Self Employment & Benefits - Help Please

Gothpugs

Self Employment & Benefits - Help Please

We're hoping to become self employed in the next month or so, but are very worried about earnings and benefits, and getting huge £1000's bills from the council or government for over payment of benefits as we've often read about on here.

What we know

• While ever we are working more than 30 hours a week we can claim tax credits
• Tax credits will pay us as a couple £89.50 - £111.45 a week while we are on little / no income
• Housing and council tax benefit will pay us the full amount available while we are earning the above amount ^
• All benefits go down, the more profit we make from the business
• at £18,000 a year income, tax credits ceases entirely

What we do not know

• How do you inform Tax/Housing of your income? For example if we expected to make little to nothing a month, and earned £200 that month, how do we inform them and will they deduct that off our benefit?
• How can we avoid getting a £1000's bill from overpayment??
• What do we do if at the end of the month, they want £x back off of us because we earnt some money from the business?
• What do we do if we don't have it to give?

- The business we are starting is a party business so there is no way of predicting how much business we will get, it could be 3 parties in 7 days and then none for a month, so its very hard to calculate potential earnings

Savvy_Sue

You probably need to speak to your local council about the whens and hows of notifying changes in income. I know that Tax Credits work in a different way to HB and CTB, in that I think the council attempts to play catch up faster than Tax Credits.

But yes, they do expect overpayments to be repaid, so it is essential to keep on top of what you have earned, AND what effect that has on your benefit entitlement, and then pay your full rent when you know you're due to, even if the council haven't caught up to that fact. You could of course put it in a very safe interest bearing place, BUT I'd say there was a risk of 'needing' it for emergencies if you do that too much.

Who's your landlord, council / social or private? A private landlord may (quite rightly) have very little tolerance of arrears building up because of benefit problems, but even social landlords will take action quite promptly if you don't keep on top of this.

hollyh

I don't think they worry about earnings until you earn over £5k profit a year. Then they need to know to adjust things. I have to submit accounts every year to the council and on the last letter I had it said once you've been in business for 2yrs even if you're not making a profit they will assume you're earning NMW for the hours worked.

BigAunty

You should also post your enquiry on the benefits board as the posters there will be aware of the notification process.

You should also look into the impact of the Universal Credit system on the self employed - tax credits will be scrapped and there is an explicit expectation that the self employed, once their business is established, should be able to earn the NMW from it. The govt are ticked off at how tax credits for the self employed have led to long term benefit dependency.

What does your business plan say about future profits?