How to go from Benefits to Self-employed?

Ceirdwyn

Hi, I'd really appreciate some advise please.

First a bit of back story; I know there's a lot here, but I don't know how to shorten it any more.
I'm long term disabled, I was born with several muscular/skeletal deformities which cause a lot of pain, and I have never worked. I'm not wheelchair bound, but I do have one that I have to use on bad days, usually I walk with a stick/frame. On my 16th birthday I was awarded DLA for life, Higher rate Mobility and Lower rate Care.
My Husband and I got married the week after my 18th birthday, and I feel pregnant on our wedding night .
He had been working part-time until then as a delivery driver, and I would go with him, however the pregnancy was very hard on my body and I became very ill. He stopped working to look after me full time, but we never applied for carers allowance because I only got the lower rate care allowance. When our Daughter was born the lady at the Benefits office told us to go on Income Support as we were now getting Child Benefit. We also got Housing Benefit and CTB.
That's how things have been ever since. We get DLA although the mobility component goes on a car, IS, HB & CTB. Our Daughter is now 10 and now she is looking towards Secondary School, is obviously getting far more independent than a small child at primary school.
My Husband is a talented musician, it's just one of those things that he has a gift for, he can play guitar, piano, clarinet, bagpipes, drums, flute and other things. He's played our church for years, but has never done anything more with it as he was too busy looking after me,our daughter and our home. He is now thinking that as our daughter get less reliant on him, he could start teaching music at home, so he can be on hand if I need him, and check on me between lessons etc.
I totally support him in this idea, and would love to see it work, I'd be happy to do some of the paperwork/accounts side of things (that's what 2am is for right?) I just want to be sure that we do it right so we don't end up with no money coming in while he builds up a client base. We only have two people who have said they would definitely start coming for lessons when he starts offering them. I don't want to get in trouble with the Tax-man either. We have less than £500 savings, not enough to life off for a month never mind any longer.
Well done if you've managed to read all that, I really hope I managed to make sense.
So, I suppose what I'm basically asking for is advice on how to go about it, what impact will it have on benefits, what will I need to keep them informed of and what do I need to do about tax? I have less than no clue, but I'm willing to learn.

Any advice, information or thoughts would be gratefully received.

Thank you

Ceirdwyn

rogerblack

It's rare to go from pure benefit dependancy to pure self-employment, if for no other reason than you have to earn quite a lot to come off all benefits.

Hitting the high spots.
DLA is unaffected.

CTB, HB will both reduce as income rises.

As I understand it, you're claiming IS on the grounds of being disabled.
At some point in the next couple of years, you will be migrated over to ESA.
You should bear this in mind, and consider what descriptors for ESA you may meet - and if it's likely you will get ESA.
http://www.dwp.gov.uk/docs/m-06-11.pdf has a list of them.

For both ESA and IS, your income is assessed as a couple, and any earnings by your partner over a small amount will reduce your IS/ESA pound for pound.

Then there is PIP upcoming - which will come in for working age DLA claimants in 2013.
A large fraction of those with HRM will lose it.

Ceirdwyn

Thanks for replying, I've looked at the ESA link and I do qualify for over 15 points, but as we all know on here, sometimes that doesn't seem to count for much. Same goes for HLM/PIP

If it's just a case of pound for pound adjustments that's okay, we just about manage to live within our means so our income staying at the same level (rather than dropping) will be fine, but I'm really confused when it comes to things like WTC/CTC, income tax and all that stuff.

I know that it will have to be a gradual change from benefits to self-employed, what I wanted to check is whether the benefits agency's know it, or would they just stop everything as soon as we started trying to earn some money. Will there come a point where we are (alot) worse off if he does start teaching than we would be if he didn't bother? I.E. If he earns £20 a week and IS drops by £20 a week, that's okay, but if HB also drops by £20 a week and CTB also drops and he has to pay tax etc....then we would end up in difficulties fairly quickly.

Thanks

Anubis_2

How many hours a week will he be doing? How many hours will you be doing?

With working tax credits one of you needs to be doing 16 hours per week minimum as you are disabled. Your first year is based on the year previous so will be based on benefits as income only.

However IS is not counted as income, neither is DLA so your first year you would receive max tax credits for your situation as none of the benefits you mention go on the tax credit form as income, so for tax credit purposes your income for the first year will be zero. You may also be entitled to help with rent etc.

I have worked out my situation being self employed and coming off benefits and I will be in the region of £50 to £100 pw better off than now - and I won't be earning a huge amount at all, but my first year will be based only on carers allowance income. Then the second year will be based on CA income and my income.

So I also did a calculation of earning £500 per month (in addition to the £58.45 CA a week) and I will still be better off than now even though less tax credits than the first year, I will have more income, and even though I will be paying my own rent/CT. We will have no dependants next year either, so won't be in receipt of CTC.

After your first year he will know what he is earning etc so these will go on your form for year two. Do some calculations at entitled.to or the gov tax credits calculator. I would also advise seeing a DEA at your JC or an advisor or welfare rights officer.

It's rare to go from pure benefit dependancy to pure self-employment, if for no other reason than you have to earn quite a lot to come off all benefits.

Not really...if you are entitled to tax credits you can be better off and you don't need to be earning a substantial amount.

Ceirdwyn

Anubis wrote: »

How many hours a week will he be doing? How many hours will you be doing?

With working tax credits one of you needs to be doing 16 hours per week minimum as you are disabled. Your first year is based on the year previous so will be based on benefits as income only.

That's the question really, and until we know how many pupils he is likely to get, it's not one I can answer. Am I right in thinking that the 16 hours don't just include actual teaching time, but also time spent doing paperwork, lesson plans, working on his website, etc, or is it only time you are actually receiving money for?
I wasn't actually thinking of claiming I was working at all. I spend days at a time semi-comatose on painkillers, other times I can't sleep at all, hence the crack about doing paperwork at 2am, I may help out, just 'cause he's not great at financial stuff, but I wouldn't really be working.

Thanks for the info on WTC, it's very interesting. I know we need to talk to someone at the JC before we really go for it, this thread is really gathering info to see if it's even worth considering. I'm starting to think it may be, I hope so.

Anubis_2

I believe if you are SE you can count all the hours relating to the business, so anything that is done for the buiness. My case is more simplistic in that I will be contracted in.

So paperwork would count. As his website is appropriate to his business, I imagine that would count too. You might want to read through these:

http://www.hmrc.gov.uk/selfemployed/

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/TaxCredits/Gettingstarted/whoqualifies/WorkingTaxCreditthebasics/DG_172728

If you're self-employed
Put down the number of hours you normally spend working in your business, either on work billed to the client or related activity, for example:
trips to wholesalers and retailers
visits to potential clients
time spent on advertising
cleaning the business premises
cleaning a vehicle used as part of the business, for example a taxi
bookkeeping
research work
If you work from home, include time spent travelling to see customers.

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/TaxCredits/Gettingstarted/Claimingtaxcredits/workoutincomeandworkinghours/DG_174173

Here is a calculator and more reading http://www.direct.gov.uk/en/MoneyTaxAndBenefits/TaxCredits/Paymentsandentitlement/entitlement/DG_181270