Universal Credits - Self Employed

leveller2911

assj wrote: »

Hello



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?

Your probably not cheats but from reading all of your posts you seem to be trying to "manipulate" your income/hours to gain maximum benefit from the new rules.........;) Just work as hard as you can and earn as much as you can and you won't need to rely on the state benefits for top ups.

The majority of new small business do not make a loss in the first year or so.Just a thought but do you both need a car on HP with a debt of nearly £16k?, maybe a good idea to get rid of one and with the spare money plough it into your business.Try and keep your overheads as low as possible, if it means running a cheaper car then do so and remember having cars on lease only ever works if the business has the income stream high enough to be tax efficient ,if not its losing you money.

[Deleted User]

Thanks for the advice we need two cars for school runs. Unfortunately we don't have a way around this, as one works early and the school is so far away.

The HP for the cars is in our signature, one we are thinking of handing back, because it's too small to fit us all in! Yes it really is too small for the children and us. But we are not sure what to do yet.

Of course we are just trying to be as tax efficient as possible, not half as bad as the BBC self employed staff.

I see that someone said most businesses do not make a loss in first year, but it says otherwise on most advice sites, so that leaves me confused...

Well at least we know a bit more now, will see what to do when we know the full extent later this year.

Thanks everyone !

princessdon

you know you "maximise the system". But from my POV if the govt allow it then I won't blame an individual.

I do think under UC you may find you have a lot less benefits coming in though - and I think that it is time the govt addressed families like yourself.

But as I said - It's not personal - not many people won't claim what they are entitled to - but it is a loophole long overdue closing.

[Deleted User]

I can accept what you say. I won't go as far to agree though haha :-)

Thanks again though!

dktreesea

assj wrote: »

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?

(Apologies for the length of this post)
First of all, losses are not compensated via the benefits system anyway. Even if you declare a loss, for beenfits purposes your income is treated as zero, so you get the maximum benefits, (assuming you are not over the liquid capital allowed threshold (shares, money, ISA funds and the like), and are therefore entitled to benefits).

It isn't that you have to declare your income at 35 hours each a week at the minimum wage (this "full time" hours bit keeps getting changed. I think at the moment it is 35 hours a week at the NMW, rather than what the self employed person declares their hours at - someone else may have more up to date info). It's just that, for the purpose of calculating the benefit, your income will be treated as the higher of your actual income or (if both working in the business) 2 x 35 hours a week at the NMW).

If you are both full time self employed, there won't be any requirement to satisfy work search or availability requirements. Not in the first 12 months, and as things currently stand, not ever. (Keep in mind this is a fluid situation). There is no need for the government to impose such a requirement, because from their point of view, the fact that, via self employment, you opt out of the working for someone else/PAYE workforce is what drives the deeming of your income to be at least the full time NMW, for calculation of benefit purposes.

In principle, even though I am also self employed, I agree with this. If, for whatever reason, a person is prepared to work for no income at all (the situation where a business is making a loss) or for a modest profit, equivalent to, say, £1 an hour, why should other taxpayers have to foot the bill for what is really a lifestyle choice?

Self employed people who are not able to earn the equivalent in profits of the NMW will need to step back and work out if they are better off staying self employed, with the deeming rules imposed, or just closing up shop and going on the dole, with all the responsibilities to look for work, and jump through whatever hoops the government of the day imposes on them.

Why target the self employed? Well, all apart from the fact that we are opting out of the paid workforce - so, for example, don't have to retrain as, say, security guards just because there are work opportunities in that sector, nor do slave labour (work for the dole) at the likes of Tesco (shame on them) - since ATOS came into being, becoming the government's attack dog on those receiving incapacity benefit (as it was a few years ago), a lot of people have opted for self employment just to avoid the ongoing horrors of having to deal with the DWP. Serves the government right. They should have thought about the unintended consequences of their drive against disabled people a lot sooner.

And lo and behold, in noticing the flight of the disabled into self employment, I guess they did a bit of analysis and realised that many micro businesses are just that, too "micro" to sustain the people they are meant to be supporting.

So the government is saying people are free to be self employed, and to work as little or as much as they want - no minimum wage restrictions on the self employed, nor working hour maximums; we can work 12 hour days 7 days a week if we so desire and for 10p an hour if we want to - but if we want help from the taxpayer, that help is restricted to what we would be entitled to if both partners (assuming a two income household) earned the NMW.

You might be surprised to realise, if you have children, how little impact this will have on your benefits. If you go to this site:
http://www.turn2us.org.uk/benefits_search.aspx
and put in all your info, but set the income for both of you, assuming you are both self employed full time in the business, at the NMW, or even just a rough estimate, e.g. £10k a year each, you will probably find that you still get a good part of your rent paid, all your child tax credits, and the full child benefit. You might have to pay all your council tax, and some of your rent.

To me, someone who is self employed should at least work enough to earn the full time NMW. If it really is more profitable to stack shelves at Tesco (well, maybe Waitrose, rather than tesco, since Waitrose pay all their staff and don't participate in work for the dole schemes), then why would someone work full time for a net income of, say, £50 a week instead? Don't get me wrong; aside from the finances, I can think of plenty of reasons to make this decision. Let's see:

- hard to get a job, due to e.g.
age/ disability/ weight/ lack of education/ poor English
- not wanting to work for someone else
- the available work is boring
- not wanting to commute the distance required each day, nor incur the costs, to get to and from work
- poorly planned public transport (anyone trying to get from the Welsh Valleys into Cardiff on public transport, in time for an 8am or 8.30am start in the morning would know exactly what I mean on this point
- sick of being pushed around by the little dictoators that some middle managers aspire to be
- not wanting to put up with the bullying and harassment that seems to plague businesses these days

But as I say, there is NO imposition from the government to make this choice to earn at least the NMW, or to make anything other than a loss for the rest of your life if that's what you are prepared to do just to avoid the hassle of working for other people. They are just limiting the amount of support you get from other taxpayers for your lifestyle.

And one final point, - if you have a mixture of PAYE income and business earnings, while for tax purposes you can offset your loss against your PAYE earnings and get some of the tax you may have paid back, for benefits purposes the self employed loss is nowadays as "zero", i.e. no offsetting. And that has been the case for years.

Icequeen99

dktreesea wrote: »

(Apologies for the length of this post)
First of all, losses are not compensated via the benefits system anyway. Even if you declare a loss, for beenfits purposes your income is treated as zero, so you get the maximum benefits, (assuming you are not over the liquid capital allowed threshold (shares, money, ISA funds and the like), and are therefore entitled to benefits).

It isn't that you have to declare your income at 35 hours each a week at the minimum wage (this "full time" hours bit keeps getting changed. I think at the moment it is 35 hours a week at the NMW, rather than what the self employed person declares their hours at - someone else may have more up to date info). It's just that, for the purpose of calculating the benefit, your income will be treated as the higher of your actual income or (if both working in the business) 2 x 35 hours a week at the NMW).

If you are both full time self employed, there won't be any requirement to satisfy work search or availability requirements. Not in the first 12 months, and as things currently stand, not ever. (Keep in mind this is a fluid situation). There is no need for the government to impose such a requirement, because from their point of view, the fact that, via self employment, you opt out of the working for someone else/PAYE workforce is what drives the deeming of your income to be at least the full time NMW, for calculation of benefit purposes.

In principle, even though I am also self employed, I agree with this. If, for whatever reason, a person is prepared to work for no income at all (the situation where a business is making a loss) or for a modest profit, equivalent to, say, £1 an hour, why should other taxpayers have to foot the bill for what is really a lifestyle choice?

Self employed people who are not able to earn the equivalent in profits of the NMW will need to step back and work out if they are better off staying self employed, with the deeming rules imposed, or just closing up shop and going on the dole, with all the responsibilities to look for work, and jump through whatever hoops the government of the day imposes on them.

Why target the self employed? Well, all apart from the fact that we are opting out of the paid workforce - so, for example, don't have to retrain as, say, security guards just because there are work opportunities in that sector, nor do slave labour (work for the dole) at the likes of Tesco (shame on them) - since ATOS came into being, becoming the government's attack dog on those receiving incapacity benefit (as it was a few years ago), a lot of people have opted for self employment just to avoid the ongoing horrors of having to deal with the DWP. Serves the government right. They should have thought about the unintended consequences of their drive against disabled people a lot sooner.

And lo and behold, in noticing the flight of the disabled into self employment, I guess they did a bit of analysis and realised that many micro businesses are just that, too "micro" to sustain the people they are meant to be supporting.

So the government is saying people are free to be self employed, and to work as little or as much as they want - no minimum wage restrictions on the self employed, nor working hour maximums; we can work 12 hour days 7 days a week if we so desire and for 10p an hour if we want to - but if we want help from the taxpayer, that help is restricted to what we would be entitled to if both partners (assuming a two income household) earned the NMW.

You might be surprised to realise, if you have children, how little impact this will have on your benefits. If you go to this site:
http://www.turn2us.org.uk/benefits_search.aspx
and put in all your info, but set the income for both of you, assuming you are both self employed full time in the business, at the NMW, or even just a rough estimate, e.g. £10k a year each, you will probably find that you still get a good part of your rent paid, all your child tax credits, and the full child benefit. You might have to pay all your council tax, and some of your rent.

To me, someone who is self employed should at least work enough to earn the full time NMW. If it really is more profitable to stack shelves at Tesco (well, maybe Waitrose, rather than tesco, since Waitrose pay all their staff and don't participate in work for the dole schemes), then why would someone work full time for a net income of, say, £50 a week instead? Don't get me wrong; aside from the finances, I can think of plenty of reasons to make this decision. Let's see:

- hard to get a job, due to e.g.
age/ disability/ weight/ lack of education/ poor English
- not wanting to work for someone else
- the available work is boring
- not wanting to commute the distance required each day, nor incur the costs, to get to and from work
- poorly planned public transport (anyone trying to get from the Welsh Valleys into Cardiff on public transport, in time for an 8am or 8.30am start in the morning would know exactly what I mean on this point
- sick of being pushed around by the little dictoators that some middle managers aspire to be
- not wanting to put up with the bullying and harassment that seems to plague businesses these days

But as I say, there is NO imposition from the government to make this choice to earn at least the NMW, or to make anything other than a loss for the rest of your life if that's what you are prepared to do just to avoid the hassle of working for other people. They are just limiting the amount of support you get from other taxpayers for your lifestyle.

And one final point, - if you have a mixture of PAYE income and business earnings, while for tax purposes you can offset your loss against your PAYE earnings and get some of the tax you may have paid back, for benefits purposes the self employed loss is nowadays as "zero", i.e. no offsetting. And that has been the case for years.

But what you say isn't entirely correct. Firstly, losses are recognised in the tax credits system. If you make a loss, you can offset it against your partner's employment income.

Secondly, re UC and the self-employed. The Government initially though the minimum income floor would be based on NMW x 35 hours, however during the Bill debates they said it would be whatever a similar person in similar circs employed would earn. They haven't confirmed where they will set it.

They have also very clearly confirmed (again during the debates) that if you make a loss or very low profit, you either have your income treated as equal to the minimum income floor (whatever it is set at) or you can CHOSE not to accept the MIF and have your UC based on your actual income (be it zero or a small amount) but you will then have to accept conditionality regime.

In terms of whether the support will be the same, clearly it won't. people in this situation will get far less in UC than with tax credits. That is evident if you run a few calculations of UC vs tax Credits.

IQ

tamiami

What about all those people who are paid commission only, which a lot of jobs are nowadays, cold calling, etc. To earn £100 a week on commission only is surely better than claiming full benefits. Do you just record the hours you are actually getting a sale and earining as opposed to the hours you actually spent cold calling?

MissMoneypenny

Icequeen99 wrote: »

The Government initially though the minimum income floor would be based on NMW x 35 hours, however during the Bill debates they said it would be whatever a similar person in similar circs employed would earn. They haven't confirmed where they will set it.

That's what I understood too and said it on these boards; but I think some people on here got it fixed in their minds that Universal Credit calculations would only ever be based on NMW, regardless of what their job was and what that expected hourly rate is.

I said before that I had noticed that this government had already set a minimal annual income for each profession (by using x amount per hour, times by the hours required to work per week) for some immigration visas: so it's not such a big step to add in the expected income of the remaining non graduate jobs, for Universal Credit calculations.

Icequeen99

MissMoneypenny wrote: »

That's what I understood too and said it on these boards; but I think some people on here got it fixed in their minds that Universal Credit calculations would only ever be based on NMW, regardless of what their job was and what that expected hourly rate is.

I said before that I had noticed that this government had already set a minimal annual income for each profession (by using x amount per hour, times by the hours required to work per week) for some immigration visas: so it's not such a big step to add in the expected income of the remaining non graduate jobs, for Universal Credit calculations.

They also use the same test for self-employed in child maintenance where people don't return figures. For that they use a database, which i presume is what they would use here.

IQ

MissMoneypenny

tamiami wrote: »

What about all those people who are paid commission only, which a lot of jobs are nowadays, cold calling, etc. To earn £100 a week on commission only is surely better than claiming full benefits. Do you just record the hours you are actually getting a sale and earining as opposed to the hours you actually spent cold calling?

I'm guessing that if UC is anything like the new immigration rules; the government will tell you how much they expect you to earn each week in that job for UC calculations? If you don't earn that money, then you have the choice of finding a job that does pay the set rate; claiming UC as if you are are earning the set rate; or be subject to Universal Credit conditions (as job seekers are now).

I think the idea is to close the loophole of people who avoid the conditions job seekers have to comply with for their benefits; by just claiming they are 'self employed but earn very little' and therefore they claim benefits anyway and avoid job seeker conditions.