Self Employment and Benefits

shelleybelly123

Hi all,

I'm hoping someone may be able to provide me with a bit of advice...

I currenlty work 30 hours a week. In August of last year my mother had a stroke and my partner was diagnosed with incurable cancer. As a result, i'd like to be able to spend more time with them but work prevents me from doing this for obvious reasons.

I have an opportunity at work to take voluntary redundancy. I won't get much of a payment but it has started me thinking about something i've wanted to do for some time which is to set up my own business.

If i did, i would want to keep as much money in the business as possible (using my redundancy money to set up) and initially thought i would just pay myself about £50 per week. My partner gets disability living allowance and our mortgage is fairly low at £365 per month. We have no other outgoings apart from the obvious gas, electric, water etc which again are all fairly lowish. No HPI or loans.

My question is, if i do choose to take VR and go self employed, paying myself just £50 per week until the business is established, would i be able to claim working tax credit still and/or income suport or anyting else.

I feel like a fraud thinking about what benefits i can have (and have never had any before) as it would kind of be my choice that i'm going self employed and forcing upon myself a lower wage but with my life at the moment it would certainly release the pressure (my partner currently takes my little girl to school as i have to leave for work at 7 and don't get back until 4 but may not be able to do this as his illness progresses).

I suppose my questions are, if its my choice as such to go on a lower income just to suit my lifestyle, would we still be able to claim income support, tax credits etc and/or anything else?

Any advice would be appreciated, we are really struggling with the best thing to do and i've not got long to make my mind up about the vr.

Thanks
Shell

MrsManda

I'm not sure about benefits as you'd be delibrately taking a paycut but I didn't want to read and run.
Self-employment is not a step to take lightly and is often not as easy as people think it is to set up and keep going. I have had a few friends/relatives take the plunge over the last few years, the latest being only a few months ago. Business plans which looked great on paper and even got starter loans to get off the ground have come to very little and the people I know have plowed everything they could into it.

This isn't to stop you from doing it if it's what you want to do but I just wanted to say that the initial planning, setting up and running of a self employed business will require a lot of time and a lot of energy to get it off the ground and therefore may not be the best way of ensuring you get to spend quality time with your partner.

It's also not your only option. Have you considered:
Reducing your hours with your employer?
Or taking voluntary redundancy and caring for your partner full time?
http://www.direct.gov.uk/en/CaringForSomeone/index.htm

You'll be able to claim Carer's Allowance, and may be eligible for HB, CTB, IS
http://www.direct.gov.uk/en/CaringForSomeone/CarersAndEmployment/DG_10027542

loislane999

I've been self employed for a few years (and single parent). You can claim working tax credit as long as you work over 16 hours a week (can include business travel, networking etc). You will need to make an estimate of how much net income your business will receive over a year and let the tax credit people know thsi amount - when you say you will pay yourself £50 a week, that is drawings, your actual income as a self-employed person will be the net income from the business (income minus expenses). There are a number of things you can claim as expenses i.e. use of room if you are working from home, travel to appoinments etc.

Look at your local business link website - they have a lot of info on there. Your bank manager may be able to help (it is advisable to set up a seperate business account as it is easier to do the self assessment at the end of the year and easier to prove to the tax man whet you have spenmt money on). You will need to keep records of all your income and spends and keep all receipts etc. This should be a weekly habit (although I have to admit I have fallen badly behind with my accounts).

It may also be wise to engage anaccountant - they neednt be exensive - I use an on-line one for less than £20 a month.

Can I ask what it is you are planning to do?

shelleybelly123

Hi,

Thanks for your replies, my partner and I have been offered an opportunity to supply a furniture range to a well known financial company and have already been offered the contract. The start up costs are low. Its not something which will take a great deal of time and at the minute we reallly want to do it but just don'thave the time as my partner is no good at the admin side of it and is also quite poorly and iam good at hte admin side but my day job takes most of my time up along with other commitments to my mother etc since she had her stroke.

I know being self employed is a big step, most of my family are self employed along with my parents so i am awareof the pitfalls which is why i'm considering it in great detail to ensure i'm not going to struggle financially.

I just don't know where i stand from a financial point of view as in essence, i'm moving job and taking a lower income but surely the government can't control whether you always stay on the same salary etc and forbid you to move down a level?

Shell

Lefs

If you take voluntary redundancy, it can affect signing onto JSA to claim out of work benefits. If you take a wage drop, you can apply for Working Tax Credits. They look at your previous tax year income and your projected tax year income, take which ever figure is lowest and use that to base your payments on.

The issue with WTC is savings - if you get a redundancy package, there is a chance that it will substantially reduce your possible payments.

Lou76

loislane999 wrote: »

*Snipped*

You can claim working tax credit as long as you work over 16 hours a week (can include business travel, networking etc).

Just to say, the 16 hour rule wouldn't apply to the OP as she's not a single parent, registered disabled (that we know of) or 50+ and returning to work.

She, and anyone else, exclusive of those in the above categories, reading this who is considering the same options, would have to base their decision on working [at least] 30 hours per week.

I hope that's right?

Hammyman

shelleybelly123 wrote: »

My question is, if i do choose to take VR and go self employed, paying myself just £50 per week until the business is established, would i be able to claim working tax credit still and/or income suport or anyting else.

If you're a sole trader, your pay is the profit of the business regardless of how much you pay yourself per week. So if the business makes £20k profit, then even if you paid yourself just £50 a week your taxable income is £20k, not £2600. Conversely if your business makes a loss, your income is zero even if you've paid yourself £50 a week HOWEVER BE AWARE THAT AS A SOLE TRADER YOUR WAGES ARE NOT A TAX DEDUCTIBLE EXPENSE.

karisc7

This is something I have also been considering Shelley.

I am currently working 16 hours a week at my current PAYE job, and receive working tax credit (disabled element).

I have realised that, due to my condition (M.E), that this is very difficult for me to continue with and have looked into home based jobs such as Avon etc.

I also did wonder whether I could continue to get WTC if I went Self-Employed, for which this thread has gladly answered .

My only concern is whether if I applied to Avon whilst I was still at my PAYE job (to see whether it is worth it, will it work etc) for a month or so (I would probably, if sucessful, leave my PAYE job as that is the ultimate aim) how would this affect my WTC, Tax etc being both PAYE and self employed at the same time for short time?

Many thanks for reading guys