per week. (having 0 income the year before which he could be reassessed at)

By which do you mean HMRC would 'pretend' he earned zero (or very little) in 2009/10, because of the new circumstances he's going to have in 2010/11?

Thanks for your help x

karenx

don't know how anyone can live on £50 per week! To pay phone, electricity, food etc! Plus national insurance. Remember come end of the tax year he will have to submit accounts, can cost a few hundred to get an accountant to do this.
Can he find a part time job at all? Bar work maybe?