How is the £20 You can earn when on IS calculated? (when self employed??)

Rainbow_Butterfly

As in the title.. I am trying to find out how the £20 you are allowed to earn while on income support is calculated.

I am a single mum, studying part time for a business degree with the OU, and struggling for money, so looked into working online. I have set up a profile on oDesk as of last week, and have made myself some money already. :j I understand that the maximum I am allowed to earn without it affecting my benefits is £20, which is fine with me, as the majority of my time needs to be on my studying at the moment anyway.

I want to do this all above board, as I really cannot risk my benefits being stopped, so I rang and registered as self employed, and then rang the IS people, and said that I would be doing a little bit of work.. £15 to £20 worth say a week, but that the hours and pay would vary week to week.

The woman I spoke to was fairly vague and unhelpful, initially said I would need to send in a time sheet or payslip for my job each week.. I explained that by the nature of the website (oDesk) I get paid 2 weeks after the work has been done and it is very variable, so there will be a lag between me actually doing the work and me being paid for it.
She got a bit confused, and said someone would ring me back about it, but noone has yet and it has been 2 days.

I was wondering then the following..
- do they take an average of your weekly earnings? Ie can I earn £10 one week, and £30 the next.. If so over what period do they average it?
- Can I deduct expenses from the earnings.. for example I have just had to buy a VOIP headset in order that I can Skype America.. this was £17.99.. can I then earn £37.99 this week?

I am very confused about all of this... if anyone knows of whom I could clarify these questions with that would be great.. this was just meant to earn me a few extra pennies.. but its already turning into a bit of a minefield.. :rotfl:

HappyMJ

You won't get payslips if you are genuinely self employed. You would issue invoices and you can then offset any expenses (such as the voip headset, telephone calls, electric) against those invoices. It can be averaged out over a time period. So I earn for instance earn £8 per hour for 30 hours being £240 per week but write off £210 against that income (mostly travel expenses and a portion of gas/elec/water/rent) each week as expenses averaged out over 26 weeks so I only earn £30 per week for tax credits and HB/CTB purposes. If your circumstances change so you may earn a lot more then you need to notify them so no overpayment occurs. They seem to like how I have presented the figures to them. I got some software from the bank (Natwest) and as I do jobs I enter the income and expenses and it can print out reports detaining the profit/loss to date. If you don't present the figures clearly then they may request the figures more often such as every 4 weeks. Oh, another thing ignore the pennies round all income down to the next pound and all expenses up to the next pound.

Rainbow_Butterfly

It will just be online work I do through oDesk, personal assistant type stuff.. making calls/web research/ admin stuff. Mosty sat on the sofa on the laptop in my pajamas! lol.

The only specific expenses I would have for it therefore, are this new headset, my Skype calling package which is 3.99 a month, and I suppose the odd bit of stationary here and there. There isnt really any expenses as such, its really just my time that I am using.

Everything else, gas/water/rent/internet etc would be paid for anyway as I would need it anyway.. am I still able to allocate a 'portion' to this? If so, how do I decide how much of a portion??

I have set up a separate bank account to keep it all separate from my personal bank.. I assumed it would be as simple as just giving them a copy of this statement every now and again, but it seems not.. eek!

karenx

Also remember with being self employed you will need to do a self assesment tax return and accounts in which you may need to employ an accountant at a cost of a good few hundred pounds.
The way it works with IS and working is the first £20 you can keep. So say for example one week you earn £30 then £10 is deducted from your IS. Same if you make £40 then £20 is taken off it

Rainbow_Butterfly

karenx wrote: »

Also remember with being self employed you will need to do a self assesment tax return and accounts in which you may need to employ an accountant at a cost of a good few hundred pounds.
The way it works with IS and working is the first £20 you can keep. So say for example one week you earn £30 then £10 is deducted from your IS. Same if you make £40 then £20 is taken off it

So they don't average it out at all? Not even over a month or so? Seems a little unfair.. some weeks I will get nothing, whereas others I could maybe do a little bit more so get £30 or £40. I assumed perhaps I could average it out?

I need to get this properly clarified from an official source somewhere, but have no idea who to ask.

HappyMJ

Rainbow_Butterfly wrote: »

It will just be online work I do through oDesk, personal assistant type stuff.. making calls/web research/ admin stuff. Mosty sat on the sofa on the laptop in my pajamas! lol.

The only specific expenses I would have for it therefore, are this new headset, my Skype calling package which is 3.99 a month, and I suppose the odd bit of stationary here and there. There isnt really any expenses as such, its really just my time that I am using.

Everything else, gas/water/rent/internet etc would be paid for anyway as I would need it anyway.. am I still able to allocate a 'portion' to this? If so, how do I decide how much of a portion??

I have set up a separate bank account to keep it all separate from my personal bank.. I assumed it would be as simple as just giving them a copy of this statement every now and again, but it seems not.. eek!

Well there's £1 per week for the calling package. You can also deduct a fixed amount of £3 per week for utilities or can apportion it if it's higher let's say 1/5 of the floor space or 1/5 of the time in the house (except sleeping) is spent on the business then you can deduct 1/5 of those expenses against income. It's up to you what portion you use but it must be reasonable. They can average it but it's not official. It's an informal agreement. Again it must be reasonable.

Rainbow_Butterfly

HappyMJ wrote: »

Well there's £1 per week for the calling package. You can also deduct a fixed amount of £3 per week for utilities or can apportion it if it's higher let's say 1/5 of the floor space or 1/5 of the time in the house (except sleeping) is spent on the business then you can deduct 1/5 of those expenses against income. It's up to you what portion you use but it must be reasonable. They can average it but it's not official. It's an informal agreement. Again it must be reasonable.

Thank you, that's helpful :T

I have been having a google, and have come up with the following..

total of rent, house ins, gas, elec, phone/internet a month = 610

610/ 4 (total rooms in the house excl bathroom)/ 168(hours in a week) x 5 (hours worked per week) = £4.53 per month?

Thats quite a way less than your £3 a week though.. perhaps Im looking at this completely wrong.

I understand that people allocate all sorts of expenses to businesses in order to claim tax back and things, but I am not planning on earning anywhere near enough to pay tax in the first place, so is it still reasonable to allocate part of the utilities etc to the 'business' as above?

Thanks again for your help.. perhaps I should start another thread in a separate part of mse for these sorts of questions, as I have wandered off my original topic slightly..

anmarj

self employed is treated differently to employed earnings (ie working for an employer) you have to submitt details of your income and expenses which should go to a specailist decison maker and they then do workings out, what you might claim as expenses might not come under dwp class of expenses. they then work out your "earnings" on a weekly basis, and this is reviewed every year. you cannot submitt the information that you send to HMRC, it has to be profit/loss accounts or details of your income and expenses with recepits.

http://www.dwp.gov.uk/docs/dmgch27.pdf

Hammyman

Rainbow_Butterfly wrote: »

Thank you, that's helpful :T

I have been having a google, and have come up with the following..

total of rent, house ins, gas, elec, phone/internet a month = 610

610/ 4 (total rooms in the house excl bathroom)/ 168(hours in a week) x 5 (hours worked per week) = £4.53 per month?

If the room is shared use, you cannot claim a percentage of all of the utility expenses and rent/mortgage interest, merely a flat annual amount which OTTOMH is £150. You can claim the percentage of the internet, phone etc.