Universal Credits - Self Employed

[Deleted User]

Hello

Well I'm having a few issues working out how I will be affected by the changed to Tax Credits.

Is the new system as simple as it seems.

We had a small business and we used to be able to offset our small loss against our earnings and give the reduced figure to Tax Credits. Is it correct that we can just no longer do this because you have to declare a minimum wage per hour regardless of any loss that you may have made.

I would point out first we are not cheats and it's only our second year in business so we have a lot of costs. :cool:

Very worried, anyone advise?

Icequeen99

It is much more complicated than that, but as the regulations stand at present you won't be able to offset losses.

If your income is below a certain level from self-employment you will either have to look for work to take it up to the set level or you will be treated as having income at that level (if you don't want to look for additional work).

You won't get any relief for losses. It is much worse for the self-employed than tax credits.

More info can be found here: http://www.litrg.org.uk/News/2012/uc-draft

IQ

[Deleted User]

Thanks IQ

I feel that it's very unfair, but I can see that some people abused the system for years, I suppose it was always going to happen.

Can you help me with some thinking out loud ...

So would it be a benefit for my partner to claim Tax credits stating her worked 40 hours per week and my worked 40 hours per week, even if she only earns £10.00, she can then visit the job cenre and look for work, because she has to. But then our entitlement will be based on us working 80 hours with X income, compared with her wages being recorded as minimum wage or closing down the self employment.

I know it's complicated but I hope you can see what I'm trying to say.

Thanks again

enabledebra

We don't know yet- there is a strong lobby against the self employment rules in the draft regulations and so far this is the concession they have won- but it's doubtful there will be more:

Self-employment start up period

Ministers recognise the need for claimants who are setting up a business to be given time to establish themselves and find sources of support. Therefore where a claimant has been self-employed for less than 12 months, a start up period will be granted. This means that claimants will not be required to satisfy work-search or availability requirements, and the Minimum Income Floor will not be applied thereby giving them time to concentrate on developing their business.

Ministers have listened to the views of stakeholders and as a result have decided to allow a new start up period every 5 years rather than once in a claimant’s lifetime.

[Deleted User]

This is really useful, thank you so much!

So we have been in business for a few months now, so when we get to the new tax year/ new universal credit system. Will we be able to take this advantage for 6 months, or can we just have 12 months as our 1 start up in 5 years.

Also do you have any links for this please :-)

paddedjohn

If your partner is working 40 hrs per week, regardless of the wage, how can they go and sign on for job seekers?

[Deleted User]

That's a good point. But if you want to live you have to follow the silly rules I guess!!! :mad:

Icequeen99

assj wrote: »

Thanks IQ

I feel that it's very unfair, but I can see that some people abused the system for years, I suppose it was always going to happen.

Can you help me with some thinking out loud ...

So would it be a benefit for my partner to claim Tax credits stating her worked 40 hours per week and my worked 40 hours per week, even if she only earns £10.00, she can then visit the job cenre and look for work, because she has to. But then our entitlement will be based on us working 80 hours with X income, compared with her wages being recorded as minimum wage or closing down the self employment.

I know it's complicated but I hope you can see what I'm trying to say.

Thanks again

Well, there won't be any tax credits. The tax credits system will start shutting down from 40 hours a week and you will have to claim Universal Credit instead at some point between April 2014 and probably 2017/18 depending on your circumstances.

But essentially, if the rules stay as they are in the draft regulations, what you suggest is an option. You either accept the minimum income floor (i.e. your partner will be treated as earning X even if she has earned zero or made a loss) or you have your UC based on actual income (or zero if a loss) and your partner will have to be subject to conditionality regime. Not a great choice really and certainly it will be nothing like the current tax credits system.

IQ

[Deleted User]

Icequeen99 wrote: »

Well, there won't be any tax credits. The tax credits system will start shutting down from 40 hours a week and you will have to claim Universal Credit instead at some point between April 2014 and probably 2017/18 depending on your circumstances.

But essentially, if the rules stay as they are in the draft regulations, what you suggest is an option. You either accept the minimum income floor (i.e. your partner will be treated as earning X even if she has earned zero or made a loss) or you have your UC based on actual income (or zero if a loss) and your partner will have to be subject to conditionality regime. Not a great choice really and certainly it will be nothing like the current tax credits system.

IQ

Thanks IQ I did mean UC, I just keep getting mixed up.

So do you know who to contact to make my thoughts known, I don't know a what stage the process is at, has it all now been passed?

I also wanted to ask you, should my partner just declare 1 hour worked as no/little income from this and then claim UC using this one hour + my salary and hours, or is it a benefit (more money) to show 2x 40 hours, earning the same as what would be in the last....

Hope that makes sense...

princessdon

So we have been in business for a few months now, so when we get to the new tax year/ new universal credit system. Will we be able to take this advantage for 6 months, or can we just have 12 months as our 1 start up in 5 years.


In your OP you say that your business has been running at least a year and that you offset your losses again employment and can't do so this year.

So I would think you have had your "12 months" and 1 business in 5 years to "avoid" the minimum hours.

Icequeen99

assj wrote: »

Thanks IQ I did mean UC, I just keep getting mixed up.

So do you know who to contact to make my thoughts known, I don't know a what stage the process is at, has it all now been passed?

I also wanted to ask you, should my partner just declare 1 hour worked as no/little income from this and then claim UC using this one hour + my salary and hours, or is it a benefit (more money) to show 2x 40 hours, earning the same as what would be in the last....

Hope that makes sense...

At this stage there isn't enough detail to answer that. It will be probably Christmas before anyone fully understands how it will work in practice.

On the start up periods, my understanding it is for new businesses only i.e. those that start when you are claiming UC. So existing businesses wouldn't qualify unless they had been running less than 12 months. But again, until we see the guidance we don't know how DWP will interpret the legislation.

IQ