Housing benefit. Help please.

JWmoney

Hello All,

When you are self employed, all "extra money" goes down as your own profit. I can earn an extra £700 in one month and the council will take away my entitlement. I know that, that £700 is going to be vital the following month when it will be quite but as the council do not new business this way, I was wondering if its best to go Ltd and employ myself so that I am on a set wage. Then all the capital is seen as the companies assets, although I will never have enough to sit on a pot of money, it will stop my entitlement constantly changing, when I know that I am not really better off!

Would someone else need to be a director? Surely I cannot be the director and employ myself and get HB??

Many thanks

BigAunty

Have you looked at your local council to identify how they assess profits for the self employed for HB, both sole or limited company structures?

AFAIK, defining a salary will not increase your benefit entitlements - they will not just taken into account drawings.

Also, some councils may exclude capital costs from your expenses. I'll see if I can find the thread where a photographer had their new camera excluded as an expense from their accounts on these grounds.

EDIT - found the thread. Read the thread and links to guidance to the self employed published by a council.

https://forums.moneysavingexpert.com/discussion/4342427

I think tax credits *may* operate differently in how they assess salaries/dividends drawn by the self employed but don't quote me on that, do some further research.

princessdon

You'd also need to consider the implications of you being an employee and employer for tax and NI.

JWmoney

Hi,

I dont want to increase my entitlement or anything like that, nor do I mind the extra tax and paperwork involved with being Ltd. Ive wanted to become limited for certain reasons anyway but the main thing is that as a sole trader everything that is "spare" that month is considered profit, unless its in my usual expenses that they have already allowed for. So for example, right now my business cannot afford much advertising, so theyve accounted for a small £50 per month allowance, if I earn £700 extra one month, most of that will go straight into advertising to make up for all the low profit months where I couldn't afford to.

What I am worried about is that they explained while you have the money in your account, its yours and will effect your entitlement. So lets say I have 2k sat there for my commercial rent, thats fine as they allow for that but then an extra 1k turns up, I know next month it will be spent of business expenses but they way they explained it was the month you have it and its sat there, its profit, so it would effect my entitlement until I got rid of it and then proved it was an allowable expense.

I dont want to change it every month and so if I was employed by the company, I could show set wage slips and if there was a month I genuinly wanted to pay myself more, I would inform them.

The bit I am stuck on is if I will need someone else to be a director of the company, as rolling capital may still be deemed as my capital, if I am the sole Director of the Ltd company.

BigAunty

JWmoney wrote: »

.... but the main thing is that as a sole trader everything that is "spare" that month is considered profit, unless its in my usual expenses that they have already allowed for. So for example, right now my business cannot afford much advertising, so theyve accounted for a small £50 per month allowance, if I earn £700 extra one month, most of that will go straight into advertising to make up for all the low profit months where I couldn't afford to.

I doubt I can advise you any further, other than to recommend you discuss this with your local council or do further research on any differences in the way that a local council will calculate profit and permit expenses between sole and limited companies in order to work out housing benefit.

There is a thread here on an accountancy forum that discusses limited company directors and means tested benefits that also has links to other discussions. Not sure if this will clarify or confuse you further.

http://www.accountingweb.co.uk/anyanswers/really/488717

emsywoo123

Do you have an accountant? Best money you can spend when starting a business.

fluffymovie

We don't use self employed income month by month but rather, use an appropriate assessment period so it isn't 700 one month, nil the next.