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

Caz3121

Tax credits will initially as for the previous years income. When they calculate the payments off this there is a disregard of £10k (so if you earn £10k more in the current year than the previous year there is no overpayment) - assuming you meet the criteria

You can ask them to base the award on an estimate of the years income. There is no disregard so if you earn more in the tax year than you gave them as an estimate there will be an overpayment, so best to overestimate

Tax credits work on annual income for the tax years. If you make a claim for tax credits in the current tax year you need to include the income you have had this year so far since 6th April

The maximum working tax credits for no children or disability seems to be £65 per week based on £9,500
http://www.hmrc.gov.uk/taxcredits/people-advise-others/entitlement-tables/work-no-child.htm

Some info for housing benefit for self employed
http://hackney.gov.uk/Assets/Documents/self-employed-advice-htbandctb.pdf

notanewuser

Gothpugs wrote: »

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

If there are no parties for a month, how will you persuade HMRC that you're working 30 hours a week each?

Or to put it another way, HMRC will expect your business to make profits of at least £360 per week (60 hours at minimum wage). Are you sure this business can achieve that in the not too distant future?

Gothpugs

Caz3121 wrote: »

Tax credits will initially as for the previous years income. When they calculate the payments off this there is a disregard of £10k (so if you earn £10k more in the current year than the previous year there is no overpayment) - assuming you meet the criteria

You can ask them to base the award on an estimate of the years income. There is no disregard so if you earn more in the tax year than you gave them as an estimate there will be an overpayment, so best to overestimate

Tax credits work on annual income for the tax years. If you make a claim for tax credits in the current tax year you need to include the income you have had this year so far since 6th April

The maximum working tax credits for no children or disability seems to be £65 per week based on £9,500
http://www.hmrc.gov.uk/taxcredits/people-advise-others/entitlement-tables/work-no-child.htm

Some info for housing benefit for self employed
http://hackney.gov.uk/Assets/Documents/self-employed-advice-htbandctb.pdf

What about if you're earning less than £9500 a year (equates to £182 a week) what if you're earning £0 a week or say £200 a month? so approx £50 a week, you get more tax credits?

Gothpugs

notanewuser wrote: »

If there are no parties for a month, how will you persuade HMRC that you're working 30 hours a week each?

Or to put it another way, HMRC will expect your business to make profits of at least £360 per week (60 hours at minimum wage). Are you sure this business can achieve that in the not too distant future?

The business includes live animals so at least 4 to 5 hours every day goes to the maintenance of these animals whether we have any parties or not

miduck

What animals need 4 to 5 hours care a day, and do you have the relevant insurance to have the animals at parties?

How many parties do you need to do to make this business pay a liveable wage? It seems very labour intensive, for very little reward.

notanewuser

Gothpugs wrote: »

The business includes live animals so at least 4 to 5 hours every day goes to the maintenance of these animals whether we have any parties or not

But that isn't income generating activity, is it? And that's what HMRC are going to expect. £360 worth of profit per week. As a minimum!

Caz3121

you would still get the maximum of £65 per week if you eant less than £9,500
If you are planning on earning between zero and £200 per month, I would question whether this is a viable business.

The hours you work for tax credits need to be work with expectation of payment, not waiting for the phone to ring

There have been many posts on here with people having to pay back WTC as they have not been deemed to be working the required hours. Have a look at Universal Credits where they will base benefits for self employed people on NMW whether you actually achieve this or not.

Are you both in work just now?

Gothpugs

We are currently unemployed, we do believe we will be able to earn a liveable wage once the business is up and running but its the first few months "teething period" where we're getting our name out there that we're worried about

miduck

Gothpugs wrote: »

We are currently unemployed, we do believe we will be able to earn a liveable wage once the business is up and running but its the first few months "teething period" where we're getting our name out there that we're worried about

Have you done a business plan, have you worked out how many parties you need to do to make a reasonable income? Do you have insurance in place?

HMRC are cracking down on people using WTC to supplement an unrealistically low income. They will allow it for a start up period, but after that they will ask for accounts. There have been many reports of WTC being stopped in circumstances such as this, and under Universal Credits it is a certainty.

notanewuser

I don't think I've ever been to a party that involved animals (well, not of the non-human kind).

Are you sure there's even a market for this? What animals are they?